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Introducing e-settlement

Introducing e-settlement

By Russell Cocks

Caveats Conveyancing Duties Real Property 

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Early adopters can feel comfortable with an electronic conveyancing special condition. 

The much anticipated arrival of e-conveyancing, at least in relation to settlement, is upon us with Property Exchange Australia Ltd (PEXA) providing a platform for firms to engage electronically. The authors of the LIV contract of sale of land (Murray McCutcheon, David Lloyd and your columnist) have therefore drafted a special condition that may be added to the General Conditions to facilitate electronic settlement.

A more detailed explanation of how conveyancing will be conducted in the electronic environment and the significance of the special condition will follow early in 2015 but the following summary will allow early adopters to feel comfortable with the special condition.

The condition is referred to as Special Condition 2 as the LIV contract already has Special Condition 1, which deals with the consequences of release of the deposit. This condition is designed to follow that condition. The condition adopts the established practice of providing a tick box format to signify that the condition applies to the particular contract.

Clause 2.1

Reference to the Electronic Conveyancing National Law means that the Model Operating Rules, the Participation Rules and the Participation Agreement can be called into operation if required.

Clause 2.2

There may be occasions when the parties will not be able to proceed electronically. For that reason, the parties may choose to opt out of electronic conveyancing at any time without any penalty.

Clause 2.3

This clause makes parties responsible for ensuring that all participants that the party introduces to the transaction, such as a financier, are subscribers.

Clause 2.4

The vendor must open the workspace in PEXA. This is consistent with the vendor’s role of preparing the contract of sale. The sub-clause requires the vendor to do so as soon as reasonably possible.

The other important issue addressed in this sub-clause is the statement that the workspace is an electronic address for service of notices. This has significant legal and operational consequences for subscribers. A subscriber may miss a significant communication, such as a rescission notice if the subscriber does not diligently monitor the workspace.

Clause 2.5

Settlement date will be known to the parties well in advance. The workspace will need to be locked at some time on the settlement day, by which time the parties will need to be in a position to settle.

Clause 2.6

Settlement in a paper transaction is effectively that point when cheques are exchanged for documents. This concept has been carried into the electronic environment and settlement is defined as the financial settlement. Just like a paper transaction, financial settlement occurs before registration, but it is anticipated that the potential time delay between settlement and registration will be reduced from days or weeks to milliseconds.

Clause 2.7

Settlement in a paper transaction may be delayed by a computer failure or by somebody missing a tram. If that occurs, settlement must be rearranged. Likewise, an electronic settlement may be delayed by computer failure. This sub-clause requires the parties to attempt to conduct a failed transaction electronically on the next business day or as soon as possible by some other (paper) means.

Clause 2.8

Provision has been made for each party to assist any other party in the event of a mistaken payment. It is likely that this obligation flows from the general contractual duties owed by the parties to each other, but the opportunity has been taken to express the obligation.

Clause 2.9

E-conveyancing removes the need to exchange title for payment, but a paper settlement often involves the vendor physically handing over additional documents, such as leases. This sub-clause requires the vendor to confirm possession of such items prior to settlement and to give those items to the purchaser immediately after settlement.

The sub-clause also addresses, for the first time, the vendor’s obligation in relation to keys and requires the keys to be with the agent before settlement. As at present, the agent will be notified of settlement and then be in a position to hand over keys.

Clause 2.10

As payment of duty will be simultaneous with settlement, all requirements of the State Revenue Office must be satisfied before settlement. This will require the purchaser’s subscriber to certify via Duties Online that all documents are in order. To do so the vendor will need to provide to the purchaser any original document that is required for the assessment of duty, such as a goods declaration or off the plan declaration and this sub-clause requires such documents to be provided seven days before settlement date.

Systems failure

The advent of e-conveyancing makes settlement more dependent on computers. The authors considered providing for the consequences of system failure, particularly in a time-poor environment such as rescission, but resolved to leave that issue for determination of the court in appropriate circumstances.

The special condition is available in print form from the LIV bookshop, in electronic form from elaw publishing and for downloading from the LIV website.


Russell Cocks is author of 1001 Conveyancing Answers. For more information go to www.russellcocks.com.au.

Cite as: December 2014 88 (12) LIJ, p.77


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