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Property: E-conveyancing: what you need to know

Every Issue

Cite as: Jan/Feb 2015 89 (1/2) LIJ, p.78

Before you rush headlong into the electronic future there are a number of things you should know about e-conveyancing. Here are the top 10.

What it does

E-conveyancing stores the data required for lodgement of dealings at Land Victoria and the transfer of funds at settlement. At a nominated time the funds are transferred and data lodged. It is not involved in the other aspects of the conveyancing transaction.

How it is being implemented

You cannot lodge electronic dealings directly with Land Victoria. They must be processed through an Electronic Lodgement Network (ELN) which can also provide the facility for funds transfers. The entity that owns the ELN is an Electronic Lodgement Network Operator (ELNO). There is only one ELNO which is PEXA Ltd (www.pexa.com.au). It is a public company the major shareholders of which are Commonwealth Bank, National Australia Bank, ANZ Bank, Westpac Bank, Macquarie Capital, Little Group, Link Group, and the governments of Victoria, NSW, Queensland and Western Australia.

Client authorisation

You need to obtain the authority of your client before lodging electronically. The form of client authorisation, along with other compliance obligations, can be found in the Model Participation Rules (MPRs) on the ARNECC website (http://tinyurl.com/n2sxang).

The client must execute the authority for you to sign documents, submit them for lodgement, transfer funds for settlement, and do anything else necessary.

Identification of clients

Before the client signs the authorisation you are required to carry out a process to verify the identity of the client. The obligation is to “take reasonable steps”. The MPRs set out a Verification of Identity Standard. If this is followed then, subject to a couple of exceptions, it will constitute reasonable steps.

There are also processes for identification of corporations, attorneys, clients without photo identification and those located overseas. Provision is made for the use of agents to carry out the identification.

Certification of dealings

Clients authorise you to sign instruments on their behalf. They no longer see or sign them. This is done by certifying the electronic instrument with a digital signing certificate. This is your online signature and, with limited exceptions, is binding on you and your client.

You are required to certify that you have identified the client; you hold a client authorisation; you obtained, considered and retained the requisite supporting evidence; the instrument is correct and compliant with relevant legislation; and the paper title has been obtained and destroyed.

Transferring funds

The funds required for settlement can be transferred from either your trust account, the PEXA source account, or an earlier electronic settlement. There are some limitations on these. Only trust accounts held with CBA, NAB, ANZ and Westpac can be used in PEXA. If your trust account is with another financial institution it cannot be used for settlements through PEXA. The PEXA source account is intended to allow subscribers who do not operate trust accounts to provide funds for settlement. Regulators have raised concerns about its status . The way it works could mean that it does constitute “trust money” with all that entails.

Linked settlements

It is not unusual for settlements to be relying on earlier ones. A common way of dealing with the funds is to have bank cheques payable to parties at later settlements. This will not be possible in electronic settlements. PEXA has indicated its system will allow for up to three settlements to be linked. How will it work, though, when not all the settlements are to be conducted electronically? If the prior settlement is paper then the bank cheques obtained will need to be deposited into an account. The funds may not, therefore, be available for an electronic settlement the same day. Funds transfers do not usually appear in the destination account until the next day. So, if an electronic settlement preceded a paper one it may not be possible to draw the bank cheques on the same day. These issues may be resolved. In the meantime you will need to ensure that by agreeing to an electronic settlement you will not run into difficulties as a result of a paper settlement.

The certificate title

One of the certifications mentioned is that the paper title has been destroyed. There is no place for paper titles in electronic settlements. Once the settlement has occurred the title that issues after it is called an eCT. This simply means that there is no paper title and that the party with control of the title is noted on it. There is an option to have the eCT converted to a paper title but it is unlikely to continue.

Opting out

An electronic settlement can only occur if all parties involved are using the system. This will usually be known at the outset of the transaction and the decision then made to proceed that way. Circumstances may, however, arise where it is no longer possible to continue. If, for example, a caveat were lodged before settlement the caveator may need to be involved with the settlement. Unless that caveator could join in the electronic process then a physical settlement would be required. This means that documentation will have to be prepared and executed by all the parties and arrangements made with banks to draw cheques and attend settlement. This could result in a lengthy delay in settlement.

Cost

There will be a cost to use PEXA. Its fees can be found at www.pexa.com.au/pricing-schedule. Conducting a standard discharge/transfer/mortgage settlement will cost $300, including the cost to mortgagees. As that is usually passed on to the customer it is reasonable to say that the vendor and purchaser will be paying about $150 each for an electronic settlement.

A number of organisations have been promoted as PEXA sponsors. Presumably this means that they facilitate the use of PEXA. Any fee they charge for this service will be an additional cost for an electronic settlement.

The move to electronic land dealings has significant implications for practitioners. There will be a lot more information available during the year. This will include an assessment of the operation of the system as and when it is rolled out in Victoria.


SIMON LIBBIS is an accredited property law specialist, principal of Subdivision Lawyers and LIV councillor. He is conducting e-conveyancing workshops in February and March (see http://tinyurl.com/qghwu2b).

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