Understanding Priority Notices in Property Transactions

Written by: Chelsea Lo Giudice

With the rise of electronic conveyancing, property transactions have become more efficient and accessible. However, this shift also introduces new risks. To address these risks, Priority Notices play a crucial role in protecting interests in land dealings.

Origins of Priority Notices

Priority Notices were introduced as part of land title reforms to enhance security and transparency in property transactions. Cases like Black v Garnock [2007] HCA 31 highlighted the vulnerability of unregistered interests in property transactions. In that case, a purchaser’s equitable interest was overridden by an execution creditor by way of a writ which was dated later than the purchasers’ contract. This case underscored the need for a mechanism to secure priority between contract execution and registration, ultimately leading to the introduction of Priority Notices. They were designed to give purchasers and/ or lenders confidence that their dealings would not be displaced by subsequent transactions lodged before registration could be completed.

What is a Priority Notice?

A Priority Notice is a formal notification lodged with the relevant Land Titles Office to indicate an intention to register a specific dealing, such as a transfer or mortgage, against a property title. It acts as a safeguard for the registering party by preventing the registration of other interests that may interfere with their priority that may potentially lodged in between.

Priority Notices function similarly to caveats but are temporary and specific to intended dealings. They serve to:

• Protect a purchaser’s or lender’s interest prior to settlement;
• Ensure transparency in the registration process by detailing the order of which instruments are to be lodged;
• Allow parties to secure priority in advance of formal registration;
• Provide an effective mechanism to prevent unforeseen competing dealings from affecting settlement.

Which States Recognize Priority Notices?

As at the date of this article, Victoria, New South Wales, Queensland, South Australia and Tasmania are the only states have adopted Priority Notices as part of their land title frameworks.

Each jurisdiction has specific rules regarding the duration, lodgement, and extension of Priority Notices.

Duration of a Priority Notice

Once lodged, a Priority Notice remains in effect for:

• 60 days – Victoria, New South Wales, Queensland, South Australia
• 90 days – Tasmania

In most states, an extension of 30 days can be applied for, but the extension request must be submitted before the original notice expires.

Lodging a Priority Notice

Priority Notices must be lodged electronically via the respective state’s online systems:

• Victoria & New South Wales – PEXA
• Queensland – PEXA or paper lodgement (with exemption request)
• South Australia – South Australian Integrated Land Information System
• Tasmania – Tasmanian Online Land Dealings

Generally, the legal representative of the party seeking to register a dealing will handle the lodgement. If an error is made, the Priority Notice must be withdrawn and re-lodged, which may affect the priority of the dealing.

What Dealings Can Still Be Lodged Despite a Priority Notice?

While Priority Notices provide significant protection, they do not completely freeze a property title. Certain dealings can still be lodged despite an active Priority Notice, including but not limited to:

• Caveats
• Court orders affecting land ownership
• Statutory charges (e.g., land tax charges)

This limitation ensures that essential legal processes and statutory rights are not obstructed, even when a Priority Notice is in place.

Advantages and Disadvantages of Priority Notices

Advantages:

• Provides an effective, low-cost alternative to a caveat.
• Protects purchasers and lenders to a degree from competing registrations before settlement.
• Ensures transparency in property dealings.
• Establishes priority between contract execution and registration.
• Especially useful for paper settlements as it acts as interim security for purchasers or incoming mortgagees in between the time of paper settlement and lodgement of all paper dealings in-person following settlement.

Disadvantages:

• Temporary in nature; cannot be used as a long-term security measure as the Priority Notice lapses after a certain timeframe.
• Errors require withdrawal and re-lodgement, which affects priority. The lodging party must ensure the Priority Notice is correctly prepared and lodged
• Improper lodgement can result in liability for compensation to affected parties.
• Does not prevent all types of dealings from being registered.

Key Takeaways for Lenders

For lenders and financiers, Priority Notices provide a subtle yet vital layer of protection in property transactions. By ensuring that their interests are secured ahead of settlement, lenders can mitigate risks and prevent unauthorized dealings from being lodged/ ranked ahead of its interest prior to actual registration. However, it is essential to monitor expiry dates and ensure compliance with jurisdictional requirements to maintain their effectiveness.

As the property sector continues to evolve with electronic conveyancing, Priority Notices remain a fundamental tool in securing property transactions efficiently and securely.

We have extensive experience with preparation and lodgement of Priority Notices and can assist with any questions you may have.

Feel free to reach out to JHK Legal for further information or guidance around Priority Notices by calling us on03 9927 3600 or emailing contact@jhklegal.com.au.