Lawyers and banks will soon be attending property settlements without leaving their desk, with the assistance of the web-based program PEXA (Property Exchange Australia Limited) now operative in New South Wales, Victoria and Western Australia with limited use currently in Queensland.
What is PEXA?
PEXA is a privately owned company with the Queensland, Victorian, New South Wales and Western Australian state governments holding majority shares. The four major banks and several private investors also hold shares in the company that formed a mandate in 2010 to introduce a national e-conveyancing system to facilitate property settlements.
How does e-conveyancing work?
Upon parties signing the newly released Houses & Residential Land 11th Edition Contract or Residential Lots in Community Titles Scheme 7th Edition Contract, they are agreeing to an electronic settlement. The conveyancing process remains fundamentally the same until the contract becomes unconditional. Once unconditional, one party, usually the Seller, will invite all other parties to the virtual “electronic workspace”. Set up of the “electronic workspace” can be done prior to the contract becoming unconditional but it is important that lawyers and conveyancers ensure all details are updated and correct especially if extensions are granted or the contract is terminated.
Once it is time for settlement, in a single transaction and with an approximate turnaround of 20 minutes the PEXA system allows lawyers and conveyancers to complete settlement by the transfer of funds from source accounts via the Reserve Bank of Australia to destination accounts and the registration of relevant land registry documents. This means a faster more efficient completion of transactions through real time lodgement and settlement. The Buyer and Seller, banks and third parties receive faster access to cleared funds and the need to physically attend settlement is removed.
Parties may elect to not proceed with electronic settlement by giving written notice to the other parties no later than 5 business days before the settlement date. This time limit has been provided to allow paper transfers and documents to be signed and ready for a paper-based settlement. Other circumstances such as death or loss of a legal capacity of a party, invalid transactions or financial institutions incapability, allow for an extension of settlement of up to 5 days after the initial electronic settlement, this is to enable the preparation of a paper-based settlement.
Fees
Whilst PEXA provides complimentary registration there are fees incurred to become a signatory and lodge documents with the DNRM (Department of Natural Resources and Mines). These fees are in addition to the statutory lodgement fee payable to the DNRM. So what are you actually paying for? The fee includes document creation, pre-population of registry data and automatic data checking (resulting in less human error and delay in settlements), security, faster third party payments, lodgement and registration within minutes instead of days.
Availability
PEXA is not available to the general public therefore self-represented people are not eligible to use PEXA. Paper-based settlements are still relevant and required in this instance. Paper-based settlements are still available and only time will tell how popular the new web-based settlement will become.
In Queensland we are waiting for legislation to be passed to allow stamp duty and transfers to be processed digitally.
It is expected that PEXA will be fully operational in Queensland by the end of 2015. Watch this space.
Benefits
- Third parties such as Councils, Real Estate Agents and the Office of State Revenue are paid online at settlement meaning faster payment and no cheque fees
- Less time spent and no mistakes on DNRM documents due to pre-population and automatic checking and verification retrieved directly from DNRM data
- Lawyers and conveyancers no longer on hold to the banks trying to arrange settlement
- Funds are transferred and cleared faster without the need for bank cheques
- No need to physically attend a settlement room, therefore no need to pay for town agents when settlement occurs in another city
Hurdles
- Additional costs incurred to client for use of PEXA lodgement services
- Can only use PEXA if all parties to the transaction are registered PEXA subscribers and agree to an electronic settlement
- Firms will need to review or introduce updated security management policies and processes to ensure their client’s funds are kept secure
- Only trust account signatories within the firm can authorise the transfer of funds
- Lawyers will need to be tech-savvy in order to sign documents electronically through PEXA
