What can rank ahead of a first mortgage? The traps on a "clear" title

“There’s no mortgage on it” is one of the best things a business owner can say to a lender. A debt-free property is the simplest security there is, and a private first mortgage over it can often settle quickly. But a title with no mortgage isn’t always a clear title. A handful of other items can sit on the register, or sit off it entirely, and still get in the way of a new first mortgage.

None of them is rare, and almost all of them can be cleared at settlement. The trouble comes when they’re discovered late. This guide explains what can outrank or block a first mortgage, how a lender finds each one, and what you can do about it before you enquire.

Why isn’t “no mortgage” the same as a clear title?

Because a mortgage is only one of the interests a title can carry. Titles Queensland describes a current title search as showing the registered owners along with “other registered interests, including mortgages, easements, covenants, leases and caveats”. Other registries show much the same, and in New South Wales the Registrar General describes the Torrens register as the “single source of truth” for interests in land, so the search is what counts.

On top of what’s registered, some liabilities attach to land without appearing on the title at all. Unpaid land tax is the main one. So when a lender takes first position, it isn’t just checking that there’s no bank ahead of it. It’s checking that nothing else will be paid before it, and that nothing will stop its mortgage from registering in the first place.

Here’s the short list:

Item	Where you’ll find it	Can it outrank or block a first mortgage?	Usual fix
Unpaid land tax	State revenue office, not the title	Can be a charge with priority (NSW)	Pay at settlement
Overdue council rates or water charges	Rates notice, not the title	Can attach to the land	Pay at settlement
Caveat	Title search	Generally blocks registration	Withdrawal, lapse, removal or consent
Priority notice	Title search	Reserves priority for a pending dealing	Let it expire or have it withdrawn
Registered lease	Title search	Doesn’t block, but stays with the land	Supply the lease
Easement or covenant	Title search	Doesn’t block, may affect value	Explain its effect

Can land tax really rank ahead of a mortgage?

In New South Wales, yes. Revenue NSW puts it in plain terms: “Unpaid land tax is a first charge on land and takes priority over all other liabilities attached to a property.” It also notes that a new owner can become responsible for unpaid land tax, including interest and penalties, which is why a buyer gets a clearance certificate before settlement.

For a lender, that means overdue land tax on an investment, commercial or vacant property is a claim that could sit ahead of its “first” mortgage. Other states have their own land tax rules, and the safe approach everywhere is the same: find out exactly what’s owed and clear it.

That’s not a reason to give up on borrowing. Paying a land tax debt out of the loan at settlement is routine, and sometimes it’s the very reason for the loan. Our page on loans to pay land tax bills covers that situation.

Council rates and water charges work similarly in practice. Arrears follow the land, and a lender will ask for the latest rates notice and usually want any overdue amount paid on settlement day.

How can a caveat stop a first mortgage?

A caveat is a notice on the title claiming an interest in the land. New South Wales’ Registrar General’s guidelines describe it as a statutory injunction that generally prevents registration of dealings, with some exceptions. In practice, a caveat sitting on your title can stop a new mortgage from being registered until it’s dealt with.

Old caveats turn up more often than owners expect:

• a lender’s caveat from a short-term loan that was repaid but never withdrawn;
• a purchaser’s caveat from a sale that fell through;
• a caveat from a family member, former partner or business associate claiming an interest;
• a builder’s or supplier’s caveat over a disputed debt.

A caveat can end by being withdrawn, by lapsing, by removal with the caveator’s consent, or by court order. If it belongs to a lender that’s been repaid, a phone call and a withdrawal form usually fix it. If it relates to a dispute, it may take negotiation or legal help, and it needs to start early. Our guides on what a caveat on a title means and how to remove a caveat go further.

What is a priority notice, and why does it matter?

A priority notice reserves priority on a title for a dealing that’s about to be lodged, such as a transfer or a mortgage, so that nothing else can slip in ahead of it. Queensland’s eConveyancing mandate includes the priority notice forms among the instruments that must be lodged electronically, and New South Wales uses them as well.

If a priority notice is on your title, it usually means another transaction is in progress, or was. That could be a sale you’ve signed, a loan with another lender, or something you didn’t know about. A lender won’t proceed until it understands why the notice is there and it has been withdrawn or has expired. If you’ve been talking to another lender or have signed a contract to sell, say so on the first call.

Do easements, covenants and leases matter?

They rarely stop a loan, but they’re read carefully because they stay with the land and shape what it’s worth.

• Easements give someone else a right over part of your land, such as drainage, power lines or a shared driveway. Most are ordinary and barely affect value.
• Covenants restrict what can be done on the land, such as building materials or the number of dwellings. A restrictive one can limit a buyer’s plans and so the sale value.
• Registered leases bind the property for their term. A long lease to a good tenant can strengthen commercial security; an unusual one can complicate it.

The lender doesn’t need these removed. It needs to understand them, so it can assess the property as a buyer would see it. If you have copies of the lease or know what the covenants say, include them with your documents.

Illustrative example: a “clear” warehouse that wasn’t quite

A Brisbane wholesaler owns his warehouse outright and needs $400k to fund a large stock order. The property is assessed at around $1.5m, and on the first call it looks simple.

Illustrative: the title search shows two surprises. A caveat lodged six years earlier by a private lender, repaid long ago but never withdrawn, and a lapsed sale contract’s priority notice that has already expired. The owner also mentions that the most recent land tax assessment is unpaid. The old lender is contacted on day one and signs a withdrawal of caveat within the week. The land tax is shown as a payment on the settlement statement. Settlement happens with the caveat withdrawn, the land tax paid and the new first mortgage registered with nothing ahead of it. Raised on the first call, each item cost hours, not weeks. Figures are illustrative only.

What should you check before you enquire?

A little homework speeds everything up. Before you start your loan check:

1. Order a current title search, or ask your solicitor to. Read every line under “encumbrances”, “dealings” or “notifications”.
2. Find your latest land tax assessment and confirm whether it’s paid.
3. Dig out the rates and water notices and check for arrears.
4. List any old loans or caveats you remember, even repaid ones.
5. Gather any leases over the property and anything you know about covenants.
6. Note any contract to sell or other loan applications in progress.

Our checklist of documents for a private mortgage covers the rest of the paperwork.

Does any of this change how much you can borrow?

Usually only at the edges. Land tax, rates or old debts paid at settlement come out of the loan, so less is left for the business. A restrictive covenant or an awkward lease might affect how the property is assessed. But on a debt-free property, the lending ceilings are the same as always: up to 80% of value on residential security and up to 70% on commercial, with no sworn valuation, because we assess value ourselves.

What it does change is time. Every item on this list is fixable, and almost every one is quick to fix when it’s raised on day one. Found the night before settlement, the same item can cost the deadline.

Debt-free property with a business need? Let’s check the title together

If you own property outright, you’re starting from the strongest position there is. Our specialists look at titles every day and know which items are routine and which need early action, so the sooner we see yours, the smoother settlement will be.

The loan check takes about 60 seconds, and there’s no credit check when you ask. Your enquiry comes to one direct lender, never passed around to other funders. A real person reviews your property and calls you. Tell us accurately about anything you know is on the title or owing on the property, and we’ll plan around it from the start.

Check your debt-free property now →