Title searches: what lenders look for

The title is the lender’s foundation

A secured lender’s protection is its interest in your property. Before it lends, it needs to know exactly what it is taking security over: who owns it, what else is registered against it and whether anything could interfere with its rights. The title search answers those questions.

Australia uses the Torrens title system, where the register kept by each state’s land registry is the authoritative record of ownership and registered interests. A title search is a snapshot of that register at a point in time.

What a title search shows

A typical search shows:

• Registered proprietor. The owner or owners, and how they hold the property (for example, as joint tenants or tenants in common).
• Lot and plan details. The legal description of the land.
• Registered mortgages. Each mortgage, the lender and the order in which they were registered.
• Caveats. Notices lodged by people claiming an interest in the property, such as lenders, purchasers or family members.
• Easements. Rights others have over the land, such as for drainage, sewerage, access or power lines.
• Covenants and restrictions. Rules about how the land can be used or built on.
• Leases. Registered leases, often over commercial property.
• Writs and other court orders. Notices relating to judgments or legal proceedings.

Ownership and authority

The first check is simple: does the person or company applying for the loan actually own the property? Lenders compare the registered owner with the borrower or guarantor. If the property is in a company or trust name, they check that the right entity is signing. Name mismatches, such as a former name or a misspelling, need to be cleared up early.

If the property is owned jointly, every owner usually needs to sign the mortgage. A borrower who owns a half share cannot generally mortgage the whole property without the other owner’s agreement.

Where the new lender will rank

Existing mortgages and caveats determine where a new lender sits. If there is a first mortgage to a bank, a new lender will rank second unless the bank is repaid. If there are already two mortgages, a third-ranking position is possible but harder to arrange. Our guide comparing first and second mortgages explains why ranking matters.

The lender will also check that existing mortgages match what you disclosed. An undisclosed mortgage or caveat raises questions about the rest of your scenario.

Caveats from other parties

Caveats can be lodged by anyone who claims an interest, including private lenders, purchasers under contract, family members in a dispute or builders owed money. A caveat prevents certain dealings on title without the caveator’s consent or a court order. Lenders need to understand every caveat. Some will be cleared at settlement; others may need negotiation. Our guide to caveats versus second mortgages covers how caveat lending works.

Writs and judgments

A writ registered on title indicates that a court has made a judgment against the owner and that a creditor may seek to sell the property. Most lenders will not proceed while a writ is in place unless the loan will pay out the judgment at settlement. In some cases, clearing a judgment is the reason for the loan. If you know a writ exists, disclose it at the start.

Easements, covenants and zoning

Easements and covenants are usually not a problem, but they can affect value. A large easement across a development site, a covenant restricting the type of building or a right of way for a neighbour may limit what a buyer would pay. Zoning is not shown on the title itself but is checked through council or planning records.

Leases on commercial property

A registered lease shows that a tenant has rights to occupy part or all of the property. For commercial security, a good lease to a strong tenant can support value, while a lease with a short remaining term or a weak tenant may reduce it. Lenders often ask for a copy of the lease to understand the rent, term and options.

Search your own title first

Before you enquire, order a title search on each property you plan to offer as security. It costs little and takes minutes. Reviewing it yourself means you can explain anything unusual upfront, chase up old discharged mortgages that were never removed and investigate any caveat you do not recognise. It also confirms the exact ownership details for your application.

Late surprises

Lenders usually search title again just before settlement to make sure nothing has changed. If a new caveat, writ or mortgage appears, settlement may be delayed while it is investigated. This is one reason why it is important not to take on new secured debt or ignore legal action between approval and settlement.

Illustrative example

A business owner offers an investment property as security for a short-term loan to clear a tax debt. His title search shows the expected first mortgage, plus an old caveat lodged by a former business partner several years earlier over a dispute that has since been settled. His solicitor contacts the former partner, who agrees to withdraw the caveat. The loan proceeds without delay because the issue was found and resolved early.

This example is illustrative only.

Getting started

If you are unsure what is on your title or how it might affect a loan, check your eligibility with no credit check. Tell us about the property and anything you know is registered against it, and we will explain how a lender is likely to view it.

You can start your enquiry here.