Is Your Property Really Yours?
Imagine purchasing a new home, moving in 6 weeks after settlement, then finding out 12 months down the track that you dont 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 sellers (vendors) and buyers lawyers/conveyancers have to physically meet, along with their financial representatives, and hand over title and transfer documents and cheques. The representative from the buyers financial institution is responsible for lodging the documents. That means sending them to the banks Loans Processing Centre (sometimes overseas), which then sends them to the banks 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 thats whats 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 homes 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 its not registered to you, its not legally yours.
Consider this if the propertys still registered to the previous owner, who goes bankrupt, creditors might make a claim on the property to get back what theyre owed (called a Writ of Execution). In the legal battle that follows youd hope a Judge would sympathise with the purchaser, who paid money in good faith and wasnt to blame for their banks failure to lodge the documents. But thats by no means guaranteed.
There have been cases where the Court ruled against the purchaser because documents hadnt 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 owners name, its worth getting your lawyer/conveyancer to chase it up. It can indicate somethings amiss. The Council generally wont 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.