As Australia moves to electronic platforms for conveyancing, Fran Rush sets out what the banking sector should be looking at now.
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PEXA is the new electronic conveyancing platform in Australia. It's intended to be the first of probably several conveyancing platforms. The idea is that by 2019, the majority of Australian conveyancing transactions will be undertaken electronically, be they a discharge of a mortgage, a transfer of title or an incoming mortgage, together with all of the other sorts of registrations you do on land.
Verification of identify is what VOI stands for, and it is a verification of the identity of the person who is acquiring an interest in land or who holds an interest in land. It is a really important rule for legal practitioners and mortgagees to understand and apply, both in the paper and electronic conveyancing platforms.
The important rule that we all remember from our law school days is that indefeasibility of title is a hallmark of the Torrens title system, and the sole rule under current law to exception to indefeasibility outside of specific registration requirements is fraud.
The verification of the identity of the person is now becoming more difficult for registrars to manage because of the change in digital technology and, therefore, there has been an increased fraud within the titles system. Fraud remains the exception to indefeasibility but now a mortgagee can also lose their interest as a mortgagee ‒ and a transferee of a mortgage can also lose their interest as a mortgagee ‒ if they fail to identify or take reasonable steps to identify the mortgagor or the person that they are acquiring their interest from.
There are some real challenges for transferees of mortgage for residential mortgage-backed securitisation and commercial mortgage-backed securitisation, because the incoming mortgagee or the trustee in those scenarios actually assumes a risk associated with the transferor, so there is a higher level of compliance and it is expected that ratings agencies will have further levels of inquiry and want a higher level of due diligence at the time of setting up any of these structures.
There are a few rules we need to follow.
The number 1 rule which I've already highlighted is verify the identity of your client.
The number 2 rule, and the number 3 rule and the other rules through number 7, are things we actually intuitively do in a conveyance anyway but we need to record what we do and make sure we keep records. Those include making sure the information your client gives you, or another party gives you, seems to be correct and not misleading. Another rule is making sure that your client has the authority to deal with its title.
There are other important rules like maintaining the privacy of parties who provide information to support a verification of identity certificate, but again these are things that intuitively we would do anyway.