The move to e-conveyancing: What is electronic settlement and when does it become mandatory?
When buying or selling property, a settlement process takes place in the period between exchange of contracts and final settlement of the property. The process culminates in the formal settlement of the property whereby the property ownership is officially transferred. Traditionally, settlements has been done as a ‘paper settlement’ whereby the parties involved in the transaction attend a set settlement time and exchange paper documents and bank cheques to formalize the exchange of property ownership.
In Australia there has been a shift away from paper settlements to an electronic process which enables the settlement to occur through an online platform.
Indeed from 1 July 2019 in New South Wales, it will be mandatory for all conveyancing transactions to be conducted through electronic conveyancing.
At the current time, electronic settlement is possible through a provider called PEXA. PEXA will soon be joined by other providers, including a platform called SYMPLI.
The PEXA process that follows exchange requires all participants to have been identified, registered and have a PEXA digital certification that entitles them to transact electronically in the work space. A ‘work space’ in the electronic conveyancing platform is opened by the vendor, or failing the vendor any other party, inviting all parties to join the transaction and setting a date and time for settlement.
Each party can add, subtract or amend their information in the workspace. Whilst such matters as requisitions and settlement adjustments are completed outside the workspace they can be uploaded to the workspace and made visible to a party of choice. For instance, a discharge authority might be made visible to the discharging mortgagee only.
Outgoing and incoming mortgagees (i.e. the banks/lenders) make their arrangements for settlement without input from practitioners. Payment directions are communicated by entry into a Financial Settlement Schedule which contains tabs for Source Funds and Disbursements. Each party to the transaction completes their tasks prior to the nominated settlement time and for settlement to take place as planned, the Settlement Schedule must balance, the source funds must be available, and all documents must be signed.
The workspace is locked automatically if everything is ready. This triggers title verification and movement of the source funds into a holding account. A final search is not required as the workspace will not lock if there are title impediments to registration. Settlement occurs exactly as scheduled and title documents are lodged and registered, and the settlement funds disbursed in accordance with the Financial Settlement Schedule.
The settlement process is automatic and completed in about 15 minutes which sees cleared funds transferred and title registered. Note settlement can be cancelled at any time prior to the locking of the workspace.
If you have any questions regarding the electronic conveyancing process, please feel free to get in touch with one of our team members to discuss.