Property
3. Torrens Principles
Authors: Staff Legal Eagle
Firm / Chambers:
Last updated: 12 Jul 2015
- The purchase and sale of land in Australia was previously regulated under an old system of title dependent on long chains of title deeds. This system was uncertain, unreliable, complex and costly.
- Today property law is regulated according to the Torrens system. The Torrens system is a system of title by registration rather than registration of title. It removes the necessity of tracing the seller’s title through a series of documents.
- The Torrens system operates on the principle of indefeasibility. Indefeasibility simply refers to immunity from any adverse claims to the land that a registered proprietor enjoys.
- Two competing theories of indefeasibility exist under Australian property law. The courts have not ruled for or against any theory and if a situation arises in which you suspect fraud you should speak to your lawyer as soon as possible. The two theories of indefeasibility are:
- immediate indefeasibility: under this theory the purchaser obtains an indefeasible title as soon as it is registered regardless of whether the registration document is valid; or
- deferred indefeasibility: under this theory the purchaser’s title can be set aside if the real proprietor of the property makes a claim. The title becomes indefeasible if a new purchaser transfers his or her title to another purchaser who is bona fide for value without notice before any claim is put forward by the real proprietor.
- It is also important to understand the difference between unregistered interests and registered interests under the Torrens system. If you have an unregistered interest in land Australian property law will sometimes recognise that interest under the principles of equity (moral right). Priority rules apply between unregistered and registered interests and between multiple unregistered interests. Generally speaking:
- registered interests will take priority over unregistered interests; and
- priority between unregistered interests is determined by common law equitable principles. Generally the person who is ‘first in time’ has better equity. This can change depending on aggravating factors such as:
- inaction or postponing conduct; or
- failure to lodge a caveat.
- There are some exceptions to the rule that the registered proprietor has an indefeasible title to land. Fraud is one example and is the most common exception to indefeasibility. Section 42 of the Real Property Act 1900 (NSW) clearly states that indefeasibility stands except in case of fraud. If a person engages in fraudulent behaviour then their interest can be set aside. The following requirements must be met before an interest can be set aside:
- the registered proprietor’s interest must have been acquired through fraud; and
- the fraud must be either personal dishonesty or moral turpitude (wicked behaviour) or occur through the acts of an agent.
- Unless fraud can be proven against the registered proprietor the registration will confer indefeasibility. Courts in Australia have stated that actual or imputed knowledge of another person’s fraud can also amount to fraud.
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