The Real Property and Conveyancing Legislation Amendment Bill 2009 (NSW) will, when passed, increase the obligations of mortgagees.
Its objects include:
- to introduce additional identification requirements to the Real Property Act 1900 in relation to mortgagees and witnesses; and
- to require a mortgagee or chargee, in exercising a power of sale in respect of mortgaged or charged land, to take reasonable care to ensure that the land is sold for not less than its market value.
Verification of identity of mortgagor
A mortgagee must take reasonable steps to ensure that the person who executed the mortgage, or on whose behalf the mortgage was executed, as mortgagor is the same person who is, or is to become, the registered proprietor of the land that is security for the payment of the debt to which the mortgage relates.
A mortgagee must keep written records of the steps taken for a period of 7 years from the date of registration of the mortgage.
Similar provisions already exist in Queensland. There the Registrar of Titles has accepted that the AML identification requirements satisfy this requirement.
Mortgagee's power of sale
A mortgagee or chargee, in exercising a power of sale in respect of mortgaged or charged land, must take reasonable care to ensure that the land is sold for:
(a) if the land has an ascertainable market value when it is sold—not less than its market value, or
(b) in any other case—the best price that may reasonably be obtained in the circumstances.
This will be a higher duty than the current duty to act in good faith and mortgagees will need to always obtain a valuation before selling a property.
You will need to review your procedures accordingly.