28/07/2016

1 May 2016, a new set of rules came into place in various States about client identification for the purposes of registration of property dealings.  The transitional period ended on 1 August. These new requirements add a whole new layer of inconvenience and cost so clients and advisers need to understand what's required.

As part of the establishment of electronic conveyancing across Australia, a number of States (including NSW, VIC, QLD, SA and WA) have established new requirements relating to the verification of the identity and ‘right to deal’ of parties to transactions involving real estate, regardless whether the parties use electronic or paper-based systems.

Every solicitor or conveyancer who acts for a party to a transaction involving real estate (and every mortgagee who lends money against the security of real estate) may now need to do up to three things as part of that transaction:

1.   verify the identity of the client;
2.   verify the connection between the client and the real estate
      (the first part of the so-called ‘right to deal’); and
3.   verify the client’s right to be involved in the particular transaction with the property
      (the second part of the so-called ‘right to deal)’.  

Verification of identity requires that each individual client prove their identity to the solicitor or the solicitor’s agent (called an ‘Identity Agent’) in a face-to-face meeting where documents such as the client’s passport, drivers licence, credit cards or photo ID cards are produced and checked.
 
If the client is a company then the directors who will be signing the relevant transactional documents must verify their identity in the same way.  

Client identities have to be verified every two years.

Verification of identity

Verification of identity (VOI) meetings must be face to face and can occur in several ways:

(a)   with the solicitor in the solicitor’s office;
(b)   with the solicitor’s ‘Identity Agent’ in that Agent’s office;
(c)   with the ‘Identity Agent’ at the client’s home or business; or
(d)   at Australia Post.

There is a fee associated with the service which varies depending on who is actually performing the VOI and where.

The fee for a meeting at our office, our Identity Agent’s office or Australia Post ranges from $30 - $39.

The fee for our Identity Agent to come to the client’s home or office is $79 for the first client and $40 for each additional client.

Verification of the connection with the property

The client also is required to prove their “right to deal” ie the connection with the real estate in question.

For clients transferring, mortgaging or leasing land, this will firstly involve a search of the title of the property at the local State land titles register.

But simply having a search showing the name of the client on the title document may not be sufficient. The verifier needs to know that the ‘John Doe’ who is the client is the same ‘John Doe’ as described in the real estate search.  It is important to know that the client not only has the same name as the registered owner of the land but is one and the same as the entity listed on the title.

Additional documents will be required such as water or council rates notice, a land tax notice or a utility notice which shows that the client has been paying the outgoings related to the property.

For clients acquiring, taking a mortgage over or renting land it will be necessary for the solicitor to sight the signed document whereby the client acquires the land, the mortgage or the lease.

Verifying the client’s right to be involved

The rules also require that the solicitor establish that the client is entitled to be a party to the conveyancing transaction.

If the client is a trustee the solicitor may need to ensure the trust deed is current and that the deed contains the necessary power for the trustee to enter the transaction (see for example second bullet point of section 5.6 of Arnecc MPR Version 3 Guidance Note 4).

If the client wishes to file a caveat against the title of a property the solicitor may need to ensure that the client has a caveatable interest and is therefore permitted to file the caveat.

Retention of supporting evidence

The solicitor must retain the evidence they used to verify the identity and right to deal of their client for at least 7 years from the date the document was lodged with the land titles office.

Certifying adherence to the requirements

The local State land titles offices will make such rules as they consider necessary about how the various parties will certify their adherence to these requirements.

The necessary certificates may need to be signed by:

(a)   the client;
(b)   the witness to the client’s signature;
(c)   the solicitor; and or
(d)   the solicitor’s Identity Agent.

At Townsends we don’t offer standard conveyancing services.  Our focus lies in the kinds of property transactions involved in a client’s wealth management structuring, in their estate planning and particularly in the proper administration of their self managed superannuation fund, such as:

(a)   limited recourse borrowing;
(b)   related party loans;
(c)   related party leases;
(d)   arm’s length leases;
(e)   transfers of property following a change of trustee;
(f)    transfers of property following the repayment of a loan;
(g)   transfers of property following the winding up of a fund;
(h)   transfers of business real property by the owner into their SMSF (s.62A NSW Duties Act).

As a result, whenever we act for a client where we are asked to arrange the lodgement of documents with a State land titles office we will need to verify the client’s identity as outlined above.

As well, any time we act for a client in a property transaction we will need to establish the ‘right to deal’.

In future, the additional costs of these processes will be shown as a separate line item in our quoted fees for the various services we provide.

Even though these measures were introduced by the Federal and various State Governments to reduce the risks of property fraud, we understand that they add a level of complexity and inconvenience to all property transactions.  As always, we are here to assist you implement these new requirements as smoothly as possible.

Please do not hesitate to contact us for further information or assistance on (02) 8296 6222 or email us at info@townsendslaw.com.au  .