Real Property And Conveyancing Legislation Amendment Bill 2009

This fortnight I want to warn you about a bill which is on its way through State Parliament which will if passed means your mortgage repayments will probably increase. It also has other nasty surprises.
The bill is the Real Property And Conveyancing Legislation Amendment Bill 2009. Its first object according to the governments’ explanatory note is to affirm the principle of indefeasibility of title which is at the heart of the Torrens system. Or as Sir Garfield Barwick said many years ago (And as I have quoted often) the Torrens system is not a system of registration of title but of title by registration But the Bill doesn’t do that. What it does is make a rather bland statement that by providing that the Torrens principle prevails over any inconsistent provision of any other Act or law unless the inconsistent provision expressly provides that it is to have effect despite anything contained in section 42. So far well and good. Then it exempts a whole range of laws from that principle- indeed almost all the laws from which challenges to the Torrens system have arisen. So far then the new bill is pretty pointless.
But the next object is what causes the problem and will cost you and me more. The next object is said to be to limit the amounts recoverable from the Torrens Assurance Fund and thecircumstances in which compensation will be available
The Assurance Fund is a sort of insurance scheme where people who have lost land or money because of the Torrens scheme can make a claim. Its funded by a $2 levy on every land transaction registered at the Department of lands (those fees start at $92 and go up).
The government says the Fund has had to pay out on mortgage frauds and that most of these frauds come from ‘low doc’ mortgages which are at high interest rates. IT does two things. The first is to limit interest and costs that a mortgagee can recover if the mortgage was obtained by fraud in particular the government says in its explanatory note the interest and costs component of a claim will be limited to be be 2 per cent above the interest rate charged on most loans by reputable lenders in Australia. But in fact the rate is pegged at 2 per cent above the official cash rate. Most banks charge at least that if not higher (At the moment the cash rate is 3% the big 4 banks all charge about 5.44%
The second thing the bill does is to make lenders check more thoroughly on who the borrowers are. The bill says that ‘as a minimum" lenders will have to undertake the 100 –point check that the Federal government already requires. That’s a worry- what else will the state want? That is not known. And the next worry is that the lender will have to keep the records for the life of the loan. IF the lender doesn’t keep those records and produce them when the Department of Lands wants then the Department can cancel the recording of the mortgage (what happens if the lenders office is damaged by fire or flood?)
All of this will add to the lenders charges and if it cant recover the cost of mortgage frauds then the cost to the rest of us will rise.
There are other changes
It’s a bad bill. There are other changes which affect easements which I will write about next time.
In the meantime read more about the bill and its effects: the New South Wales Parliament website has a full text of the bill http://www.parliament.nsw.gov.au/prod/parlment/nswbills.nsf/0/2d6ce9ccb4d3a56dca2575830021a477/$FILE/real.pdf
It also has its legislation review committee’s comments (which criticise the bill in quite another way which I will also write about next time)
http://www.parliament.nsw.gov.au/prod/PARLMENT/committee.nsf/0/39dedc97f2f6a09cca25758a000cc771/$FILE/2009.4%20Legislation%20Review%20Digest.pdf
(local papers article for week of 20.4.09