FOR-01 Foreclosure(Section 121 of the TLA)
Version 1 - 26/02/2018
The TLA provides the machinery whereby a mortgagee may foreclose a mortgage and become the registered proprietor of the land formerly mortgaged. This procedure is a last resort by the mortgagee to protect an investment after having been unsuccessful in the attempts to sell the land.
Note: Part of the procedure leading to a foreclosure is the offer for sale, by Landgate, of the subject land. For this reason, where a mortgagee is both first and second mortgagee, action to apply for a foreclosure order should be taken on the second mortgage. If action is taken on the first mortgage and an offer to purchase, sufficient to cover the debt, interest and expenses of that mortgage is received, then the moneys owing under the second mortgage could not be recovered and would be lost to the mortgagee.
2 How to Apply
The application is made by the mortgagee on a blank Application setting out the land affected and asking that an Order of the Commissioner of Titles, foreclosing the interest of the mortgagor in a specified mortgage, be granted.
Before a foreclosure order may be granted it must be proved that:
- default had occurred and continued for a period of six months after the time for payment of the mortgage
- the land had been offered for sale at public auction and no bid or an insufficient bid (state the highest amount) had been received
- notice of the intention to apply for a foreclosure order had been served on the mortgagor (registered proprietor)
- notice of intention to apply for a foreclosure order had been served on every encumbrancer subsequent to the mortgage the subject of the application and, in the case of memorials, that these have either been withdrawn or the written consent of the body lodging the memorial has been obtained.
4 Notice of Default
Notice of default in the payment of interest or principal by the mortgagor must be made as set out in s.106. These matters are fully covered in TFR-08 Transfer by Mortgagee, Debenture Holder or Annuitant (Chargee) Exercising Power of Sale and are the same as those required where a mortgagee has exercised the power to sell.
The mortgagee must declare that:
- notice of default was sent and when
- default had continued for six months
- the attempt to sell at public auction was unsuccessful
- notice of intention to apply for a foreclosure order had been served on the mortgagor
- notice of intention to apply for a foreclosure order had been served on all subsequent encumbrancers or if there are none, that there is no subsequent encumbrancer
- at the date of the application for a foreclosure order the mortgagee had not received full and sufficient payment from the mortgagor, i.e.: that default under the mortgage still continued.
5 Evidence Required
The following evidence must be supplied as annexures to a statutory declaration by the person or persons sending the notices of default and intention to apply for a foreclosure order:
- a copy of the notice of default
- proof of service of the default notice e.g. a Post Office receipt, which should show the full names of the mortgagor and the full address (refer to DOC-02 Parties to Documents - name and address requirements for address requirements for Western Australia’s land registry forms.
- a copy of the notice (to the mortgagor) of intention to apply for a foreclosure order
- proof of service of the notice (to the mortgagor) of the mortgagee’s intention to apply for foreclosure
- a copy of the notice (to subsequent encumbrancers (if any)) of intention to apply for a foreclosure order
- proof of service of the notice to subsequent encumbrancers.
6 Certificate of Auctioneer
This certificate in the form of a statutory declaration made by the auctioneer should state that:
- the auctioneer is a licensed auctioneer
- the auction of the mortgaged land was held at a specific place, date and time
- no bid was received or that the highest bid received (to be stated) was insufficient to cover the mortgage debt and costs incidental to the mortgagee’s exercise of power of sale.
7 Conditions of Sale
The conditions of sale under which the auction was held must also be produced as an annexure to the declaration by the auctioneer.
8 Copies of Advertisements
Full pages of the newspapers in which the notice of intention to sell by auction appear must be produced as annexures to a statutory declaration either by the solicitor for the applicant or by the applicant.
Such advertisements should contain:
- a description of land by its local situation (ie: number in a certain street and its town)
- a reference to the lot, plan and certificate of title number, and area
- sufficient detail to make the property attractive to a prospective purchaser
- an allowance of sufficient time for inspection by a prospective purchaser
- a statement that it is a mortgagee’s sale.
In general, the advertisements should properly identify the property, permit time for inspection, and contain nothing calculated to deter a prospective purchaser from buying. The onus is on the mortgagee to obtain the best price possible when exercising a power of sale.
Failure to advertise the sale to the satisfaction of the Commissioner could result in the advertising and the sale having to be conducted for a second time.
9 Attempt to Sell by Landgate
Before the order is granted the land the subject of the mortgage is again offered for sale by the Commissioner. An advertisement, at the expense of the mortgagee, is placed in three consecutive weekly issues of a newspaper circulating in the City of Perth offering the land for sale and setting a time, being not less than one month from the first advertisement, after which an Order for Foreclosure would be issued.
10 Final Declaration of Mortgagee
Upon the Commissioner being satisfied that the requirements of the TLA have been fulfilled and before the Foreclosure Order is made, a statutory declaration by the mortgagee is required, referring to the application, and declaring that no sufficient payment had been received from the mortgagor nor had the mortgagee’s solicitors received such payment up to the date of the declaration.
11 Preparation, Stamping and Processing of the Order
The order is then prepared in Landgate and signed by the Commissioner of Titles.
The order may then be collected from Landgate by the applicant or the solicitor for the applicant and submitted to the Office of State Revenue (Stamp Duties Division) for assessment of stamp duty.
Once stamped the order is returned to the Landgate staff, who arrange for its lodgement as a document, and processing.
12 Effect of Order
On completion of the processing of the order the estate and interest of the registered proprietor/mortgagor is vested in the mortgagee and the right of the mortgagor to redeem the land is foreclosed.
Any encumbrances subsequent to the mortgage under which the order is made are removed and no longer affect the land and the new certificate of title which is created and registered is subject only to prior encumbrances and to those encumbrances (easements and leases) to which the mortgagee had given an unqualified consent. Memorials which encumber the land continue as encumbrances if the consent of the statutory body which lodged them is obtained.