First ranking mortgagees often assume that their interest is adequately protected. However it is important to be aware of potential issues that may be arise when subsequent interests are registered, without the consent of the first mortgagee or a proper priority arrangement. Relevant provisions, such as s 86 of the Transfer of Land Act 1958 (Vic) and s 96 of the Conveyancing Act 1919 (NSW), may require a first mortgagee to produce the certificate of title on request of the proprietor. This can result in a subsequent interest being registered without the consent of the first mortgagee, which could potentially disrupt a consensual sale process.
Second ranking mortgagees should also be aware of potential issues surrounding their interest in the property. Various steps need to be taken to ensure the security of money paid. Investigations should be conducted to ensure there is sufficient equity in the property to allow for full recovery, even in the case of a forced sale. A carefully examined priority agreement should always be entered into with the first mortgagee to set out each parties rights. Further, second mortgagees should register their mortgage over the property. A registered mortgage is preferable to a caveat as it is more secure.
Legal advice is essential to navigate these challenges and more. Contact M+E for further information about how to properly protect your interests in land.