The importance of Final Title Checks in PEXA Transactions

Insights from Cui v Salas-Photiadis [2024] NSWSC 1280

Property transactions conducted on PEXA (Property Exchange Australia) comes with an expectation of streamlined process and secure settlements. However, the recent case of Cui v Salas-Photiadis [2024] NSWSC 1280 underscores the critical importance of performing final title searches or title activity checks before signing off on a PEXA workspace.

Case Background

The plaintiff in this case entered into a contract to purchase a property from the second defendant, with funding secured through a bank acting as the incoming mortgagee. However, the first defendant had previously lodged a caveat over the property, claiming an interest under a charged granted by a loan agreement related to building work.

Despite the caveat’s existence, none of the participants in the PEXA workspace detected its lodgement. The transaction proceeded to settlement, during which the necessary documents were lodged with Land Registry Services (LRS), and funds were disbursed according to the financial settlements schedule. The next day, LRS issued a requisition to the bank, advising that the transfer and mortgage could not be registered due to the first defendant’s caveat.

The plaintiff subsequently sought an order under section 74MA of the Real Property Act 1900 (NSW) (RPA) for the caveat’s withdrawal.

Court Decision

The Supreme Court held that:

1.    Nature of the Caveat: An equitable charge does not necessarily equate to an equitable mortgage and the reference to a “charge” in the caveat did not automatically invoke the statutory definition of a “charge” under the RPA. The caveat was valid despite describing the interest as a charge.

2.    Relevance of the Home Building Act: Under section 7D of the Home Building Act 1989 (NSW), an agreement granting security for payments under a residential building work contract is valid as an “other agreement”. While the loan agreement fell within this scope, section 7D did not invalidate the remainder of the agreement.

3.    Substance of the caveat: The Court rejected the argument that the failure to specify the secured amount was sufficient grounds to invalidate the caveat. The first defendant demonstrated a good arguable case that the caveat had merit.

4.    Balance of Convenience: The Court found that the balance of convenience favoured maintaining the caveat until the parties competing claims could be resolved on a final basis. The application under section 74MA to remove the caveat was refused. 

This matter was subsequently listed for further directions in the Real Property List.

Key Takeaway

This case highlights a crucial procedural safeguard for all participants in PEXA transactions: always conduct a final tile search or perform a title activity check before signing off on a PEXA workspace.

Failing to do so can lead to significant delays and complications, as unresolved caveats or other title defects may surface after settlement. Diligence such as final checks ensures smoother transactions and avoids the risks of unregistered interests disrupting post settlement processes.

For assistance with your sale and purchase of property, please contact one of our people.

Ron Zucker 0410 590 111

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