Wednesday, 16 March 2016

What are the 2016 verification of identity provisions for non electronic land transactions in Victoria?


Further to my post about Verification of Identity on 17 December 2014, there is now a proposal to require the same level of verification for paper transactions as well as electronic transactions.

For consistency between paper and electronic conveyancing, Land Victoria has introduced a new verification of identity process for any paper instrument or dealing lodged with Land Victoria.

Lawyers, mortgagees and conveyancers must take reasonable steps to verify a client's identity. 

The Verification Process Simplified
A person must have their identity verified if they are a party to a paper dealing to be lodged with Land Victoria. 

The verification process comprises three key elements:
1.   Verification of a person's identity
2.   Verification that the person is a legal person
3.   Verification that the person has the right to enter into the transaction.
The Verification Of Identity Interview may be with the lawyer, the mortgagee or with a third party Identity Agent authorised by them. 

At the Interview, the client must produce original identification documents (Identity Documents) to formally verify their identity (Acceptable forms of identity documents include a passport, driver's licence and a birth or citizenship certificate).

The person conducting the interview is required to take a copy of these documents, which will be retained for nine years from the date of the Interview.

Once completed, an Interview remains current for two years.


Verification of Persons Overseas
Presently there is no formal process to verify the identity of a person residing out of Australia. I expect that Australian Consular Officials may be called upon to undertake this task (more details below).

More than one Paper Dealing
Standard sales and acquisitions of land generally involve more than one paper dealing to complete the land transaction. For example, a purchaser of land who borrows money to pay for the purchase will be need to sign a mortgage and a land transfer. 

In that case, both the purchaser's lender and the purchaser's lawyer will have separate verification requirements that will need to be satisfied. 

I would expect that the lawyer and the lender would co-ordinate their efforts to minimise unnecessary duplication of the Interview process.

Who May Perform the Verification of Identity?
The lender, a lawyer or a third party Identity Agent authorised to undertake the verification (such as Australia Post) may conduct the Interview.

Mortgagees may use reasonable steps or safe harbour procedures to identify mortgagors in all jurisdictions for both paper and PEXA mortgages.

ARNECC Participation Rules – version 3
1.   Verification Of Identity is required for all PEXA dealings as specified in Model Participation Rules version 3.
2.   Mortgagees must take ‘reasonable steps’ to identify mortgagors (see previous blog on this issue). 
3.   If a Subscriber (such as a panel lawyer) is lodging mortgages on behalf of mortgagees, the Subscriber must be reasonably satisfied that the mortgagee has taken reasonable steps to verify the identity of each mortgagor – cl 6.5.1(b).  As a result, Subscribers will need to ask mortgagees what steps are taken.  This enquiry can relate to the procedure used by mortgagees as distinct from asking for details of the steps taken on a case by case basis.
4.   The rules prescribe a ‘safe harbour’ procedure that can be used called the ‘Verification of Identity Standard’ – cl 6.5.2.  This standard requires the mortgagee or an approved ‘Identity Verifier’ (such as lawyers, finance brokers and Australia Post) to conduct a face-to-face interview.  If documents containing photographs are produced, the mortgagee or Identity Verifier must be satisfied that the person being identified is a reasonable likeness to the person in the photographs – Schedule 9.
5.   Often mortgagees will not know whether a mortgage will be registered through PEXA or paper. As a result, mortgagees normally also need to comply with the rules for paper dealings.  It is therefore good news that paper and PEXA processes should be aligned from May 2016.
6.   There is no safe harbour prescribed for Verification Of Identities conducted overseas.  However, ARNECC and the Department of Foreign Affairs and Trade (DFAT) have developed a new arrangement to assist. The VOI service will be provided by an Australian Embassy, High Commission or Consulate – see MPR Guidance Note #2 – Verification of Identity (Updated).  The service can be used for both electronic and paper conveyancing.

Procedures
1.   Verification Of Identity for paper dealings now applies to most dealings for land located in Victoria.
2.    Evidence supporting the Verification Of Identity must be retained for seven years from the date of lodgement of the mortgage.
3.    In Victoria, mortgages lodged through PEXA are void if the mortgagee ceases to retain a copy of the mortgage signed by the mortgagor – s 74(3) Transfer of Land Act 1958.  The copy can be retained electronically.  PEXA mortgages can also be signed electronically.
4.    Mortgagees who title insure should ensure that their insurer’s cover will apply given the process used for VOI.

Conclusion  
It seems that we are edging ever closer to the day when all conveyancing transactions will be conducted electronically. For now, it seems that the requirements for conducting paper and electronic transactions are being aligned, to the point where eventually the procedures will be identical. Then, the inevitable question will be: "Do we need paper transactions any more?"

WG Stark 
Hayden Starke Chambers

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