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Discharge of mortgage

how to discharge your mortgage

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Discharge of mortgage

Once the principal or secured sum has been repaid, and any other obligations fulfilled, the mortgagor has the right to have the mortgagee’s interest in the secured property discharged.

The approved form, Discharge of Mortgage (D1), must be used for this purpose. It is then lodged, accompanied by the certificate of title for registration at Landgate’s Document Lodgement & Registration Service. Once the discharge has been registered, it operates to release the land from the mortgage security.

If an estate is subject to a number of mortgages and only some of these are being discharged, use form D3 Discharge of Mortgage (Part of Moneys and some of the Mortgagees).

All mortgagees must sign a discharge: Drake v Templeton [1913] HCA 14. Where all money secured by a mortgage has been paid by the mortgagor and the mortgagee is dead, the executor or administrator must apply for registration as proprietor by transmission and then join in the discharge in that capacity. If the deceased mortgagee was a joint tenant, then discharge is achieved by the other tenants first applying to be entered on the register as surviving proprietors and then executing the discharge.

A mortgage can be registered over one or more folios of the Register. There are situations where the mortgage is registered over a number of parcels of land, often, but not always, in a number of different titles. A mortgagor may seek to discharge the mortgage only insofar as it relates to one of these parcels. This is known as a partial discharge of mortgage.

Other examples of a partial discharge are where the principal sum secured is reduced or where the number of mortgagees is reduced.

A discharge may not be made over part of a lot of land or part of the land in a certificate of title, as this would leave the mortgagee with an unsaleable security.

If the whole of the land

in a folio of the Register is being discharged, it is only necessary to insert the relevant volume and folio number in the land description panel. However, if only part of the land in a folio of the Register is being discharged, it is necessary to competently describe the land to be discharged. Usually, but not always, this is done by lot and plan number. It is preferable to have the duplicate title produced when a discharge is registered, particularly when the discharge relates to the only mortgage on the land.

No stamp duty is payable on a discharge of mortgage. But documents must be marked exempt from duty by the Commissioner for State Taxation before registration.

When land is subdivided as part of a development scheme, often the whole of the land is mortgaged to finance the development. The mortgagee must consent to registration of the plan of subdivision and the new titles for the various lots will issue each showing the mortgage as an encumbrance.

It is possible to contract to sell a lot on an unregistered and/or uncertified plan of subdivision. This practice is known as 'pre-selling', which means exchanging an enforceable contact with completion subject to registration of the plan.

Where a plan of subdivision has not yet been registered, the land can still be identified and sold by using a proposed plan of subdivision attached to the contract.

Once the plan of subdivision has been registered, details of the new volume and folio are communicated to the purchaser and ultimately the incoming mortgagee. Sometimes, but not always, these new details are inserted and/or added into the transfer and any incoming mortgage.

Whilst most discharge documents simply refer to the discharge of the land from the obligations under the mortgage, it is conceivable that some personal covenants might continue to bind the mortgagor pursuant to the mortgage contract.

Industrial Acceptance Corporation Ltd v Tarulli [1974] WAR 125

Grundy v Ley [1984] 2 NSWLR 467 - discharge takes effect from time of registration

DFC New Zealand Ltd v Poulopoulos (1992) ANZ ConvR 22

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