There's now more than one way to skin a Certificate of Title
Mark Everingham, CSO Senior Solicitor
On 1 January 2013, the Electronic Conveyancing (Adoption of National Law) Act 2012 commenced in NSW. This adoption of the Electronic Conveyancing National Law means that e-Conveyancing is fast approaching.
In July 2008 the Council of Australian Governments ("COAG") agreed to develop and implement National Electronic Conveyancing. The company formed to deliver national electronic conveyancing is Property Exchange Australia Ltd ("PEXA").
Akin to the Australian Stock Exchange and its role in the exchange of shares, PEXA aims to remove the manual processes and paperwork associated with the exchange of property by allowing land registries, financial institutions and practitioners to transact together, online, for the first time. Previous efforts to establish an electronic conveyancing system struggled due to lack of interest by both practitioners and financial institutions. The key difference between earlier attempts and PEXA is that it is a national system including stakeholder investment by the four largest financial institutions. There now seems to be a commitment from most stakeholders in seeing that PEXA succeeds.
PEXA testing is underway, with the first release to enable land titles offices and financial institutions to perform single party transactions such as standalone discharges, mortgages and re-finances.
The second release of PEXA, scheduled for 2014-2015, will enable solicitors and conveyancers to take part in the exchange. At that point settlements, transfers, notices and caveats involving multiple parties will be able to be managed electronically. The first electronic transfer of property in NSW was completed on 24 November 2014.
Impact on property transactions
When lawyers are able to subscribe to PEXA to carry out electronic conveyancing, electing to use PEXA and adhering to its Rules will alter the settlement process, impose new obligations on lawyers and will affect the interaction of lawyers and clients. Some examples include:
- Requirement to sign documents on behalf of the client – as part of PEXA a lawyer is required to digitally sign the transfer and release settlement monies on behalf of their client. In order to sign on behalf of a client, a client authorisation form is required. This is a similar process to signing documents pursuant to a power of attorney. In New South Wales, lawyers already execute on behalf of the purchaser so this concept should be familiar. For a client, this means that they will be required to sign the client authorisation form at the start of the transaction but will not be required to sign the transfer at a later stage.
Verification of Identity – a lawyer will be required to take reasonable steps to verify the identity of their client. In NSW this is not a new requirement as practitioners are already required to verify the identity of their clients. For a client, this may mean that they will be required to attend their lawyer's offices to have their identity verified.
- Settling monies electronically – PEXA will also enable the financial settlement of electronic conveyancing transactions. However, this aspect of the system's operation is not provided for in the model law as it is subject to existing regulatory oversight by the Reserve Bank or by the Australian Securities and Investments Commission. NECDL is discussing with the Reserve Bank, Law Council of Australia and other relevant bodies to the legal industry how settlement monies can be disbursed to the client account from PEXA immediately at settlement meaning vendors should get their funds faster.
Electronic certificate of title – in an electronic conveyance there will be electronic titles and as such the hard copy CT will no longer exist in certain circumstances. The exact solution for electronic titles is currently being worked through. A proposed solution for electronic CT in NSW is now being considered in the Land and Property consultation paper: Certificate of Title Solution for Concurrent Electronic & Paper Conveyancing. Government agencies are anticipated to be eligible to participate in the proposed system of no paper CT so that the Land Registry creates a 'Control of the Right to Deal Record' ("CoRD") on the title instead of issuing a CT. The principal benefits of the optional 'No-CT' regime will be:
- reduced CT handling and storage costs for the eligible CoRD participants
- fully electronic transaction processing for eligible CoRD Holders in the majority of instances.
It is important to note that the national electronic conveyancing law does not amend anything other than the process of settlement from a paper system to an online system. The paper system will continue to be available. Conveyancing practice will need to change in light of the new electronic world but the fundamental principles of the Torrens system will remain.
Benefits for participants
Once the electronic conveyancing network is rolled out, the inefficiencies of current paper-based conveyancing should be removed.
The direct cost benefits from increased efficiency include:
- removing the cost of a settlement agent to attend settlement
- removal of need for extra bank cheques
- removal of cost to collect and deliver documentation
- reduction in time spent organising settlement, such as travel time to settlements, arranging bank cheques and arranging execution of transfer documents.
In addition to the cost benefits, further benefits include:
- Greater transparency is available as you will be able to see the status of all documents in the transaction, including the other party's financial institutions.
- Reduced failure rate as PEXA will carry out dummy lodgements through the electronic settlement process to ensure there are no errors in relation to any part of the process, e.g. any issues with the transfer, reducing the risk and inconvenience caused by delayed or failed settlement.
- As settlements occur electronically, there is close to instantaneous registration of dealings, so there is close to nil risk of another dealing being lodged or registered before registration of change of ownership is completed.
The Crown Solicitor will continue to keep you informed of the progress of the National Electronic Conveyancing roll out.