The main reason why banks are often considered to still have a mortgage even though the
mortgage has not been registered is because the registration of mortgages in the Torrens system is
sometimes said to be only to ensure priority. That is to ensure which mortgagee can claim the property
first in the event that a borrower defaults.
The bank ensures that it has priority by having a priority notice placed
over the folio of the register when a borrower arranges a loan. This priority
notice remains over the folio for 30 days and it means that no-one else can place dealings on
that particular folio without notice of the bank's interest.
Immediately prior to releasing the loan funds to the purchaser, the bank's solicitors effect an
unregistered dealings search of the dealings on the folio of the register which they are mortgaging.
This means the bank can find out if the borrower is mortgaging the same land to more than one lender.
The print out below shows an unregistered dealings search conducted by my mortgagee (a large Australian
bank) prior to settlement. It shows that the only dealing on folio 4267/27 on 23rd February 1994 was a
transfer to me and the bank's mortgage. The bank would be ensured that its priority was preserved.
However other dealings have been placed on another folio affecting the same land. On 22 February 1994
two dealings were placed on folio 55429/11 which is supposed to have been the successor folio to
4267/27. (It is important to note here that these dealings have been placed on this folio 55429/11 some
10 days before folio 55429/11 was officially "issued" on March 1, 1994).
It is obvious that the bank could not have known about the existence of these dealings on folio 55429/11 as
folio 55429/11 was not in existence yet. The bank has only concerned itself with investigating the
dealings which might have been registered on the folio known to them - that is the folio specified on the mortgage
deed. In this case folio 4267/27.
QUESTIONS WHICH COULD BE ASKED HERE
1. What is the point of the Unregistered Dealings Report if other folios are
in existence which relate to the same land?
2. Should bank shareholders be concerned about this laxity on the part of the
banks in ensuring that other dealings are not placed on folios which could
affect priorities?
The print out below shows the placing of dealings on folio 55429/11. If we can remember previous pages, we saw then
that folio 55429/11 was supposed to have been a successor folio to 4267/27.
