If the operator fails: token holders and the Queensland land title

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Kooky

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Order a title search on a Cairns apartment that has been sold to investors in two thousand digital tokens and the result will not list two thousand names. It will show one registered owner, and that owner will be a company or a trustee. Everything a token holder has is a claim that runs through that single name.

While the arrangement is working, the name on the register is a detail. When the business behind it stops paying its bills, it becomes the whole question: whose asset is the apartment, who can sell it, and what can a holder do to stop it leaving the structure? The answers are split between two systems. Queensland's Land Title Act 1994 and the Titles Queensland practice manual govern what the register shows and who may lodge a caveat. The Commonwealth Corporations Act, as explained by the Australian Securities and Investments Commission (ASIC), governs how property held for investors must be kept and what happens to a scheme whose operator is insolvent.

This guide follows the title from registration to failure. It covers who can be on the register and how that reads on a search, ASIC's standards for holding scheme property, what the regulator says happens on insolvency, what the practice manual says about caveats, and the reach of the Compensation Scheme of Last Resort. Where the published sources stop short of an answer, the guide says so: how beneficiaries are identified for a shifting body of holders, whether a token supports a caveat, and how a holder ranks against a company with no trust recorded are all left open.

ASIC Information Sheet 225; Titles Queensland, Land Title Practice Manual, Part 11; Australian Financial Complaints Authority page on the Compensation Scheme of Last Resort.

One lot, one registered owner, many holders

A lot in Queensland has a registered owner or a small group of registered co-owners. Titles Queensland's Land Title Practice Manual, in the part on transfers updated on 28 April 2026, sets out how co-owners are recorded: tenants in common hold stated fractions of the whole, and under section 56(2) of the Land Title Act 1994 the Registrar records co-owners as tenants in common where a transfer does not say how they hold.

That is ownership on title. It is not how the tokenised structures described by regulators work. ASIC's Information Sheet 225 on digital assets, last modified on 30 April 2026, contains a short hypothetical about tokenised real estate. In it, investors' funds buy an apartment building and the issuing company goes onto the title as nominee for the investors as a group. The tokens are described as part interests in the building, and ASIC's view is that each is likely to be an interest in a managed investment scheme.

So the first fact to fix is that the investors in such a structure are not registered owners. Somebody holds the lot for them. Who that somebody is, and in what capacity it is registered, decides most of what follows.

Who can be on the register for the investors

Three kinds of registered owner appear in the regulators' material.

The operator itself, as trustee. For a registered managed investment scheme, section 601FC(2) of the Corporations Act requires the responsible entity to hold scheme property on trust for members. ASIC's Regulatory Guide 133, "Funds management and custodial services: Holding assets", issued in June 2022, starts from that duty.

A custodian engaged by the operator. The same guide says a responsible entity may appoint an agent or engage another person to hold scheme assets, and that it remains liable to members for what the agent does or fails to do. The guide notes that the use of a nominee company satisfies its standard on keeping client assets apart from the holder's own.

A company that owns the lot outright, with investors holding claims on the company or the arrangement. This is closest to ASIC's hypothetical, where a company is on title as nominee. Whether such a company is a trustee for the holders, and of what kind, depends on the documents of each arrangement.

The table shows how each would be expected to read on a search, based on what the practice manual requires at lodgement. It is a guide to reading the register, not a statement about any existing arrangement.

Reading a Queensland title search for a trust

The practice manual is specific about how a trust reaches the register. When a transfer is to a trustee, the words "as trustee" are inserted after the transferee's name in Item 5 of the Form 1 transfer. For a corporation registered by ASIC, the Australian Company Number or Australian Registered Body Number must also be shown.

The detail of the trust does not sit in the name. The manual gives three ways of supplying it: depositing an original Form 20, the Trust Details Form; depositing all the trust documents, including any variations; or referring to documents already deposited with another dealing. It says all of the beneficiaries must be identified, and that a minor beneficiary's date of birth must be shown. The register entry then identifies, for each interest or share, the dealing number under which the trust was first registered.

Two points follow for a reader looking at a search. First, the words "as trustee" on a title are a signal to look further: the particulars of the trust are in the deposited form or documents under the dealing number, not in the owner's name. Second, the manual's requirement that all beneficiaries be identified was written with ordinary trusts in mind. The part read for this guide does not say how that requirement is met where the beneficiaries are a changing body of scheme members or token holders, and this guide does not guess.

If the registered owner is a company with no trust recorded, the search shows the company and its number and nothing else. The existence of holders is then invisible on the register. That is the position in ASIC's hypothetical as far as its text goes: the company is "on the title as nominee", and the sheet does not say what, if anything, is recorded about the investors.

What ASIC expects of whoever holds the property

Regulatory Guide 133 applies to responsible entities of registered schemes, licensed custodial service providers, managed discretionary account providers and operators of investor directed portfolio services. Its minimum standards for anyone holding assets can be summarised under five heads.

Structure. Client assets are kept separate from the holder's own property and from the property of other schemes, apart from permitted pooled accounts. Custody staff are kept apart from those making investment decisions.

People and resources. Staff have the knowledge and skills for the work, and the holder has secure systems, records that identify the assets held for each client, documented authorisations for every movement of assets and arrangements for business continuity.

Trust. Assets are held on trust, with narrow exceptions for some foreign assets and pooled accounts.

Identification. The holder can identify which assets are held for which client.

Records. Records showing compliance are kept for seven years.

Where a responsible entity uses a custodian, the guide lists what their agreement must cover. The list includes the manner in which assets are held, how instructions are given, liability and indemnity for losses caused by the holder's breaches, annual written certification that the standards are met, cooperation with auditors, notice before a sub-custodian is engaged, and the transfer of assets on termination. One item bears directly on land: the asset holder is not to take a security interest over the assets it holds, apart from limited exceptions for its expenses.

The guide also deals with what investors are told. Disclosure documents should explain the limited role of the asset holder, which acts only as a custodian. A custodian's name on a Queensland title is therefore not a statement that the custodian chose the property, values it or stands behind the returns.

Money stands behind the standard as well. Information Sheet 225 says that the responsible entity, or the custodian it engages to hold scheme property, will be required to hold minimum net tangible assets of $10 million.

Custody of the token and custody of the land

A tokenised property structure has two things that can be held for someone else, and the sources treat them separately.

The first is the land, covered above. The second is the token. Information Sheet 225 says a person provides a custodial or depository service when they hold financial products, or a beneficial interest in them, on trust for or on behalf of clients, and that where a digital asset is a financial product, holding it for clients is a financial service. Its working test is control of the private keys: a person who controls the keys for an address on a public blockchain is likely to be providing a custodial service, while a self-custody wallet product is unlikely to amount to one.

Holding one's own keys does not change who is registered as owner of the lot, and neither arrangement alters the entry in the Queensland register.

Regulatory Guide 133 contains one passage about land that shows how seriously ASIC takes the register. It is written for primary production schemes, where members need rights over land for the scheme to work. There, the guide says, the interest in land must be registered under the relevant State or Territory titles law before or immediately after interests in the scheme are issued, in the names of the members collectively, of a company the members control, or on trust for the members, in a way that cannot be adversely affected by creditors other than those properly authorised. If notice of the trust cannot be registered, the guide says a caveat and the trust deed should be lodged with the titles registrar where practicable. That passage is not addressed to residential property schemes. It is recorded here because it is the one place in the guide read for this article where ASIC links scheme property to the mechanics of a land register.

When the operator becomes insolvent

ASIC's page on the effect of insolvent managed investment schemes, last updated on 12 August 2026, separates two events that are easily run together: the insolvency of the responsible entity and the winding up of the scheme.

When a responsible entity becomes insolvent, the page says, an external administrator or a receiver is appointed to it. The external administrator may be a liquidator or a voluntary administrator. That appointment is to the company. It does not by itself end the scheme.

Whether the scheme continues depends, on ASIC's account, on several things: whether a replacement responsible entity can be found, whether continuing is viable on cost, whether a court is willing to appoint a temporary responsible entity until one is confirmed by a meeting of members, and the scheme's structure and profitability.

If the scheme is wound up, the page lists how that comes about: the scheme reaches its provided end, a court orders it, the members pass an extraordinary resolution directing the responsible entity to wind it up, or the responsible entity acts because the scheme's purpose has been accomplished or cannot be. Winding up, in ASIC's words as paraphrased, involves realising all the assets of the scheme, deducting reasonable costs, including unpaid creditors, and distributing the balance, if any, among members under the constitution and according to their respective interests.

For the Cairns apartment, "realising the assets" means selling the lot. The Property Occupations Act 2014 anticipates the seller: section 6 exempts administrators, liquidators, receivers and trustees in bankruptcy from the Act's licensing requirements.

ASIC's page tells members what to do in practical terms: obtain legal or financial advice, ask the responsible entity about any freeze on withdrawals, get hold of the product disclosure statement and the scheme constitution, and keep their address details current so that notices reach them.

What a holder's claim is, and what the sources leave open

The scheme property is held on trust for members under section 601FC(2). Regulatory Guide 133 requires it to be kept apart from the holder's own property, and the purpose of that separation is to keep clients' assets distinct from the claims of the holder's own creditors if the holder fails. On that footing the apartment is not simply one more asset of the insolvent company.

That does not put members first in line for the sale price. ASIC's winding-up description deducts unpaid creditors before members. Its guide for investors in unlisted property schemes, published in November 2012, puts the risk in one sentence: an investor could lose all or part of their capital because other creditors of the scheme will be repaid before them.

Several questions are not answered by the ASIC pages read for this guide. The insolvency page does not say whether members are treated as creditors of the responsible entity, how the entity's own claims on scheme property for its costs are ranked, or what happens in a scheme that was never registered. Those are matters for the Corporations Act, the constitution and, in a contested case, a court. A structure in which a company owns the lot outright and no trust is recorded raises a further question, whether the holders have any interest in the land at all or only a claim against the company. The sources do not settle it, and the answer would turn on that structure's documents.

Can a token holder lodge a caveat?

A caveat is the Queensland register's stop sign. Part 11 of the Land Title Practice Manual, updated on 1 August 2025, says a lodged caveat prevents registration of an instrument affecting the lot from the time it is lodged until it is withdrawn, removed, cancelled, rejected or lapses, with listed exceptions. A holder worried that the lot is about to be sold or mortgaged out from under the structure will naturally ask whether one is available.

Section 122 of the Land Title Act lists who may lodge: a person claiming an interest in a lot, the Registrar under section 17, the registered owner, a person to whom a court has ordered an interest be transferred, and a person with the benefit of a court order restraining the registered owner from dealing with the lot.

A token holder would have to come in under the first category, and the manual explains what that demands. The caveator must identify an interest in the lot, described well enough to show a claim to a currently existing legal or equitable interest. The caveat must state the interest claimed and the grounds, which must be clear and, wherever possible, supported by reference to documentary evidence.

The manual gives examples on both sides. Interests it lists as supporting a caveat include those of a purchaser under a valid unconditional contract, a chargee under an agreement charging the land, an unregistered mortgagee, and a beneficiary of a constructive, resulting or implied trust. Claims it lists as not supporting one include judgment debts, personal contractual rights, the mere possibility of obtaining a court order, a right of first refusal, and the interest of a beneficiary under a discretionary trust.

A unit holder in a scheme, or a token holder, appears on neither list in the part read for this guide. The examples point in two directions. If a holder's right is only a contractual claim against the issuer, it resembles the personal rights the manual excludes. If the documents give the holder a present equitable interest in the lot itself, the position may differ. The manual does not decide the point for scheme members, and it says plainly that it is not the Registrar's function to decide the rights and wrongs of a caveator's claim. Whether a given holder has a caveatable interest is therefore unsettled on these sources, and would be a question for legal advice on the particular documents and, ultimately, the Supreme Court.

How long a caveat lasts and what a wrong one costs

Even a caveat that is accepted is temporary unless the caveator goes to court.

The manual sets out the detail under section 126. Where the caveatee serves a notice, the caveat lapses at the end of the 14 days or three months after lodgement, whichever is earlier, unless the caveator has acted. Some caveats do not lapse, among them one lodged with the registered owner's consent, deposited on a Form 18 with the caveat, one lodged under a court order, and a Registrar's caveat.

A caveatee may apply to the Supreme Court at any time under section 127 for the caveat's removal. Under section 129 the same caveator cannot lodge a further caveat on the same or substantially the same grounds without the leave of a court.

Section 130 carries the cost of getting it wrong. A person who lodges or continues a caveat without reasonable cause must compensate anyone who suffers loss or damage as a result, the court may include exemplary damages, and the manual records that the absence of reasonable cause is presumed until the caveator proves otherwise. For a holder unsure whether a token carries any interest in the land, that presumption is a serious consideration.

There is one more possibility in the Act. Under section 17 the Registrar may register a caveat to prevent a dealing that may prejudice certain people, a list that includes a person affected by fraud or forgery and any other person with an interest in the lot. A Registrar's caveat does not lapse and is removed only by the Registrar's withdrawal or a court order. The manual describes the power in general terms and gives no example involving scheme investors.

What the Compensation Scheme of Last Resort covers

The Compensation Scheme of Last Resort (CSLR) is the Commonwealth scheme that pays consumers when a financial firm cannot. The Australian Financial Complaints Authority (AFCA) describes it this way: Parliament passed the legislation on 22 June 2023, the scheme began operating on 2 April 2024, and it can pay up to $150,000 to an eligible consumer who holds an unpaid AFCA determination.

AFCA's page lists four areas the scheme covers: personal financial advice to retail clients on relevant products, dealing in securities for retail clients other than issuing them, credit provision, and credit intermediation of the kind mortgage brokers do. It lists managed investment schemes among the services that are not covered, along with foreign exchange dealing, derivatives, arranging insurance and funeral insurance.

The preconditions matter as much as the categories. According to AFCA, a claim requires a completed AFCA complaint with a determination in the consumer's favour, an amount awarded that remains unpaid, and a financial firm that is insolvent. The consumer then lodges the claim with the CSLR, attaching the determination, and an offer of compensation is open for acceptance for 90 days.

Information Sheet 225 describes the layer that comes before any last resort. A firm providing financial services to retail clients must have an internal dispute resolution procedure and be a member of AFCA, and must have arrangements for compensating retail clients, for which professional indemnity insurance is the primary means. Those obligations attach to licensed firms. They are not a guarantee of the property's value, and they are not a fund that stands behind the land.

Kooky, from Shaka

Kooky edits Queensland Estate and builds Shaka, the payment router he made for Queensland property professionals. One payment comes in, and every agent, agency and party in the deal receives their signed share on closing date.

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