This subtopic deals with the formation of mortgages over Torrens system land. The Australian Registrars National Electronic Conveyancing Council (ARNECC) has produced a standardised National Mortgage Form (NMF), designed for use in all Australian jurisdictions. In some jurisdictions, use of the NMF is compulsory — see the overview of each jurisdiction below. The NMF can be accessed through the ARNECC website.

For the formation of chattel mortgages, see the Personal property securities subtopic.

Form of the mortgage

In New South Wales, all mortgages signed on or after 3 March 2018 must be lodged using the National Mortgage Form (NMF), in accordance with the NSW Conveyancing Rules r 10.1.10. Mortgages that do not use the NMF may be subject to a requisition and associated fees. Mortgages signed before 3 March 2018 may still use (Form 1.5 from the LRS website).

See Memorandum (Form 16LM from the LPI website).

A common mistake by practitioners is to draft a mortgage consisting only of the prescribed cover page without referring to an annexure or memorandum which contains important terms. Mortgages need, at a minimum, to specify not only the land being mortgaged, the details of the mortgagor and the mortgagee, but also to set out the obligation being secured by the mortgage. In some cases this obligation will be expressed in wide terms and include the payment of all monies due to the mortgagee by the mortgagor (this type of mortgage is known as an “all monies mortgage”). In other cases, the obligation will be more narrowly defined and be limited to the repayment of a specified loan.

In Victoria, the Mortgage of Land (Form M1A) form and the Mortgage of Land (Form M1B) are used. Both these forms can be obtained from Land Victoria / the Department of Transport, Planning and Local Infrastructure (DTPLI). There is also an interactive online form available on the Land Victoria/DTPLI website.

In Queensland, where the land to be mortgaged is under the Land Title Act 1994 (Qld) or the Land Act 1994 (Qld), the approved form is the National Mortgage Form from the Queensland Land Registry / Department of Natural Resources, Mines and Energy (DNRME). This consists of:

• a one page Mortgage (NMF) (Version 1.5); and

• any schedule or annexures (Form 20) to that form (if needed for operative words and terms and conditions of the mortgage).

The mortgage may also incorporate (by reference) the terms of a standard terms document, which is already registered in the Queensland Land Registry. The Document Reference section provides for this to be inserted.

Note that the standard terms document number 703149459 is an “all monies” mortgage. This standard terms document has been registered by the Registrar and is therefore available for use by anyone. For more information on standard terms documents, see the DNRME website.

In Western Australia, since 1 January 2018, all mortgages must be lodged using the National Mortgage Form (NMF).

In South Australia, the appropriate form for a mortgage registrable under the Real Property Act 1886 (SA) is the NMF1 or NMF1A) from the Land Services Group. The detailed mortgage covenants can either be attached to the Form M1 document or incorporated by reference to a memorandum of standard terms which has already been registered at the Lands Titles Office.

In Tasmania, where the land to be mortgaged is under the Land Titles Act 1980 (Tas), the approved form is a Mortgage from the Recorder of Titles, available for preparation and download via Tasmanian Online Land Dealings (the LIST) website. This one page is supplemented by any schedule or annexures to that form.

In the Northern Territory, mortgages must be registered in the approved form. This is Mortgage (Form 39) from the Northern Territory Land Titles Office. The lodgment of Form 39 permits the essential terms of the mortgage to be included within the form itself if there is sufficient space. Alternatively, the mortgage may incorporate by reference additional standard terms ("Common Provisions") already registered at the Land Titles Office for that mortgagee, or provisions can be annexed.

In the Australian Capital Territory, the approved form, which is the Mortgage (Form 26) from Access Canberra should be used.

Identification of the mortgagor

New provisions of the Real Property Act 1900 (NSW), introduced on 1 November 2011, impose on a would be mortgagee the duty to take “reasonable steps” to ensure that the person who signs a mortgage of land governed by that Act is the registered proprietor of that land (or the proprietor’s attorney). The provisions are accompanied by regulations which specify two methods of verification which are considered to constitute “reasonable steps”. Failure to comply can lead to the cancelling of the registration of the mortgagee’s interest in the land. There is also the requirement for a witness to a signature on a dealing, application or caveat under the Act to take reasonable steps to verify the identity of the person signing, unless the witness has known the person for at least 12 months.

In all jurisdictions besides Queensland, Victoria and Western Australia, there is no equivalent to the recent statutory amendments made in New South Wales in relation to identifying the mortgagor. However, practitioners should consider whether or not the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (Cth) applies to the particular transaction.

In Queensland, for all mortgages executed on or after 6 February 2006, the mortgagee must take reasonable steps, before the mortgage is lodged for registration, to ensure that the person who executed the mortgage as mortgagor is identical with the person who is the registered proprietor or about to become the registered proprietor of the land: s 11A(2) of the Land Title Act 1994 (Qld). A mortgagee will have taken reasonable steps if the mortgagee complies with the practices included in the Land Title Practice Manual: s 11A(3) of the Land Title Act 1994 (Qld). See paragraph [2-2005] of the Land Title Practice Manual on the Department of Natural Resources, Mines and Energy website (DNRME website) for further information.

See Drafting mortgages.

In Western Australia, a mortgage lodged for registration at Landgate must be accompanied by evidence of verification of the identity of the mortgagor. The evidence lodged must comply with Landgate's Verification of Identity Practice — see Western Australian Registrar and Commissioner of Titles: Verification of Identity and Authority Requirements. This commenced on 4 April 2016 and replaces the Registrations Practice Manual Ch 14: Western Australian Registrar and Commissioner of Titles Joint Practice, Verification of Identity.

Legal practitioners should be aware of r 28.4 of the Law Society of WA — Professional Conduct Rules 2010 (WA).

In South Australia, the Registrar-General's Verification of Identity Requirements came into operation on 1 July 2013 and compliance with those requirements is mandatory in respect of documents executed on or after 28 April 2014. Conveyancers, lawyers and mortgagees must certify on the document that reasonable steps have been taken to verify the identity of the mortgagor. See the Registrar-General's Verification of Identity (VOI) Requirements which can be found on the Land Services Group website. In addition, the Registrar-General’s Verification of Authority Guidelines came into force on 4 July 2016 and require conveyancers, lawyers and mortgagees to verify the authority of a party to enter into a conveyancing transaction: ss 273A and 273B, Real Property Act 1886 (SA).

The “all monies mortgage” is a very popular form of mortgage, but has both advantages and drawbacks. The advantages are that it is quick and easy to draft, it is drafted widely to secure the maximum number of obligations owed by the mortgagor to the mortgagee, and makes it easier for the mortgagee to bring forward the date for repayment of a loan if the mortgagor defaults.

The drawbacks include the need to draft one or more collateral documents (such as a loan agreement) to accompany the all monies mortgage, and the fact that just because the mortgage clearly states that “all monies” are secured does not necessarily mean that it will be interpreted by a court to secure all debts owing.

A greater drawback to “all monies” mortgages is that there are many cases of mortgages drawn up in this fashion which are found not to secure any money in a case where the mortgage and loan agreement are later found to be forged (although better drafting of these mortgages would reduce and conceivably even eliminate this risk). Registered mortgages that identify within them the amount of the loan secured are effective even if forged (provided neither the mortgagee nor its agent was aware of the forgery) because of the doctrine of indefeasibility of title.

See Pros and cons of “all monies mortgages”. For more on indefeasibility of title, see Indefeasibility of title and exceptions.

The most common type of defence in mortgage enforcement proceedings is a defence of general law unconscionability, or under one or more of the statutory regimes similar to general law unconscionability, such as under s 7 of the Contracts Review Act 1980 (NSW) or Pt 2-2 of Sch 2 of the Competition and Consumer Act 2010 (Cth) — the Australian Consumer Law. Although sometimes such defences are filed merely to delay enforcement while the mortgagor explores refinancing options or tries to make a deal with the mortgagee, many are seriously pressed and often result in mortgages being set aside or varied to the mortgagee’s disadvantage. No sensible mortgagee should enter into a loan or mortgage transaction without having a strategy in place to make it difficult for the mortgagor to attack the loan or mortgage later under either general law or statutory unconscionability.

Many strategies exist for managing the risk of unconscionability defences. The previously popular strategy of limiting contact with the mortgagor or enquiries into the mortgagor’s circumstances is now less viable given recent decisions that failure to enquire can itself be unconscionable. In the light of those decisions, making enquires sufficient to form a genuine belief that it is likely the loan will be paid back without the mortgagee needing to sell the security property and that the loan is for a sensible purpose is a far better policy. A mortgagee should also do what it can to ensure that the mortgagor is advised by at least a solicitor (and preferably also an accountant) about the mortgage transaction before entering into that transaction.

See Unconscionability.