Legislation to enact the proposed Electronic Conveyancing National Law was introduced as a Bill in the NSW Legislative Council on 18 October 2012 with a view to have the law operative (at least to a limited extent) in New South Wales by June 2013 and the other states and territories to follow.
While the introduction of the Bill is a significant step forward in making national e-conveyancing a reality in Australia, it is not without issues and has raised more questions than answers about how e-conveyancing will operate.
While some of these issues may be clarified through a proposed pilot program, the current plan is to have just a few selected banks as testers for the pilot.
Background
E-conveyancing – the goals
The main goals of the e-conveyancing legislation are stated as being:
- to enable conveyancing documents in electronic form to be lodged and processed under existing Torrens Title legislation, but
- not to derogate from fundamental principals of the Torren Titles system eg indefeasibility of title.
Essentially, to increase efficiency and uniformity across Australia in property conveyancing and presumably with the use of less paper.
The key players
Under the Bill, it is proposed that the key players in the e-conveyancing system will be:
- The users of the system, who are referred to as "subscribers" in the Bill. Initially the subscribers will be banks, solicitors and conveyancers.
- The network operators that facilitate the electronic lodgment of data through to the Register, the facilitation system is referred to as the Electronic Lodgment Network (ELN).
- The Title Registry Office, the Registrar and the Register.
The rules
The players are required to abide by the rules of the system (referred to as "participation rules") and the ELN operators are required to abide by the rules to operate an ELN system (referred to as "operating requirements").
The subscribers and the ELN operators would also need to agree the rules as between them as to the authority of the subscribers and use of the system (referred to as a "participation agreement").
The essential requirements
In order to use the e-conveyancing system, a subscriber will need:
- Authority from their client/customers, ie the vendor/purchaser/mortgagor
- A Digital Certificate or Digital Signature (terms used interchangeably at this stage) recognised by an ELN and authorised by the client/ customer to bind both the subscriber and the client/customer
- Agreements (or agreement to the relevant rules) with key players and clients/customers regarding the participation rules and participation agreement (and retainers from clients/customers), and
- The data/information usually required for a "paper" or physical settlement of a conveyance eg property details, payment and other terms or agreement to convey title and settle transfers.
How e-conveyancing might operate
As noted earlier, the details of how e-conveyancing is to operate in practice have yet to be determined. However, if the operation of the Personal Property Security Register (PPSR) or the new online ASIC lodgment protocol are any guide, the process might be as follows:
- Completion occurs on the provision of settlement funds to the vendor's solicitor or conveyancer (ie the subscriber) on the completion date. Stamp Duty on the transfer will need to have been paid prior to settlement and the Office of State Revenue would presumably notify the Registry of receipt of payment (similarly to insurers notifying RTA of payment of the green slip).
- Confirmation of completion is given by the subscriber to the purchaser (or their legal representative).
- The subscriber, via the pre-determined and authorised "signer", will prepare and lodge the transfer online by completing pertinent details through an ELN (similarly to the PPSR).
- The Register is either updated online (ie live) or will be processed by the Registry and updated with the process proceeding as usual eg notifying authorities of the transfer and issuing title deeds in the new proprietors' names, etc.
- New title deeds (where ones currently exist) will be issued to the subscriber after processing.
Potential legal issues
There are many potential issues that the introduction of e-conveyancing could create, including:
- The increase in risk and liability of a subscriber (namely the solicitor/ conveyancer) eg in recording information incorrectly or lodging settlement when settlement is not correct or not authorised or where fraud is involved.
- The laws regarding fraud and indefeasibility are largely unchanged except, significantly, that the subscriber is more likely to carry most of these risks.
- Unauthorised transactions or use of the ELN or a digital signature becomes significantly more difficult to establish with the subscriber carrying the burden to prove he/she has been "hacked" or "defrauded".
- The ability for the subscriber to obtain insurance cover for the e-conveyancing risks may be limited, expensive or otherwise prohibitive.
Conclusion
Basically, the current NSW Bill focuses more on electronic "lodgment" rather than electronic "conveyancing" and how the proposed new law will work in practice is yet to be settled.
The lack of clarity and certainty in the provisions of the rules, the lack of provision for procedural fairness in the operation of some rules, and the increase in risk and liability to the subscriber in the rules, are a particular concern given we are only eight months out from the planned commencement of the new legislation.
If the new e-conveyancing regime is to achieve its stated goals of increasing efficiency and uniformity across Australia, these issues – which will be a deterrent to participation in the system – need to be addressed for all participants.
Expanding the proposed pilot program to include a broader representation of the players and providing details of the practical processes would be good first steps to address these issues.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
