04 Aug 2016

Verification of identity in NSW - full compliance now required

From 1 August 2016, full compliance is required with the NSW new identity verification rules in conveyancing transactions.

The NSW Land and Property Information (LPI) has introduced new conveyancing rules under section 12E of the Real Property Act which are in full effect from 1 August 2016 (Conveyancing Rules).  

These Conveyancing Rules relate to, amongst other things, the requirements for lawyers and conveyancers to verify the identity of their clients and to check that they have authority to deal with the land.

What transactions do the new rules apply to?

The Conveyancing Rules apply to:

  • all conveyancing transactions which are transactions involving one or more parties and the purpose of which is:
    • to create, transfer, dispose of, mortgage, charge, lease or deal with in any other way an estate or interest in land, or
    • to get something registered, noted or recorded in the titles register, or
    • to get the registration, note or record of something in the titles register changed, withdrawn or removed; and
  • the delivery of certificates of title to clients and mortgagors.

What are examples of Conveyancing Transactions?

Documents required to be registered including:

  • transfers of land or leases;
  • leases;
  • variations and surrenders of leases; and
  • easements,

as well as documents which create or deal with an interest in land (which are not registered) such as:

  • agreements for lease;
  • contracts for sale; and
  • possibly call options.

What is the new rule about verifying identity?

Under Rule 4.1.2:

"A Representative must take reasonable steps to verify the identity of:

(a) Clients: each Client or each of their Client Agents; and

(b) persons to whom certificates of title are provided:

(i) any Client or Client Agent, prior to a Representative giving a certificate of title to that Client or Client Agent; and

(ii) where a Representative acts for a mortgagee, any existing mortgagor, former mortgagor or their agent, prior to the Representative giving a certificate of title to that existing mortgagor, former mortgagor or their agent."

How do you verify identity?

For the purposes of complying with the Conveyancing Rules, a legal representative can either:

  • apply the Verification of Identity Standard; or
  • verify the identity of a person in some other way that constitutes the taking of reasonable steps.

Generally, the Verification of Identity Standard can be applied by a legal representative, its identity agent, or by both in combination.

The Verification of Identity Standard requires a face-to-face interview and production of at least two original identification documents (depending on the nature of those documents).

In the case of a company, the Verification of Identity Standard requires a legal representative to:

  • confirm the existence and identity of the body corporate by conducting a search of ASIC's records; and
  • take reasonable steps to establish who is authorised to sign or witness the affixing of the seal on behalf of the body corporate; and
  • verify the identity of the individual or individuals signing or witnessing the affixing of the seal on behalf of the body corporate as one would for execution by an individual.

In the case of execution by an attorney, the legal representative must take reasonable steps to establish that the conveyancing transaction is authorised by the power of attorney and verify the identity of the attorney.

A legal representative may engage an "identity agent" to undertake the verification of identity process on its behalf.

LPI and Storing Requirements

While the LPI does not yet require a certification that the verification of identity process has been undertaken in order to register dealings, we expect that this will follow as it is a requirement in other States. In the meantime, legal representatives are required to keep a copy of the verification of identity for seven years as a document supporting the dealing. The information will be retained securely.

Once an identity has been verified, it need not be re-verified for two years.

What is the rule about authority to deal?

Rules 4.3.2 and 4.3.3 say:

"For each Conveyancing Transaction a Representative must take reasonable steps to verify that its Client is a legal person and has the right to enter into the Conveyancing Transaction.

A mortgagee, or a Representative of a mortgagee, must, for each mortgage, variation of mortgage or transfer of mortgage, take reasonable steps to verify that the mortgagor is a legal person and has the right to enter into the mortgage."

The legal representative's obligation to take reasonable steps to verify that its client is a legal person and has the right to enter into the conveyancing transaction is in addition to the verification of identity requirement.

What should you do now?

If you are to be a signatory to a Conveyancing Transaction, or if you are to receive a certificate of title from your legal representative, you must contact your legal representative to have your identity verified.

 

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Disclaimer

Clayton Utz communications are intended to provide commentary and general information. They should not be relied upon as legal advice. Formal legal advice should be sought in particular transactions or on matters of interest arising from this communication. Persons listed may not be admitted in all States and Territories.