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In some cases, a lender may obtain a signed mortgage but hold off on its registration pursuant to an agreement with the borrower to that effect.
Whilst this is possible, and the mortgage will not expire per se, there are significant risks to this approach:
• Changes to mortgage form - Where the form of mortgage is changed by the relevant titles office, or more recently the Australian Registrars’ National Electronic Conveyancing Council, the mortgage may become un-registrable. This happened to lenders who entered into mortgages on titles forms that existed prior to the introduction of the National Mortgage Form and who failed to register within the grace period.
• No power of sale - You cannot, of course, exercise power of sale against a property until your mortgage of the property is registered. If the property is in NSW, you run the risk that you could be refused consent to register the mortgage at a later date, and could be forced to caveat the property and commence proceedings, which would cause you considerable added cost and delay.
• Loss of priority - If the title is unprotected, there is of course the risk of registration of other dealings (including other mortgages) that will take priority.
• Changes to title - In addition to the registration of additional dealings on title, the title itself could change by subdivision, amalgamation, or transfer to a new owner, which will render your mortgage un-registrable and, in the worst case scenario, void or voidable.
• Protection against tacking - Whilst there is support for the fact that the common rule against tacking applies to lenders who notify of an unregistered second mortgage as well, there is definitely no statutory support for this position, so there is considerable risk that tacking may arise. Tacking will be addressed further in our next publication on deeds of priority.
Please be advised this is general information only, and is not to be taken as legal advice. If you would like more information, or have a legal query, please contact Abbott & Mourly directly.
Reviewed: 17/01/2024