IS YOUR PROPERTY REALLY YOURS?

8/06/2011

Imagine purchasing a new home, moving in 6 weeks after settlement, then finding out 12 months down the track that you don’t really own it. Is that even possible?

Actually, it is.

When you buy a property you have to go through a standard conveyancing process. For a property to officially ‘settle’, the seller’s (vendor’s) and buyer’s lawyers/conveyancers have to physically meet, along with their financial representatives, and hand over title and transfer documents and cheques. The representative from the buyer’s financial institution is responsible for lodging the documents. That means sending them to the bank’s Loans Processing Centre (sometimes overseas), which then sends them to the bank’s settlement and lodgement departments, who then lodge them with the Land and Property Information Office (LPI). You only legally own the property when LPI officially registers it to you. Then you get a ‘Certificate of Title’.

At least that’s what’s supposed to happen.

But what if the bank representative is having a bad day and puts the documents in the bottom of their in-tray, subsequently forgetting about them? Or something gets lost during the to-ing and fro-ing between bank agents?

You assume the process is underway and that the home’s legally yours. Not necessarily.

Under the Real Property Act, until a property is officially registered to you, you only have an ‘equitable’ interest, not a legal one. In other words, despite having paid your deposit and possibly several months of mortgage repayments, if it’s not registered to you, it’s not legally yours.

Consider this – if the property’s still registered to the previous owner, who goes bankrupt, creditors might make a claim on the property to get back what they’re owed (called a ‘Writ of Execution’). In the legal battle that follows you’d hope a Judge would sympathise with the purchaser, who paid money in good faith and wasn’t to blame for their bank’s failure to lodge the documents. But that’s by no means guaranteed.

There have been cases where the Court ruled against the purchaser because documents hadn’t been registered after too long a period, or were beaten by a registered writ.

And regardless of the outcome, the purchaser still has to pay legal costs to fight for the property.

Clearly it pays to be on the ball. If you notice your Council rates still show the previous owner’s name, it’s worth getting your lawyer/conveyancer to chase it up. It can indicate something’s amiss. The Council generally won’t change its records until the property is registered to you.

Many conveyancers/lawyers will advise you to take out ‘Title Insurance’ (about $300), to cover you between settlement and registration – the ‘registration gap’.

While the registration process usually unfolds without drama, humans have been known to botch things.

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