Introduction to taking security in Australia — title and interest real property

When handling a matter or transaction that involves the taking of security in real property, it is essential that legal practitioners have a sound understanding of title and interest in real property. Against this background, title and interest in real property is the focus of this subtopic.

Torrens system

Torrens title is a system for land. Under the Torrens system, ownership of land is only obtained once the title is registered and no title arises until registration. Torrens title creates a single document for the ownership of each land holding which is guaranteed by the relevant state government.

This guidance note explains the role and the importance of the Torrens register, and the government’s promise that the land owner, or “registered proprietor” recorded in the system, is the true owner of their land. It also explains what is a Torrens title “dealing”, and some key matters relevant to a registered mortgage over Torrens system land, including the concept of indefeasibility of title and the use and role of the certificate of title.

This guidance note also provides guidance on how legal practitioners can access Torrens title information that is required when acting or advising on matters relating to taking security over real property.

See Torrens system.

Other systems

Legal practitioners may encounter old system title land in New South Wales, Victoria, Western Australia, South Australia and Tasmania. It is therefore practical to understand the nature of old system title land. This guidance note describes the nature of old system title land, and considers whether conversion from old system title to Torrens title should be part of a matter or transaction that a legal practitioner is acting or advising on. The old system title concept of “good root of title” is also explained.

It is common for legal practitioners to encounter shared title in all jurisdictions, and this guidance note provides legal practitioners with the essentials of shared title, which includes strata and community title.

Company title is a method or ownership which enables apartments in residential flat buildings held under a single title to be separately owned. In addition to providing legal practitioners with the essentials of company title, this guidance note also considers the practical aspects of taking security over company title property.

See Other systems.

Legal interests

For the protection of interests under law, property is commonly divided into real property and personal property, and interests can be legal interests or equitable interests. The division and difference between legal interests and equitable interests are important to a legal practitioner for many reasons, including when determining when and whether to take real property or personal property as security, and how to protect a client’s interest in the security, which is dependent upon whether the interest is a legal interest or an equitable interest. This guidance note expands on these points, and provides common examples of legal interests in real property. It also explains how legal interests can be created by registration and by deeds, and provides practical guidance regarding how to ensure a deed is binding.

See Legal interests.

Equitable interests

This guidance note starts with informing legal practitioners about the origins of, and the modern practice relating to, equitable interests. It explains what is an equitable interest, and considers the most significant and recognised equitable interest — a trust, where the same piece of land can be the subject of two proprietary rights.

This guidance note also includes an illustration to aid legal practitioner’s understanding — it uses the example of a real property mortgage to illustrate what is an equitable interest, as opposed to a legal interest, in real property.

See Equitable interests.