September 2014
New ID law means mortgages could be void
Strict requirements for mortgagees to take positive steps to verify the identity of borrowers were
introduced in Victoria on 24 September 2014.
Similar requirements are already in place in Queensland, New South Wales, South Australia and
Western Australia.
The Transfer of Land Amendment Act 2014 (Vic) received Royal Assent on 23 September 2014 and
commenced the following day. It amends the Transfer of Land Act 1958 (Vic) to require a
mortgagee to properly verify the authority and identity of a mortgagor by taking ‘reasonable steps’
before the execution or variation of a mortgage.
A mortgagee is able to satisfy the onus by either following the standards set by the Registrar or the
participation rules as defined by the Electronic Conveyancing National Law (Victoria). In the event
a fraud has been committed and reasonable steps were not taken to verify identity the lender will
lose the benefit of indefeasibility and the mortgage will be void.
This amendment addresses situations where lenders do not confirm they are dealing with the
registered proprietor. The Explanatory Memorandum notes that a fraudulent mortgage will be void
if the mortgagee did not adequately verify authority and identity. However, fraudulent mortgages
could remain registered in certain circumstances, for example where the mortgagee did take
reasonable steps to verify identity but the fraudster used high quality forged identity documents
that went undetected.
Consequently, any practitioner acting for a lender taking out a mortgage over Victorian land,
whether they are institutional lenders or private client lenders, should advise their client of the new
requirements to verify identity of mortgagors, the need to document the steps taken and the risks if
they fail to do so.
For examples of mortgage fraud claims LPLC has seen in the past see Chapter three: Mortgage
fraud, Managing Mortgage Risk
For more information on acting for lenders see:
1. LPLC blog on Bank of Western Australia Ltd v Abdul & Anor
2. LIJ article Don’t forget the valuer
3. LIJ article Security Alert
Legal Practitioners’ Liability Committee
September 2014
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