In September 2014 Gadens was the first law firm to lodge a mortgage for registration electronically through PEXA.
The Australian Registrars' National Electronic Conveyancing Council (ARNECC) comprises the Registrar Generals (or equivalent officers) of each state and territory. ARNECC was established to make e-conveyancing nationally consistent.
Property Exchange Australia Limited (PEXA) provides the IT platform for Subscribers to operate in the Electronic Lodgement Network (ELN).
ARNECC publishes Participation Rules which govern how Subscribers participate in the ELN. These Participation Rules provide that Subscribers must take reasonable steps to VOI (verify the identity) of clients for whom they are acting. The rules specify a safe harbour standard but Subscribers can use any reasonable method to conduct identification.
Conducting a transaction
E-conveyancing is arguably a misnomer. The ELN is more accurately described as a system for e-settlements of real estate transactions.
In a ‘pure’ e-conveyancing environment, there are no paper dealings except for a counterpart mortgage at this stage and no paper certificate of title. Instead, Subscribers acting for the vendor and the purchaser VOI their clients, and have their clients sign a Client Authorisation authorising the Subscriber to effect the transaction. The Subscriber then certifies in ELNO that VOI has been conducted, a Client Authorisation is held, and that the transaction can proceed.
The documents which come into effect once this certificate is given are standard form pre-lodged forms. Accordingly, there will no longer be a paper form of transfer of land, and the vendor will only sign a Client Authorisation and never a transfer document. Payment of purchase price and stamping will occur automatically at the scheduled settlement time.
Mortgagees may participate directly or through other Subscribers (ie lawyers acting on behalf of the mortgagee). Irrespective of whether the mortgagee acts as a Subscriber or uses another Subscriber to settle the mortgage, the mortgagee can VOI the mortgagor (by their own staff, brokers, or using other agents), or mortgagors may be separately represented by their own Subscriber who will VOI the mortgagors.
Gadens anticipate that usually mortgagees will VOI their mortgagor, and mortgagors will not be separately represented by their own Subscriber. Mortgagors sign a mortgage document which is on the same terms as a pre-lodged electronic version. The mortgagee or the mortgagee’s Subscriber then digitally certifies that a copy of the mortgage has been signed and the mortgagor has been VOI’d. The end result being that there will no longer be a signed copy of the mortgage available on the register.
Usually, an e-conveyance can only proceed if all parties to a transaction are Subscribers or represented by Subscribers. This will require the participation of the vendor’s mortgagee, the vendor, the purchaser, and the purchaser’s mortgagee.
Alignment is a proposal that will require paper based transactions to be conducted in the same way as electronic transactions. Under alignment, even if a lawyer or conveyancer has elected not to become a Subscriber, they must follow the e-conveyancing system. This means that they must conduct VOI, obtain a Client Authorisation, and lodge a (paper) certificate, just as if they had elected to subscribe. Alignment is likely to reduce the take up time for e-conveyancing from many years to a shorter period.
Victoria proposes that alignment should commence on 1 July 2015. Other jurisdictions have yet to specify dates. The introduction of alignment is crucial to gaining the efficiencies PEXA can deliver.
E-lending and true e-conveyancing
Gadens’ interest goes well beyond participating in PEXA. We are rapidly changing the way loan and mortgage transactions are conducted to enable wholly online transactions.
A home loan documented online (maybe even using a tablet or smartphone) can result in a quicker, more convenient and better experience for today’s consumers. Gadens have developed a number of novel solutions to bring new efficiencies and levels of service to the mortgage industry.
Gadens are also developing solutions to facilitate e-conveyancing in its true form. Why should exchanging contracts be a paper war when the process can be automated? Using a combination of our existing RSP (rapid settlement process) and new initiatives, we expect to be able to bring huge efficiencies to sale process, especially for large developers with multiple sales to be exchanged and settled at the same time.
Helping your business
We can help formulate customised solutions for your business. The process starts well before going live and involves creating e-friendly documents, streamlining procedures, removing obstacles, and maximising customer satisfaction.