A Q&A with Richard Harvey and George Patrinos
Richard Harvey is an Accredited Specialist in Property Law and Chair of the Property Law Committee. George Patrinos is the Principal lawyer of Lawsome Property Lawyers.
Congratulations on being among the first solicitors in NSW to embrace the revolution in conveyancing practice.
Q. What made you take the leap from paper to electronic conveyancing?
GEORGE PATRINOS (GP): I had long-standing clients who were familiar with the new electronic conveyancing system and wanted to try it. I was also interested to see if the new system was more efficient than my process and whether it was going to allow me to give a better level of service to clients. I am also interested in technology generally.
RICHARD HARVEY (RH): Well, technically I nearly got to complete a transfer but the transaction had to be settled in paper. The purchaser’s incoming mortgagee claimed they were unable to complete in PEXA because ‘it was out of scope on PEXA’. Because the purchaser was a company and mortgage duty may be payable, currently PEXA does not support this function. I have, however, completed five caveats for various purchaser clients.
Q. What kind of properties were they?
GP: The first was a house and my second was a strata unit.
RH: Residential and farm properties.
Q. How did you find the process?
GP: It’s not a difficult process to learn, although like any new system there’s a need to be trained on it and learn how to navigate it. I like the way the transfer is automatically generated, minimising errors.
The financial settlement side of the system was a bit more challenging. The focus now is on what the balance purchase monies are and each side of the transaction only needs to input what amounts and payees they need.
Those details are not necessarily visible to the other side, so although a cheque direction is still issued by a vendor, the process around that within the electronic workspace is a bit different.
I found the PEXA staff very helpful and, overall, I was very satisfied with the experience in my first transaction.
RH: Like anything new, it was a bit overwhelming at first but, like a practice management system, you get used to it fairly quickly as the processes are all similar and make sense. PEXA are also very keen to assist.
Where you have instructions to register a caveat and are happy to not require the caveator to sign the declaration, it is so much quicker than paper, as drawing the caveat, signing it as solicitor for caveator and lodging it in the workspace can be done within 15 minutes rather than the days it takes to get it done in the paper world, especially if you are not next door to the Registry.
Q. How did your clients find the process? Did you need to provide significantly different advice from in the past?
RH: From the client’s perspective, the only thing different was performing verification of Identity (VOI) and obtaining the simple form of Client Authority. Even VOI was no drama, given that to stamp a paper transfer you need to obtain a driver’s licence or other identification, even if it is your 90-year-old mother who is paying the duty.
I don’t believe there is anything significantly different you need to advise the client on in terms of legal advice, but the provision of settlement funds may be done in a different way where they are not all coming from an incoming mortgagee.
GP: From the clients’ perspective, the process was fairly easy. At our first meeting, I asked them to sign the Client Authorisation form (which allowed me to act on their behalf in the transaction) and I also used the opportunity to verify the clients’ identities (something which is also necessary for the Office of State Revenue’s EDR stamping process – meaning both PEXA and OSR requirements were able to be satisfied at the same meeting).
Obviously, being my first PEXA transaction, I was only able to advise the clients about how the system should work in theory. Not having completed a PEXA transaction meant the clients placed a lot of trust in me to ensure the necessary process was followed properly.
Closer to settlement, once settlement figures were determined, I was able to inform the clients of the PEXA-generated bank account into which the clients could place the balance purchase funds for the settlement. It seemed quite easy for the clients to arrange the transfer (I don’t run a trust account so I found this an easy and convenient enhancement to my offering).
On the day of settlement, it was fascinating to watch the PEXA workspace, which had a bar graph showing the progress of the settlement. Settlement was scheduled for 3pm, settlement was completed at 3.07pm, all funds were disbursed into all relevant accounts (being for the local council, Sydney Water, Office of State Revenue, vendor account, and my bank account for my fees) by 3.14pm. LPI updated the Register with my clients’ names as registered proprietors at 3.39pm.
It was really amazing to watch the process and to confirm the same-day title transfer to my clients.
From my clients’ perspective, it was seamless and their only interaction with me physically was to sign the Client Authorisation form and to have their identities verified. I could have had their identities verified using the other options PEXA has available, but for me the meeting worked well in this case.
Q. What would you say are some of the main advantages or disadvantages of e-conveyancing when compared to paper?
- Given that 95 per cent of true ’legal work’ in conveyancing is completed at the stage of exchange of contracts, e-settlements will massively reduce the time taken to prepare and complete the largely non-legal work of arranging settlement and, most notably, eliminate the time wasted on the phone with banks.
- Payments including stamp duty, rates and levies, and legal costs can all be made as line items in the Financial Settlement Schedule (FSS) and paid directly by the Reserve Bank to the nominated accounts – no waiting to receive and deposit a costs cheque.
- Flexibility in payees – given that the amounts to be paid at settlement being line items in the FSS can change up to an hour before settlement. With paper cheques this would likely make settlement fall over.
- I have not encountered any real disadvantages other than PEXA has only recently finalised the capability to do linked sequential transactions, i.e. a sale, purchase and sale, or a total of two transfers. At this time PEXA does not support more than two transfers and they are not simultaneous settlements as, say, with interdependent contracts. If the first sale goes through but that vendor’s purchase settlement falls over, the first sale settlement cannot be undone and the vendor/purchaser will be potentially homeless that night.
- It brings the financial settlement side of the process into the 21st century using electronic transfers of funds instead of cheques.
- Because transfers are now electronically signed by the practitioners involved in the transaction and the transfers are checked by LPI before the matter settles, the paper-based problems are gone. This is a huge advantage.
- Efficient title transfer is also a great advantage. In the traditional system, titles could take many weeks to be transferred often because of delays by mortgagees. I assume the ENOS details are updated by the rating agencies much quicker, too.
- You need some training and experience in the new system. Your first transaction will be time consuming because you will want to make sure you are doing it correctly. I found I was double- and triple-checking the most basic entries.
- I can imagine the VOI process will be difficult for some practitioners, particularly if they have overseas clients. I suspect this process may be improved over time.
Q. Solicitors appear not to be adopting e-conveyancing at the same rate as conveyancers. Why do you think that is?
RH: I think conveyancing lawyers are busy, feel under financial constraints re costs and to take on anything new is hard and just something for another day, if they really have to.
In NSW there are 29,000 practising lawyers and only 1,200 licensed conveyancers. In other words, only 4 per cent of those able to act in the conveyancing field are conveyancers and yet conveyancers make up a whopping 40 per cent of those registered on PEXA practising solely in NSW. There is no doubt e-conveyancing is the most cost-effective way to complete transfers of Torrens land.
If lawyers are not ready they are going to lose out to those who are ready.
GP: As lawyers, we like to adopt processes that have been tried and tested by others first. I can imagine the major take-up of e-conveyancing by lawyers may come about when lenders cut back on the traditional settlement process and make e-conveyancing the preferred settlement process.
My experience with conveyancers is that because they only do conveyancing and want to be able to do it as efficiently as possible, they are probably more likely to adopt something that aids them in providing a better service. Conveyancers tend to have smaller operations so it takes fewer layers of management to make a change in process.
Q. Do you have any advice for solicitors considering making the change?
RH: Yes, do it! Get registered so you are enabled and look for the opportunity to electronically complete a caveat or mortgage or discharge of mortgage or, better still, a transfer. Learn how to do it. The more lawyers are registered the better the chances of finding someone to play with.
Also, LPI’s harmonisation of paper with electronic conveyancing is coming, possibly by the end of this year, which will require practitioners in the paper space to perform the exact same VOI as in the electronic space – so you may as well get on with electronic conveyancing.
GP: Like anything, the growth of e-conveyancing will depend on the critical mass of users, the role of lenders and their encouragement of lawyers to use the new system. There will also be increasing client demand, because as happens at barbeques and dinners all over Australia, people talk about property, and as soon as enough people start talking about the efficiencies of e-conveyancing, others will demand it from their lawyers. It’s good to get on board now and become experienced with the system and be able to offer it to clients. It’s an additional skill and something that will, right now, differentiate you from other property lawyers.
Q. With the introduction of e-conveyancing, how soon will it be before traditional paper conveyancing becomes obsolete?
RH: Hard to say, but given my belief the banks will push e-conveyancing along with incentives and/or disincentives for customers who do or do not use PEXA-enabled practitioners, perhaps five years. But noting this is for standard transfer matters, PEXA cannot yet do transfers creating easements or other less common transactions.
GP: I would imagine that by late 2016 most transactions will be conducted electronically. It’s the way of the future. It’s more efficient and critical mass of demand from clients, lenders and other participants in the system will make it the way we settle property transactions.
This interview was edited for the purposes of clarity and brevity.