e-Conveyancing: the basics
From October 2014 Electronic Conveyancing will be available in New South Wales and others states. Electronic Conveyancing (NEC) enables the completion of property transactions and lodgement of title documents with the Land and Property Information office as well as completing conveyancing and mortgage transactions.
The big proviso is that both the vendor and the purchaser’s solicitors must be registered to complete electronic conveyancing. The incoming and outgoing mortgagees also need to be registered for electronic conveyancing.
How does it work?
The process allows electronic settlements, funds movement, revenue collection, lodgement and registration.
What this means is that once a contract is exchanged, mortgage documents will be signed electronically. To enable this to happen, there must be certain things in place:
- The mortgagee has to ensure that the funds are available.
- A purchaser who is relying on some of their own money will need to have those funds in a prescribed account.
- Stamp duty will be deducted by the mortgagee from either the mortgage funds of from the purchaser’s funds and all stamp duty and lodgement fees will be paid at the same time on settlement.
There will be no need for a face-to-face settlement process. It will all be completed electronically.
You may ask how this is regulated and whether it is safe. Legislation called the Electronic Conveyancing (Adoption of National Law) Act 2012 has been introduced. Most banks and lending facilities have agreed to be party to the electronic conveyancing system.
What’s the setup?
A Federal Government corporation named Pexa Ltd has been established to administer electronic conveyancing.
Solicitors and conveyancers wishing to undertake electronic conveyancing will need to be registered with Pexa Ltd
Part of the registration process involves Pexa Ltd nominating various sponsors such as SAI Global, Lawlink and others, who will facilitate and assist in the transactions.
Are there problems with e-Conveyancing?
One of the great benefits of Pexa Ltd is that all vendors and purchasers will have their identity verified. This will provide you with greater security and knowledge that your identity cannot be stolen or abused.
However, there are issues. Initially, some solicitors, conveyancers or financial institutions may not be registered for Pexa Ltd and have not reached an agreement with a sponsor such as SAI Global or Lawlink. This means there will need to be a paper conveyance.
Over time, it is anticipated that most solicitors and conveyancers who do value providing good service to their clients will participate in an electronic conveyancing system.
Sometimes vendors will need money from a deposit being held in the agent’s trust account. The agent will need to be able to ensure that they have those funds as cleared funds and place them into the solicitors trust account. No agent will release the money directly to the vendor until settlement takes place.
There will also need to be an education process between vendors, purchasers and the vendor’s agent, and the Pexa Ltd-registered solicitors to ensure that the deposit funds are available upon settlement if required.
Is it better to use a solicitor rather than a conveyancer?
It is anticipated that the workspace in which Pexa Ltd operates will require a party to have a nominated bank account where the balance of the funds are used to complete the purchase.
It is anticipated that most of these nominated bank accounts will be a solicitor’s trust account. Purchasers and vendors who are using a solicitor will have the benefit of the trust account rules and regulations nominated by each state’s law society and the protection of the indemnities. This gives you a safety net.
By using a solicitor, the vendor and purchaser will also know the solicitor has familiarised themselves and is property trained in the Pexa Ltd system. This has the benefit of the solicitor’s professional indemnity insurance, which is a compulsory insurance for all solicitors in Australia. Insurers are of substance and will means you are fully indemnified.
Answers to further questions on electronic conveyancing can be found in our article: e-Conveyancing – Q + A
As electronic conveyancing is new in 2014, there are a number of areas that will not be clear until the system has been in operation for some time.