Pri­or­i­ty notices: Pru­dent or impractical?

S
Swaab

Contributor

Swaab, established in 1981 in Sydney, Australia, is a law firm that focuses on solving problems and maximizing opportunities for various clients, including entrepreneurs, family businesses, corporations, and high-net-worth individuals. The firm's core values include commitment, integrity, excellence, generosity of spirit, unity, and innovation. Swaab's lawyers have diverse expertise and prioritize building long-term client relationships based on service and empathy.
Priority notices are cheap but temporary, so if there is a caveatable interest, perhaps a caveat should be preferred.
Australia Real Estate and Construction

With the dead­line for manda­to­ry e-con­veyanc­ing fast approach­ing, con­veyanc­ing in New South Wales has unequiv­o­cal­ly entered the dig­i­tal age.

And while the change from ?'paper' con­veyanc­ing to online plat­forms gives prac­ti­tion­ers the oppor­tu­ni­ty to stream­line their ser­vices and poten­tial­ly pass on costs sav­ings to clients, it also cre­ates new poten­tial prob­lems – one of the most pro­nounced of which is fraud.

It is thought that pri­or­i­ty notices will be a use­ful tool in the respon­si­ble e-conveyancer's armoury – if gen­uine land trans­ac­tions are flagged by a pri­or­i­ty notice, it is hoped that iden­ti­fi­ca­tion of poten­tial­ly fraud­u­lent trans­ac­tions will be quick­er and easier.

But the actu­al legal and prac­ti­cal effects of pri­or­i­ty notices have left many scratch­ing their heads. What are they? And how and why should they be used?

This arti­cle aims to answer some of the most com­mon ques­tions about pri­or­i­ty notices.

What is a pri­or­i­ty notice?

Pri­or­i­ty notices were intro­duced in Novem­ber 2016 under the Real Prop­er­ty Amend­ment (Elec­tron­ic Con­veyanc­ing) Act 2015.

A pri­or­i­ty notice is a form of land deal­ing which, once reg­is­tered on title:

  • acts as a notice to the pub­lic that some­one intends to lodge a deal­ing on a rel­e­vant title (for exam­ple, a trans­fer, lease or mort­gage); and
  • tem­porar­i­ly (ie for the dura­tion of the pri­or­i­ty notice) pre­vents the reg­is­tra­tion of oth­er deal­ings in order to pre­serve the pri­or­i­ty-on-title of the deal­ing cov­ered by the pri­or­i­ty notice. Any sub­se­quent deal­ings are not­ed on title as 'unreg­is­tered deal­ings' until the pri­or­i­ty notice is with­drawn or lapses.

Thus, for exam­ple, if you are intend­ing to lodge a trans­fer or mort­gage, you can reg­is­ter a pri­or­i­ty notice to hold the transferee's or mortgagee's place on title up until settlement.

It has been sug­gest­ed that the pri­or­i­ty notice replaces what used to be known in New South Wales as a 'set­tle­ment notice'. How­ev­er, we con­sid­er the pri­or­i­ty notice to be more com­pa­ra­ble to a caveat.

Lodge­ment, dura­tion and cost

Pri­or­i­ty notices must be lodged online via PEXA, but they can apply to any trans­ac­tion—paper or electronic.

A pri­or­i­ty notice has an ini­tial pri­or­i­ty peri­od of 60 days from the date of reg­is­tra­tion and can be extend­ed once, for a fur­ther 30-day peri­od. How­ev­er, a pri­or­i­ty notice can also be with­drawn before the end of the 60-day (or extend­ed 30-day) period.

Pri­or­i­ty notices are cheap to reg­is­ter (approx. $48 for sin­gle or mul­ti­ple titles) and to extend (approx. $21). The fee for with­draw­ing a pri­or­i­ty notice is approx­i­mate­ly $25.

Pros and cons

Pri­or­i­ty notices have some dis­tinct advan­tages and disadvantages.

In their favour:

  • they are cheap
  • they are quick and easy to lodge
  • a caveat­able inter­est is not need­ed in order to reg­is­ter a pri­or­i­ty notice – all that is required is that you are a par­ty to a land dealing
  • a sin­gle pri­or­i­ty notice can remain on title for a rea­son­able time (60 to 90 days), and
  • sequen­tial pri­or­i­ty notices can be lodged with­out lim­it in rela­tion to the same land deal­ing (ie when a pre­vi­ous pri­or­i­ty notice lapses).

On the oth­er hand:

  • unlike a caveat, a pri­or­i­ty notice is time lim­it­ed and does lapse, and
  • pri­or­i­ty notices do not pre­vent reg­is­tra­tion of all sub­se­quent deal­ings – for exam­ple, a caveat is not sub­ject to a pri­or­i­ty notice and there can also be com­pet­ing pri­or­i­ty notices.

Pri­or­i­ty notices vs caveats

We con­sid­er the auto­mat­ic laps­ing attribute to be one of the main pit­falls of a pri­or­i­ty notice. As stat­ed above, when a pri­or­i­ty notice is reg­is­tered, sub­se­quent deal­ings lodged for reg­is­tra­tion are not­ed on title as 'unreg­is­tered deal­ings' until the pri­or­i­ty notice deal­ing is reg­is­tered or the pri­or­i­ty notice lapses or is with­drawn. The abil­i­ty to lodge con­sec­u­tive pri­or­i­ty notices for the same deal­ing (if the deal­ing is not reg­is­tered with­in the ini­tial pri­or­i­ty peri­od), does not appear to pre­vent an unreg­is­tered deal­ing not­ed on title (if in reg­is­tra­ble form) from reg­is­ter­ing imme­di­ate­ly on the lapse of the pri­or­i­ty notice and before a sec­ond pri­or­i­ty notice can be lodged. This is clear­ly unsat­is­fac­to­ry if the deal­ing for which you are try­ing to pre­serve pri­or­i­ty can­not be reg­is­tered with­in the pri­or­i­ty notice peri­od for what­ev­er reason.

So, while many have pon­dered whether caveats will lose their rel­e­vance with the intro­duc­tion of the pri­or­i­ty notice, we believe that, if a there is a caveat­able inter­est, it may well be more pru­dent to lodge a caveat than a pri­or­i­ty notice – par­tic­u­lar­ly, if the reg­is­tra­tion date of the deal­ing can­not be pre­dict­ed with certainty.

The beau­ty of a caveat is that it remains on title indef­i­nite­ly, pre­vent­ing vir­tu­al­ly all deal­ing with the title until it is either with­drawn (for exam­ple, when pay­ment is made to the caveator) or is lapsed by the own­er or anoth­er inter­est­ed per­son seek­ing its removal. Giv­en that achiev­ing laps­ing can be com­plex (and even involve court pro­ceed­ings if the caveator defends their caveat­able inter­est), a caveat gives strong pro­tec­tion for the pri­or­i­ty of a pro­posed dealing.

Even though the pri­or­i­ty notice and caveat have dis­tinct pur­pos­es—the pri­or­i­ty notice mere­ly to pre­serve the pri­or­i­ty of a spe­cif­ic deal­ing that is to be lodged for reg­is­tra­tion at a lat­er time and the caveat to act as a form of secu­ri­ty and a warn­ing to third par­ties that the caveator has an equi­table or legal inter­est in the land – where a caveat­able inter­est exists, either can be used to pro­tect the pri­or­i­ty of an impend­ing deal­ing. In our view, where that caveat­able inter­est exists, reg­is­ter­ing a caveat is the safer bet (albeit that it costs $100 more).

Con­clu­sion

Although pri­or­i­ty notices are, unde­ni­ably, a quick and cheap tool that can be used to pre­serve a future dealing's pri­or­i­ty on title, one must also care­ful­ly con­sid­er whether:

  • the rel­e­vant deal­ing will, in fact, be reg­is­tered with­in the pri­or­i­ty notice peri­od, and
  • if the cir­cum­stances per­mit, whether a caveat should be lodged instead.

Per­haps these draw­backs explain why their uptake in New South Wales has been slow.

For further information please contact:

Daniel Kentwell, Senior Associate
Phone: +61 2 9233 5544
Email: dck@swaab.com.au

Carly Howard, Solicitor

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

Mondaq uses cookies on this website. By using our website you agree to our use of cookies as set out in our Privacy Policy.

Learn More