Your home may not be your own, says expert

Land Information New Zealand says it has robust security measures and systems in place. Photo / Janna Dixon

Safe as houses, right?

Not according to a legal expert who holds fears about the system which says who owns a property.

Rod Thomas, a barrister and senior lecturer at the Faculty of Business and Law at Auckland University of Technology, said the property registration system was open to abuse.

Land transfer is prone to fraud or error and while you might own your house and think your name is registered on the title, you could be wrong, he says.

Title registration is at the mercy of dishonest or incompetent conveyancers, he says, criticising the electronic system operated by the Government's Land Information New Zealand.

Either through fraud or a lawyer's mistake, someone else could be the legal owner of your property, Thomas said.

Even if your name is on the title today and you have a copy of the title to prove that, the property could easily be transferred into someone else's name without your authority or knowledge, Thomas claims.

"We've heard of leaky-home syndrome, well this is leaky-title syndrome," Thomas said.

A lawyer can fill out a transfer form, saying they are representing the homeowner and transfer the title, he says.

The system is ripe for exploitation, he says. He recommends it be changed so homeowners each have a unique code which has to be put into the automated title system to certify the change of ownership is authorised by the home owner.

This code would be known only to the homeowner and a legal adviser. Now, the system allows any lawyer with access to the system to transfer land belonging to anyone without anyone else knowing, Thomas says. The older manual system which has been abolished had more checks and balances, he said.

Problems arose after the Land Transfer Amendment Act was passed eight years ago, he said. Titles are now transferred electronically by any lawyer having access to the computerised system, but no safeguards or checks and balances are in place to ensure mistakes are avoided, he said.

The way the system operates, unless the new owner is found to have knowledge of the fraud, the registration cannot be reversed, and homeowners have to try for compensation from the Government for the loss of a home.

Thomas cited a case recently where a lawyer was penalised by the Law Society disciplinary body for removing a caveat placed on a title without the consent of the person who put the caveat on. The lawyer then transferred the land to his client.

Not everyone in the profession shares the fears.

New Zealand Law Society communications manager Geoff Adlam defended the system. "I would be surprised if it was insecure. The Torrens system is a well-established one," Adlam said.

However he found two possible complaints on the issue.

"The first was a decision under the old Law Practitioners Act 1982. However, no orders were made for it to be published and it cannot therefore be provided. The second is a case where the Standards Committee has decided that details can be published, but not names. To complicate things, the appeal period for this decision has not yet expired, meaning that the details cannot be provided until that happens at the end of this month," he said.

He provided a ruling from the High Court at Auckland last year over the removal of caveats on a title to a property.

Robbie Muir, Registrar-General of Land, said although he was aware of concerns, he was satisfied with the way titles are registered and transferred.

"We have a very secure and efficient land registration system. Landowners' titles are guaranteed by the Crown under the Land Transfer Act 1952. Land Information New Zealand has robust security measures and systems in place to support this. We register in the region of 750,000 land title transactions per year. Cases of fraud happen very rarely. The statutory guarantee of title protects landowners' interests in these circumstances," Muir said.

But Thomas said an article in the NZ Law Journal's April issue gave weight to his fears.

Benito Arrunada, a Spanish academic, and international expert on automated title registration systems, wrote about the New Zealand leaky- title syndrome, citing the system of property transfer and questioning aspects of it.

The Law Commission is reviewing the workings of the Land Transfer Act, but it is not thought they will be looking at shortcomings of the automated title system.

Thomas said the situation was similar to the leaky home fiasco, as it would take some years for frauds to be uncovered. By then, the consequences for homeowners could be catastrophic and the losses significant.