Indefeasibility and the Torrens System

I don’t advise on property law, but this topic is relevant to asset protection.

The Torrens system of registration of title for real property was first introduced in the late 1800 and it has slowly been replacing the existing system since then. The existing system of title is known as ‘old system title’ and it was complex and cumbersome.

In old system title when a property was sold the ownership had to be proved by both the physical title and locating all the previous transfers relating to that title. Sometimes documents went missing and it was a real pain in the arse being both time consuming and costly.

Torrens was introduced as a system of registration to replace all of this. The name registered on title was the legal owner. This is enough proof.

Indefeasibility refers to the fact that what is registered on title is proof. So, a registered owner is proof of legal ownership. A registered mortgage is proof of the legal mortgage. It is said to be a ‘system of title by registration’.

But this doesn’t mean registered ownership takes priority in all cases.

An example is fraud. Where title to a property is fraudulently transferred to someone else then them being registered owner does not mean it is indefeasible. This can happen with mortgages too. There is a recent case where one spouse mortgaged a jointly owned property to borrow money by forging the signature of their spouse. Since this was fraudulent the lending bank could only recover half of their money.

Keep in mind that there are also unregistered or equitable interests. The legal owner may not be the beneficial owner of a property. This happens where they are acting as trustee under an express trust, such as a discretionary trust, or where a trust is implied such as a resulting trust. In these cases the courts will enforce transfer of title based on equitable grounds.

Then there claw back provisions in various legislation such as

  • S 37A of the Conveyancing Act NSW (and other state equivalents)
  • S 120 to s121 of the Bankruptcy Act
  • Family Law Act
  • Succession Acts

Title of a property might be held by person A but the courts can reverse this and transfer it to person B and then to creditors, spouses, missed out beneficiaries etc.

So, in summary, indefeasibility does not mean a property dealing cannot be attacked, but it is evidence of the current legal ownership of property.

Discuss at https://www.phttps://www.propertychat.com.au/community/threads/legal-tip-223-indefeasibility-and-the-torrens-system.40248/ ropertychat.com.au/community/threads/legal-tip-223-indefeasibility-and-the-torrens-system.40248/

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