Encumbrances on Your Property by Way of Mortgage or Caveat
One of the first questions that you may be asked by your solicitor or conveyancer when you decide to sell your property is “where is your title deed?”
It is often the case that the vendors do not know.
1. A Mortgage Is Registered On Your Title Deed
A simple Land Title search of the Title Deed will show whether there is a mortgage registered on the Title Deed. If there is, then the bank or other financial institution that has registered the mortgage will be in possession of the Title Deed. The Title Deed will be held by them as security for their loan until such time as the loan or mortgage has been repaid.
In some cases the vendors of the property tell us that their loan was repaid years ago. So why is it still showing up on the Title Deed?
In order for the mortgage to be taken off the Title Deed a Form of Discharge of Mortgage has to be prepared by the Bank or Financial Institution and produced at the Land Titles Office together with the original Title Deed for registration. Only then it would no longer show up on the Deed.
The Bank or financial institutions do not register the Discharge of Mortgage as a matter of standard procedure when the loan has been repaid. Quite often they write to their customers and advise them that the loan has been finalised and may suggest to their customers that they make arrangements to collect their Title Deed and a Form of Discharge of Mortgage, but usually they do not automatically attend to the registration of these documents themselves.
While the mortgage is still showing on the Title Deed, whether the loan has been repaid or not, the Title Deed is deemed to be encumbered by that mortgage.
2. Encumbrances On Your Property By Way Of Caveat
Another form of financial encumbrance on a Title Deed can be a Caveat. A Caveat is a warning that another party has an interest in the property, usually because they are owed money by the owner of the property but have not formally registered their interest by way of a mortgage. One example of this could be a private loan between friends.
Although a Caveat does not show up on the Title Deed the same way as a Mortgage does, it does show up on a Title Search and most certainly there could be no registration from one party to another if the Caveat was not formally withdrawn on or before settlement. As with a form of Discharge of Mortgage, in order to clear a Title encumbered by a Caveat the owner of the Title Deed would need to obtain a Withdrawal of Caveat from the Caveator (the person who lodged the Caveat).
At Rankin Ellison we take some time to ascertain from our vendor clients where their Title Deed is when we are preparing a Contract for Sale. We will carry out a “search” of the Title Deed and if either a Mortgage or a Caveat or both are registered on the Title Deed we do all things necessary to obtain the correct documents to remove the encumbrances.
If the mortgage has already been repaid then we would contact the financial institution that has registered the Mortgage and ask them to prepare a Discharge of that Mortgage and send the documents to us to lodge for registration.
If however the mortgage is current and still being repaid we arrange the settlement with the financial institution and provide them with the funds they require to release the Mortgage on settlement.
The same applies to a Caveat. We contact the Caveator on behalf of our client and ascertain what their requirements would be in order to release the Caveat by providing us with a Withdrawal of Caveat.
It is easy to understand why people think that there is no Mortgage or Caveat on their Title when they have repaid their loans but the fact is that until the documents that created the Mortgages or Caveats have been formally discharged and registered at the Land Titles Office they will show up as encumbrances on the Title Deeds.
