I’ve been a practising conveyancer for nearly twenty years, and it’s interesting to take a moment and reflect on how technology in conveyancing has changed over that time.
Not that long ago, we used typewriters to type every single letter. They were all sent by post and we had to wait for responses. If one side wanted a change to the contract, it could take days, a week, even longer.
That’s probably where conveyancing got its stigma for being so time-consuming.
Fax made it faster. Email made it even faster.
The real issues weren’t in preparing for settlement though. They were always about the day of settlement itself.
There are two things which make settlement complex.
Even the simplest settlement has multiple parties
· the vendor
· the purchaser
· the vendor’s solicitor or conveyancer
· the purchaser’s solicitor or conveyancer
· the Office of State Revenue (for stamp duty)
· Land Registry Services
In most cases, people also have mortgages, which means the involvement of
· the vendor’s bank or lender
· the purchaser’s bank or lender
There are also other parties with a financial interest
· the real estate agent, who will receive commission
· the local council and water services, who will experience a change of customer
There are a lot of moving parts, and they all have to move at the same time to make it happen like clockwork.
One important task for the solicitor or conveyancer acting for the vendor was (and still is) to determine how the purchaser’s money should be distributed. It doesn’t all go to the vendor – it goes to a whole host of different parties:
· If the vendor has an existing mortgage, their lender needs to be paid.
· The real estate agent usually receives commission at settlement
· Some goes to the Office of State Revenue as stamp duty
· There are usually adjustments for council rates and water rates, depending on what has been paid already vs the date of settlement
· And what’s left over goes to the vendor!
Some of the distribution is time-sensitive. The amount required to payoff a mortgage changes every day. In a similar way, while the total Council and water rates are fixed, a change of settlement date means the way these are divided between vendor and purchaser changes.
Settlement was a highly manual process up to the introduction of PEXA.
It took place in a ‘settlement room’ - a large room set up with a lot of separate tables, one for each bank and a larger one at the side for the Office of State Revenue. These organisations were involved in multiple transactions every day, just as they are now. They each had a representative, with a list of their transactions and all the relevant paperwork.
As a conveyancer, you’d go into the room and find all the parties to your matter, then confirm everyone had correct documents. If they did, you’d go around swapping documents until the transaction was completed. But there could be 50 or more other people doing the same thing for different matters.
Even when settlement went smoothly, it was chaotic.
But sometimes there were issues.
· There might be a spelling mistake on one cheque, which made it invalid.
· Perhaps a bank missed one transaction off their daily list. The mortgage couldn’t be discharged, so the property transfer couldn’t take place.
Any error or discrepancy would stop the entire settlement process, and a delay of even one day meant some of the disbursements (amounts to settle mortgage discharges, rates and water) had to be recalculated.
The usual result of any issue was a minimum delay of two days, plus a massive amount of tedious, time-consuming rework.
There could be knock-on effects too. If the vendor in one transaction was also buying a new home, a delay in the sale put the purchase settlement was also at risk. If it was also delayed, all the numbers changed for that transaction too.
The domino effect of one small error could cause nightmares.
PEXA – Property Exchange Australia – is an online settlement platform which was introduced into NSW in 2014. It is now used for almost all property transactions, and it makes the traditional settlement room seem prehistoric.
The platform was designed with input from the banks, conveyancers and solicitors.
There’s a private area for each matter, which all the parties are invited to.
They enter bank details so that payments are by electronic transfer – no more cheques with pesky errors holding the whole process up.
Even better, you can see the current status of the other side. Previously, there was no way to be sure of that till settlement day. For example, the other party might tell you that the mortgage discharge documentation was in place, but on the day you discovered the bank hadn’t accepted or processed that. On PEXA, it’s possible to see whether that approval has been processed. At Contract Conveyancing, we check proactively and contact the other side if we can see potential causes of delay. The system gives us more ability to spot and resolve potential issues.
It's also very time-efficient in that messages are in-platform, so they’re immediately linked to a specific transaction. We don’t spend hours on the phone to a bank or financial institution, then have to wait while someone looks up a specific transaction.
Managing through Covid
Fortunately, the property industry had adopted PEXA before Covid hit. The old-style physical settlement room would have been impossible under lockdown.
Another technological advance which was already underway before Covid hit was the ability to verify buyer and seller IDs online.
Previously, these individuals had to compile all their proof of identity documentation and come into the office. That often required taking time off work, and the timing was less flexible. With the InfoTrac system, you can simply scan or photograph documents and verify your identity from home. There’s two factor authentication and bank-level security to protect you, plus it’s wonderfully convenient. I’ve even completed settlements for clients while they were overseas.
