Daniel Pinti, Senior Associate

On 3 December 2008, the Queensland Parliament urgently passed the Property Law (Mortgagor Protection) Amendment Bill 2008 (Qld) which amends the Queensland Property Law Act 1974.

Purpose of the Bill

The objective of the Bill is to protect the interests of mortgagors whose properties are sold by mortgagees when exercising their power of sale. In particular, the Bill is concerned with the duty imposed upon mortgagees to ensure that the property is sold at market value. This Bill has been passed due to the overwhelming concerns engendered by the current global economic and financial circumstances that are being felt especially by financial institutions and struggling homeowners. In Parliament, Anna Bligh, Premier of Queensland stated that the amendments are to protect mortgagors from "mortgagee fire sales" where mortgagees intentionally sell the repossessed property below the market value to reclaim enough money to cover their own costs, but show no regard to the interests of the mortgagor. The Queensland Government, by strengthening the laws which relate to a mortgagee's power of sale, are attempting to maximise the mortgagor's ability to pay the debt and to limit the residual debt of the mortgagor.

Particular Clauses

Currently, mortgagees who exercise a power of sale are required to take reasonable care to ensure that the property is sold at market value. Firstly, the Bill extends the duty of the mortgagee so that it now caters for situations in which property is sold by a receiver under a delegated power or by the mortgagee who is acting as attorney for the mortgagor.

The Bill specifies the steps which need to be taken in order for the mortgagor of a prescribed mortgage to satisfy the duty. Under the amendments, unless they have a reasonable excuse, the mortgagee or receiver must:

  • adequately advertise the sale;
  • obtain reliable evidence of the property's value;
  • maintain the property, including by making reasonable repairs;
  • sell the property by auction, unless it is appropriate to sell it in another way; and
  • do anything else prescribed under a regulation.

The Bill also provides that mortgagees who fail to comply with this duty will face fines of up to $20,000.00.

The amendments do not apply to a mortgagee or receiver if, immediately prior to the commencement, the mortgagee was entitled to exercise the power of sale.

The bottom line for all mortgagors and receivers is that they must strictly comply with the steps set out in the amendments or otherwise be liable for a significant penalty. In addition, these new provisions apply to all mortgages, including those which exist prior to the commencement of the new legislation, thus the extended duty and legislated requirements for its fulfillment will apply to all mortgages.

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