Home sold without knowledge of owner

You may have seen our Managing Partner Archie Tsirimokos in the news lately. He appeared on Channel 7’s Sunrise show and 2GB radio, as well as in the Canberra Times.

The article then appeared in many major daily newspapers across Australia. The story was about the unfortunate property fraud suffered by an ACT property owner. The following are some of the fact that may give context to what has appeared in the media.

What happened?

A fraudster managed to sell a home in Macgregor without the owner’s knowledge, pocketing the sale proceeds.

Surely they can get the house back?

Unfortunately not. On the basis that the innocent buyer is now the registered owner of the property, the buyer has what is called indefeasible title. This is one of the founding principles of Torrens title. It exists so that people may have confidence that the Land Titles Register is conclusive as to ownership of property.

Whilst the legislation provides that ‘fraud’ is an exception to indefeasibility, the High Court has long held that this must be fraud on the part of, or attributable to, the person who becomes the registered owner of the property. Where the buyer is innocent of the fraud this will not apply. In this instance there is no indication that the buyer is anything other than an innocent party and as such gets good title to the property, albeit at the expense of the original owner.

What can the unfortunate home owner do?

As the Land Titles Register is conclusive as to ownership it can result in some harsh outcomes where people suffer a loss due to the inflexibility of the application of the legislation on which it is based. This is why territories and states have a compensation scheme to compensate those who suffer a loss as a result of the operation of the register. In the ACT the Land Titles Act 1925 contains provisions which entitle the deprived owner to seek compensation, but these provisions are not straightforward. Subject to the original landowner complying with the requirements of the legislation, they will have the right to bring an action against the Territory claiming damages. As it is a claim for damages it may be open to the Territory to claim contributory negligence, depending on the particular facts involved.

What are the implications?

The manner in which property transactions are executed is now likely to come under the spotlight – particularly when it comes to identifying the parties involved. The Office of Regulatory Services have issued a fact sheet which urges businesses to have a due diligence framework in place to alert them to improper activity or conduct. In other countries professionals involved in property transactions are required by legislation to

undertake the equivalent of 100 point ID checks. Whilst it is not known whether this would have prevented this fraud, it may be the case that such an obligation may be imposed on Australian property professionals in the future. When e-conveyancing comes in lawyers will be required to undertake such ID checks. However e- conveyancing is a long way off for the ACT, unlike in other states or territories.

For more information contact:

Archie Tsirimokos | Partner
(02) 6279 4444

John Morrissey | Special Counsel
(02) 6279 4444