The Registrar of Titles and the President of the QLS recently sought solicitors’ views on whether paper certificates of title play any useful role in current property law practice and whether there are any compelling arguments for their retention. The corollary seems to be that if no compelling arguments for their retention are raised then paper certificates of title will be abolished.
I think abolition of paper certificates of title would be a retrograde step. To me a paper certificate of title is an important piece of evidence which can be used to prevent fraud. A certificate of title is evidence of the ownership of the property and the transaction, including encumbrances, entered on it and presents a significant obstacle to anyone who fraudulently claims to be the registered owner of the property to which the certificate refers.
In New South Wales a person fraudulently claimed to be the owner of a property title of which was unencumbered. By fraudulently completing a statutory declaration and application for a replacement certificate of title that person received a replacement certificate and raised a loan on it claiming, again fraudulently, to be the registered proprietor. In due course when the mortgagee demanded payment from the “mortgagor” i.e. the true registered proprietor, that person was able to produce the original certificate of title which of course showed no mortgage on the title.
If the registered proprietor in the above example had no certificate of title imagine the difficulties they would have faced in dealing with the ostensible mortgagee. The abolition of paper certificates of title removes protection for the registered proprietor and also for the first mortgagee. If there is no paper certificate of title, second and subsequent mortgagees are not obliged to require the first mortgagee to produce the title to enable the subsequent mortgage or mortgages to be registered. Consequently the first mortgagee may not even be aware that a subsequent mortgage has been registered until after the event.
It remains a relatively common practice for a registered proprietor to pledge a title by way of lien for a short term loan. For instance, clients sometimes deposit their certificates of title with their bank as short term security for a temporary overdraft or with their solicitor to cover fees. If paper certificates of title are abolished then, of course, this facility will not be available.
On a less legal but none the less just as important point, in my experience most property owners take comfort (once they have paid off the mortgage) in holding a paper certificate of title which evidences their ownership of what then becomes truly their property. It is of course not incumbent on property owners to require the issue of a paper certificate of title and indeed some do not. That is their choice. However, for the reasons cited above, our firm recommends to conveyancing clients and mortgagees alike that they should hold a paper certificate of title. An overwhelming majority do so.
What are the disadvantages in retaining paper certificates of title?
Only two come to mind. The first is the “inconvenience” to the registrar of titles in having to issue such a document. However the system is set up to issue paper titles and it is hard to envisage any great financial saving in abolishing them. The second is that paper certificates of title are easy to lose or to mislay. In many years of practice both in New South Wales and Queensland I have had only two clients who have mislaid certificates of title both of which subsequently turned up after a diligent search. I have not had a single client who has lost a certificate of title. If we as solicitors are entrusted with the care of certificates of title for clients then it is our duty to ensure we have a proper security system in place and I am sure that all firms uphold this duty.
In summary there are several reasons for retaining paper certificates of title but no valid reason for their abolition.