Is a property settlement possible without mortgagee (bank)?

[Misty]

A lawyer advised that if a council sells a home under rates recovery, that they dont have to notify mortgagee (bank) of settlement. ie:
* Council sells property
* Council settles property THEN contacts bank and pays bank out.
My understanding is that this is not possible (bank MUST be at settlement).
Can someone with EXCELLENT knowledge of settlements please advise? As this is doing my head in.
(PLEASE dont respond with uncertain replies, Ive already had too many)

 

[Rob Legat - SBPL]

What state is the property in? It will make a difference to how this gets answered as each state has its own laws and procedures for property.

 

[Misty]

A lawyer advised that if a council sells a home under rates recovery, that they dont have to notify mortgagee (bank) of settlement. ie:
* Council sells property
* Council settles property THEN contacts bank and pays bank out.
My understanding is that this is not possible (bank MUST be at settlement).
Can someone with EXCELLENT knowledge of settlements please advise? As this is doing my head in.
(PLEASE dont respond with uncertain replies, Ive already had too many)

Thanks Rob: Property location is Victoria

 

[Rob Legat - SBPL]

The short answer is: Bank doesn't need to be at settlement.

The procedure seems to relatively similar to that in Queensland (where I practise). In Victoria, the procedure is set out in section 181 of the Local Government Act 1989 (LOCAL GOVERNMENT ACT 1989 - SECT 181 Council may sell land to recover unpaid rates or charges )

The section provides:

- The Registrar of Titles must register a transfer of land given under this section in the proper form.
- The Registrar must cancel any mortgages or charges when doing so.
- The Council has a set order of payments to be made from the proceeds of sale, including payment to interest holders (such as banks).
- Before selling the land, Council must give notice a 'person [who] has an estate or interest in the land'. I'd infer that to include the mortgagee. Mortgages usually include a mechanism where the bank can pay any relevant amount the property owner hasn't (such as rates) and add it to the loan.

In practice the above means the Council sells the property free of encumbrances, and registering the transfer wipes them all away. Therefore, no need for the bank to be at settlement or to provide a release of their mortgage.

 

[Misty]

The short answer is: Bank doesn't need to be at settlement.

The procedure seems to relatively similar to that in Queensland (where I practise). In Victoria, the procedure is set out in section 181 of the Local Government Act 1989 (LOCAL GOVERNMENT ACT 1989 - SECT 181 Council may sell land to recover unpaid rates or charges )

The section provides:

- The Registrar of Titles must register a transfer of land given under this section in the proper form.
- The Registrar must cancel any mortgages or charges when doing so.
- The Council has a set order of payments to be made from the proceeds of sale, including payment to interest holders (such as banks).
- Before selling the land, Council must give notice a 'person [who] has an estate or interest in the land'. I'd infer that to include the mortgagee. Mortgages usually include a mechanism where the bank can pay any relevant amount the property owner hasn't (such as rates) and add it to the loan.

In practice the above means the Council sells the property free of encumbrances, and registering the transfer wipes them all away. Therefore, no need for the bank to be at settlement or to provide a release of their mortgage.

well THANK YOU Rob for such a concise, and speedy answer. Truly appreciated.