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Indefeasibility of title is an essential element of the property system operative in Australia. It ensures there is a system for determining who has priority of ownership of real property (i.e. land and buildings) when there are competing interests. 

You need to understand the principles of indefeasibility of title to ensure that you, in turn, understand your priority rights and ownership over any of your properties. This article will explain indefeasibility of title in more detail and why it is important to your business.

The Torrens Title System

There are two main systems of property in Australia:

  •  the Torrens Title System; and 
  • the Old Title System.

The Old Title System was the main system until the introduction of the Torrens Title System in 1863. Since the introduction of The Torrens Title System, all property needs to be registered. In some cases, you may have to deal with the Old Title System. Under the Old Title System, no one title proves ownership. You must, therefore, establish ownership through examining an unbroken series of deeds. 

However, under the current Torrens Title System, a contract of sale for real property is not sufficient to transfer the property. After signing the contract, you must register the dealing at the relevant land title office in the state or territory of the property. Upon registration, the property transfers correctly, and the interest in the property is registered. The purchaser will be listed on the title for the property as its registered proprietor. 

The Torrens Title System simplifies dealing with land, as it relies on the indefeasibility of title concept. This is where a registered interest has priority over all other interests. For example, this allows you to rely solely on title registration to determine ownership or interest in the property. As a consequence, you do not need to investigate whether the prior transfer was valid. This provides a higher level of security in real property transactions.

Indefeasibility of Title

Indefeasibility of title means that you have a registered title over real property. Additionally, no third party can challenge your claim over your property. It is an ‘absolute’ system. 

Suppose you have indefeasibility of title, and your name is listed as the registered owner on the title records. In that case, your claim to the property is indefeasible, and any unregistered third parties cannot claim the property belongs to them, except in very exceptional circumstances.

Even with indefeasibility of title, others may register interests over your property that impact what you can do. This may include mortgages, leases, easements, and caveats. These interests are registered over the title and given priority in the order of their registration. 

For example, if you purchase property and enter into a mortgage concerning that property, the mortgage will be the priority registered interest after your interest as the owner. Then, if you default on the terms of your mortgage, the mortgagee can exercise its power of sale rights against you. If you wish to enter into a lease for the property, with the mortgage registered over it, you will need the mortgagee’s consent. 

If you are entering into a commercial lease, you want to ensure the landlord has indefeasibility of title and the right to grant you the lease. 

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Exceptions to Indefeasibility

Generally, you cannot challenge the indefeasibility of a title. However, there are some exceptions where a court may consider overruling indefeasibility. Some of these exceptions include: 

  • fraud;
  • forgery;
  • prior registered interests;
  • prior certificates of title; or
  • misdescriptions.

For example, suppose you can prove that title registration was acquired by fraud (including fraud carried out by an agent). Then, a court may reverse the registration. Despite the above, a good faith purchaser who purchases a property for fair value, without knowledge of competing or adverse claims concerning that property, will take indefeasible title to the property. 

In a landmark case in this area, party A and party B were joint owners of a property. Party A forged the signature of party B to execute a mortgage over the property. Party A failed to make payments under the mortgage, and the mortgagee exercised their powers of sale over the property and sold the property to party C for a fair value. Then, Party B brought proceedings stating the mortgage occurred without their knowledge and challenged the title of party C. Despite the fraudulent conduct of party A, the court determined that party C obtained indefeasibility of title as they were unaware of the fraudulent conduct. 

Why Is Indefeasibility of Title Important? 

Indefeasibility of title grants you greater security in your property and land ownership. Whilst this may not be something that comes up every day, it is important to ensure you register everything. You should conduct proper due diligence when purchasing or leasing a property. Ensure the owner is on the title and note any other interests on the title that may affect the property.  

Indefeasibility of title does not just affect the ownership of land but also may affect your mortgage, commercial leases and other property encumbrances. The registration order of such instruments will affect your rights. For example, priority is according to the registration date in most Australian states, meaning the first registered interest takes priority. Reviewing the title of a property is an essential part of any property transaction, so ensure you do this to determine what interests others have on the property.

It is also important for your business that you correctly transfer or register property to ensure that you have indefeasibility of title. 

Key Takeaways

Indefeasibility of title is an essential feature of the Torrens Title System. Indefeasibility establishes a system for priority over ownership of real property. Therefore, if you have indefeasibility of title, you will have priority of ownership of that property. When purchasing or leasing a property, you must be aware of the concept of indefeasibility of title and conduct appropriate due diligence concerning the property. 
If you have any questions about indefeasibility of title, our specialist property lawyers can assist you as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. Call us today on 1300 544 755 or visit our membership page.

Frequently Asked Questions

I own a property, and have registered it under the Torrens Title System. What does indefeasibility of title mean for me?

Indefeasibility of title means that no third party may challenge your title over that land. Other parties cannot claim the land belongs to them, as you have definitive proof of your title.

Can indefeasibility of title ever be defeated?

In very rare circumstances, fraudulent registration may defeat indefeasibility of title. However, an innocent party who obtains title due to fraud may still maintain their indefeasibility of title.

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