The land title system is becoming computerised in a bid to simplify the management of land transfer and mortgage data for consumers, business and government. This article looks at how these major changes will affect the land title system.
How "electronic conveyancing" works
The core of the new process will be similar to how tax agents prepare an electronic tax return for clients. The tax agent prepares a paper tax return which their clients sign. The tax agent then sends an electronic representation of the tax return to the tax office, certifying that the tax return has been signed by the client.
A purpose built national system – Property Exchange Australia (PEXA), will lodge data with the titles offices in each Australian state and territory electronically, replacing paper documents.
PEXA will allow lawyers, licenced conveyancers, regulated financiers and government authorities (called 'subscribers') to send electronic data certified as correct to the Titles Office. On receipt of the data, the Titles Office will change its title register to reflect the change of registered proprietors or changes to legal estates and interests in land.
In summary, PEXA will allow subscribers:
- who are lawyers or conveyancers to sign and electronically lodge their clients' land title transfers, mortgages, discharges/releases of mortgages and caveats for registration at the titles office;
- who are financiers to sign mortgages and discharges of mortgages on their own behalf, and for their customers if they certify that the customer has signed a paper mortgage or discharges;
- to simultaneously settle and complete the transaction by paying and receiving all the financials of the conveyancing transaction including paying stamp duty, registration fees, unpaid council and water rates and land tax.
The system will not be used to complete the other aspects of conveyancing; like title investigations, vendor disclosure statements, contract preparation and negotiation, contract signing, payment of the deposit or calculation of outgoing adjustments and physical delivery of keys. Key changes
The major differences between the new PEXA system and the current paper system are:
PEXA requires a formalised client identification process. This is in place of the current systems that require or provide paper certificates of title on request. Some jurisdictions currently require an official paper certificate of title before the Titles Office registers a change of proprietor of the land or a mortgage on the title. The identification process is likely to be extended to the existing paper system.
The subscriber is required to electronically "sign" the transaction data they send as correct. This is the equivalent of ‘signing’ on behalf of the client the paper documents currently known as the transfer of land, mortgage, discharge of mortgage/release, caveat and withdrawal of caveat.
Subscribers who are lawyers or conveyancers must hold professional indemnity and fidelity insurances. The subscribers will either represent clients or act in their own right. This means that lawyers and conveyancers will generally act as agents for their clients for transfers of land. Financiers will only act for mortgages and discharges of mortgages on their own behalf but will certify that their customer has already signed a paper mortgage.
Only those who qualify as subscribers will have access to the system to ensure the quality and integrity of the data. This is similar to the way that only stockbrokers are able to transfer company shares through a stock exchange.
Expected rollout date
A majority of land titles offices with the exception of the Australian Capital Territory are now rapidly moving towards a computerised system. The ACT is likely to be the last mainland jurisdiction to adopt the system as most ACT land titles are not the usual freehold title form of ownership.
PEXA have already lodged the first electronic transactions for mortgage documents. The Commonwealth Bank was the first bank to conduct the transactions. The National Australia Bank is expected to be the second bank.
The ability to conduct transfers of land in the system is expected to be rolled out from the second half of 2014.
Implications for clients, financiers and lawyers
Clients may find the identification process troublesome and time consuming. Similar to a passport application, a client may need to visit either the post office or their lawyers' office, and possibly their bank, to be identified. However, this is just a once off process.
- Individuals who attest the sealing of company documents or similar authorisations will also need to be identified.
- Commercial clients with a large number of transactions will benefit as they are only required to be identified once every two years.
Companies which operate nationally will gain efficiencies from adopting a national system. In particular, it will be easier for financiers and individuals who buy or sell land in one state and finance the transaction in another state.
However, land laws remain state based and contracts for sale and vendor disclosure will still be different in each state or territory.
Smaller low volume operators, like small legal firms or conveyancing firms may find the new system too difficult or administratively burdensome to continue their conveyancing transactions. The larger and more specialised operators will become larger, more focussed and more specialised in delivering conveyancing services.
There will be opportunities for commercial property clients to integrate their electronic systems with Hunt & Hunt's systems to provide a more seamless and faster conveyancing process.
The system is likely to be used for data matching by state and federal revenue authorities. The State Revenue Offices are seeking more data matching to capture information for land tax aggregation purposes. The previous federal government recently authorised the Australian Tax Office to spend approximately $77 million on better data matching to identify transactions with potential capital gains, and possibly GST, implications.