New rules impose obligations on lawyers and conveyancers acting in land transactions to verify the identity of clients and check that clients have the authority to deal with land.
To verify a client’s identity, legal representatives can apply the “Verification of Identity Standard” which involves a face-to-face in-person interview with the client who must produce original identification documents to establish their identity.
To verify a client’s authority to deal, legal representatives must take reasonable steps to verify that their client is a legal person who has the right to enter into the land transaction.
From 1 May 2016, new verification of identity rules intended to reduce the risk of identity fraud and the registration of fraudulent land transactions apply to land transactions in New South Wales.
The Conveyancing Rules, published by the NSW Land and Property Information on 28 March 2016, impose new requirements for lawyers and conveyancers to verify the identity of their clients and check that they have the authority to deal with land. The Rules came into effect on 1 May 2016 however there is a transition period of 3 months with full compliance required from 1 August 2016.
What are the new rules regarding verification of identity?
Under Rule 4.1, legal representatives must take reasonable steps to verify the identity of:
- their clients including a client’s agent; and
- persons to whom certificates of title are provided.
For the purposes of complying with the Rules, a legal representative can either:
- apply the Verification of Identity Standard (VOI Standard); or
- verify the identity of a person in some other way that constitutes the taking of reasonable steps.
The VOI Standard involves a face-to-face in-person interview with the person to be identified who must produce original identification documents from the applicable categories in order to establish his or her identity. The categories are listed in a cascading arrangement and the person being identified must produce original documents in one of the categories starting with the highest category before moving to the next category if documents in the higher level cannot be produced. For Australian citizens or residents, the highest category requires an Australian passport or foreign passport plus an Australian drivers licence or photo card. For persons who are not Australian citizens or residents, the highest category requires a foreign passport plus another form of government issued photographic identity document.
In the case of companies, legal representatives must confirm the existence of the company by searching ASIC’s records, take reasonable steps to establish who is authorised to sign or witness the affixing of the company’s seal and verify the identity of the individuals signing or affixing the seal. For attorneys, they must take reasonable steps to establish that the conveyancing transaction is authorised by the power of attorney and verify the identity of the attorney.
Identity agents may be engaged by legal representatives to undertake the verification of identity process on their behalf. Evidence of the verification of identity must be retained for at least 7 years in support of the relevant dealing lodged with the LPI during the conveyancing transaction.
What are the new rules regarding authority (or right to deal)?
Rule 4.3 deals with a party’s authority (or right to deal) with land. The right to deal is the entitlement of a person to be a particular party to a conveyancing transaction (such as a transfer, mortgage, lease or other dealing with an estate or interest in land). For each conveyancing transaction, legal representatives must take reasonable steps to verify that their client is a legal person who has the right to enter into the transaction. Similarly, a mortgagee or legal representative of a mortgagee, must verify that the mortgagor is a legal person and has the right to enter into the mortgage.
Verifying right to deal requires legal representatives to sight supporting evidence that includes the name of the person whose right to deal is being verified and the property or transaction details in order to link the registered holder or transacting party to the land.
For a party that is relinquishing an interest in land, this could include:
- the certificate of title;
- government rates notices;
- utility bills; or
- land tax assessment notices.
For a party acquiring an interest in land, this could include:
- the contract of sale for the property; or
- loan documentation.
More extensive checks and enquiries should be made where doubt arises in relation to a transaction and a person’s right to deal.
Post by Patrick Pilton