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The tale of the registered mortgage and the missing lender...

December 4, 2016

Picture this.

 

You borrow some funds from a friend or a friend of a friend, or simply a private lender (non-bank) that you were introduced to via a third party.

 

The lender secures the loan via a mortgage over your house.

 

In time you re-pay the debt and assume that the mortgage has been lifted off the title of your property.

 

Years later you decide to sell the property, but discover that although the debt has been repaid the mortgage is still registered over your land.

 

Worse still, you have not had any contact with the lender for many years and they appear to have moved. You cannot find them and their lawyer has retired.

 

What can you do? A mortgage prevents a property from being dealt with in most ways - i.e transferred, sold etc.

 

A recent case highlighted this issue, and involved a couple who had repaid a loan 42 years earlier and who had been unable to find the mortgagee and remove the mortgage from their land. (Full case: http://www.austlii.edu.au/au/cases/nsw/NSWSC/2016/1621.html)

 

The problem was solved via section 98 of the Conveyancing Act. It allows a mortgagor (borrower) to apply to the Supreme Court of NSW to obtain an order stipulating that the debt has been repaid and that you have complied with the loan agreement (and providing a certificate to that effect). This allows the NSW Land & Property Information (formerly Department of Lands) to remove the mortgage and issue a new title deed free of the debt.

 

Although this particular case involved a couple, I sometimes find the same issue arising with land held by deceased estates. The deceased may have taken out a loan many decades earlier and not been aware of the need to obtain a "Discharge of Mortgage" when a debt was repaid. This may be confusing for an Executor who has no idea who the registered mortgagee is, and who can be frustrated by the inability to sell land or transfer it to the nominated beneficiaries.

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