Electronic Conveyancing commenced on Monday 4 July 2016 which will make the settlement and conveyancing process easier for everybody.

The term “electronic conveyancing” refers to a conveyancing transaction where practitioners have elected to settle electronically through the electronic platform provided by Property Exchange Australia Ltd (PEXA). The electronic process facilitates a secure, electronic exchange of documentation and online funds transfer via the Reserve Bank.
 

What is electronic conveyancing

The term “electronic conveyancing” refers to a conveyancing transaction where practitioners have elected to settle electronically through the electronic platform provided by Property Exchange Australia Limited (PEXA). The representatives of the parties and their financiers participate in an electronic workspace, where:

• registry instruments are prepared and electronically signed (transfer, mortgage, discharge/release of mortgage);
• duty may be paid as a settlement disbursement;
• the balance of the purchase money and its disbursement are agreed;
• the documents to be lodged for registration are checked pre-settlement at Land and Property Information (LPI);
• at the agreed settlement date and time, provided the documents are in order for registration, the balance of purchase money is paid and proceeds of settlement are disbursed; and
• the relevant registry instruments are electronically lodged for registration (which usually follows that same day).

Electronic conveyancing does not cover the whole of the conveyancing transaction; just the preparation for and execution of settlement and registration. In relation to the settlement itself, the platform is essentially a virtual settlement room.

The regulatory framework

The principal legislation, first enacted in NSW and then replicated in participating States and Territories, is the Electronic Conveyancing National Law (ECNL).

The national regulatory framework for electronic conveyancing was developed by the Australian Registrars’ National Electronic Conveyancing Council (ARNECC), a body comprised of the Registrars from all Australian States and Territories.

Two sets of Rules have been made pursuant to the ECNL:

• the Model Participation Rules (MPR), which govern the relationship between the electronic lodgement network operator (ELNO) and participants in the system, such as lawyers; and
• the Model Operating Requirements (MOR), which govern the relationship between the ELNO and the land title registries.

The activities and responsibilities of conveyancers and lawyers choosing to use electronic conveyancing are primarily governed by the ECNL and the MPR, but it should be noted that further refinements of the MPR and MOR are continuing.

Once adopted by a particular jurisdiction, the MPR and the MOR become the Participation Rules, and the Operating Requirements, respectively. Not all jurisdictions have the same version of these requirements and rules operating at the same time – it depends upon the system readiness, the timing of the PEXA roll-out in that jurisdiction and the process of adoption in that jurisdiction. Find out the operative versions in a particular jurisdiction.

In NSW, version 3 of both MPR and the MOR have been adopted by the NSW Registrar General and commenced operation on 9 November 2015.

Key concepts

Client authorisation

For a practitioner to conduct the client’s conveyance using the electronic platform, the client must first provide written authorisation in the form of a Client Authorisation, a prescribed form in Schedule 4 of the MPR.

Through the Client Authorisation, the client expressly authorises the signing of documents on its behalf, the lodgement of documents such as transfers for registration, the financial settlement of the conveyance and anything else necessary to complete the transaction.

See further the Guidance Note on Client Authorisation issued by ARNECC.

Verification of identity

In conjunction with the Client Authorisation, taking reasonable steps to identify the client is a keystone of electronic conveyancing. Schedule 8 of the MPR contains the Verification of Identity Standard (VOI Standard). Compliance with the VOI Standard ensures that a practitioner will be deemed to have taken reasonable steps to identify the client, that is, have the benefit of “safe harbour”. The advantage of safe harbour is the practitioner avoids the evidentiary burden of establishing he or she took reasonable steps in identifying his or her client.

The verification may be undertaken by the practitioner or may be provided by an Identity Agent. There are a number of commercial providers of verification of identity services. Practitioners need to be aware of the express contractual terms of these agreements, particularly any limits placed on the liability of the Identity Agent.

See further the Guidance Note on Verification of Identity issued by ARNECC.

Digital signature

Documents such as the transfer and the financial settlement statement are digitally signed in the electronic workspace using a digital certificate. A law practice Subscriber must obtain a digital certificate. The Subscriber Administrator then appoints the practitioners that will be Signers for the practice. Each Signer must then have his or her identity verified before being provided with a “Child” digital certificate. Signers are authorised to digitally sign registry instruments and the financial settlement statement. It is critical that digital certificate hardware and passwords are kept secure at all times.

Electronic certificate of title

As it is not possible to provide a paper certificate of title in an electronic workspace for settlement, a new approach is required. In New South Wales, LPI has introduced an option where certain parties can elect to have an electronic Certificate of Title (eCT). At present, eligibility for an eCT is limited to Australian Prudential Regulation Authority (APRA) regulated financial institutions who hold a registered first mortgage and are Subscribers to PEXA or are represented by a Subscriber to PEXA.

ARNECC have also published a Guidance Note on the key concept of Certifications, and Draft Guidance Notes on Right to Deal and Retention of Evidence.