Escrow (unregistered) mortgages

This page covers the registration of mortgages held on escrow.

Historically, there has been a practice to hold mortgages or transfers unregistered to protect family advances and other off-the-register arrangements. Often those documents would remain in Deeds for years and may never need to be registered. The need for such arrangements will not change in the future, just the means of registration of those documents.

Historical escrow mortgages and transfers

E-dealing has been mandatory for mortgages and transfers lodged by practitioners since 1 August 2007. While dispensations may be sought, it is rare that they are needed. Dispensations for escrow mortgages should be sought as set out below.

New escrow mortgages

Since the inception of e-dealing, the key difference for an e-dealing mortgage versus the previous paper instrument is the need to have authority from both mortgagor and mortgagee. If the mortgagee is a bank or institutional chargeholder, a letter of instruction is sufficient. Most 'off-the-register' mortgages will be between private individuals. Accordingly, there will need to be a separate A&I for the mortgagee and mortgagor. Certifications are made by practitioners for both mortgagee and mortgagor.

The mortgagee will obviously want to be in effective control of registering the mortgage without the need for recourse to the mortgagor. In order to achieve that, the A&I from the mortgagor needs to be addressed to the mortgagee's law firm. The mortgagor can (and should) still be independently advised by having the A&I witnessed by the practitioner (or other suitably appropriate party) for the mortgagor. The only difference being that the A&I is addressed to the mortgagee's lawyer's firm.

Both essential components are then held by the mortgagee enabling creation, certifying, signing and submission of that mortgage by the mortgagee's practitioner, if required in the future.

While it is possible to adapt the e-dealing process with the use of A&I forms, that may not be ideal if there is a change of lawyers by the client or disbanding of the firm to whom the A&I is addressed. Any transactions created in workspace but not registered or worked on for a given period will be deleted after a reminder is sent to the parties.

Accordingly, having a certified and signed but unregistered mortgage in Landonline is not generally a practical solution.

Paper option

With the potential e-dealing issues outlined above, LINZ allows all escrow mortgages including those dated after 1 August 2007 (and any other registerable document that is to be held in escrow for a lengthy period) to be registerable as part of the paper exception process.

The following factors have been considered in making that decision:

  1. Most escrow mortgages will never be registered
  2. If registration is required it may be many years after execution
  3. The client may change firms or the firm may no longer exist when registration is required. The A&I option could pose practical and possibly insurmountable problems if this occurs.
  4. That the exception of escrow mortgages being in paper adopts a consistent approach with historical escrow mortgages.

LINZ will still require a letter at the time of registration explaining why an exception is sought. If there is a very short time period between the execution and submission date further questions will be asked.

It would be prudent for practitioners to file a statement of the reasons why registration is not to occur for at least six months (if at all) with the paper escrow document in Deeds so there is evidence readily to hand to support registration by the paper exception in the future.