What is an electronic settlement (E- Conveyancing), and what happens at settlement?
In Victoria, Land Registry has mandated electronic conveyancing since 2018. Most transactions must be lodged electronically. The requirements to lodge electronically apply to conveyancers and lawyers acting for a party or themselves and PEXA subscribers. The Electronic settlement must be conducted via an Electronic Lodgement Network Operator (ELNO). Currently, PEXA is one ELNO provider, and there is an incoming ELNO, Sympli.
What is an electronic settlement?
Electronic settlement is the process whereby property settlements are completed via an Electronic platform (virtually) instead of a physical location for all parties to attend. At the electronic settlement, all parties exchange funds, lodge transfer documents, and stamp duties electronically. Once a settlement completes, the vendor discharges the mortgage, receives funds, and the purchaser is registered, the incoming mortgagee is also registered on the title (if there is a bank involved).
The process of an electronic settlement consists of a Lodgement process with Land Registry and Financial Settlement. The Lodgement process is Lodging, Lodged and Complete. The financial settlements status is Settling and Settled.
What happens at settlement?
Once all parties involved in a workspace have signed off for settlement, the workspace will be locked at the time of settlement, no changes can be made. The lodgement process and financial settlement are taken place simultaneously.
Firstly once the workspace is locked, the financial settlement status moves to Settling. If a Trust account is involved, a Source Funding instruction is sent to the Bank. Once Source Funding is complete, Reservation is sent to the RBA (Reserve Bank of Australia).
Once an RBA Reservation is received, Lodgement Request is sent to the Land Registry and the Lodgement status moves to Lodging.
Once lodgement is complete, the Lodgement status moves to Lodged. The Land Registry will commence reviewing documents. Once Lodgement status is Lodged, Settlement Response is sent to the RBA (every 2 minutes)
The RBA will send a response once the Settlement Request has been processed. When the Settlement Response has been received Financial Settlement status will move to Settled- at this point Financial Settlement has been successfully and irrevocably completed.
Once Settlement at RBA is complete, disbursement will commence, Financial Settlement status moves to Disbursing. Disbursement batch runs every 10 minutes.
When the Land Registry has completed reviewing the documents and has provided a final status for the documents the Lodgement status will move to Completed.
When all banks involved in settlement have returned Disbursement responses, the Financial Settlement status will move to Disbursed.
Source: PEXA.com.au
What are the benefits for clients of Electronic Conveyancing?
Constant settlement result and lodgement means once settlement completes, the transfer is lodged with Land Registry (in most cases unless the lodgement is manually examined by the Land Registry). The purchasers are registered constantly. This gives the purchasers peace of mind. And also, Electronic settlement eliminates the need for bank cheques, saving time and money.
The vendor receives funds into their account constantly once settlement completes. They do not need to wait for the time of banking the cheques like in paper settlements. For all major destination banks, the funds will be instantly cleared within 24 hours of settlement.
Constant communication between all related parties such as their Representatives, Bank; Clients is updated on the status of the workspace often.
Save time and money for all related parties, travelling, settlement agent fee, and friendly environment.
Stamp Duty must be paid at settlement
This also means that the stamp duty must be paid at settlement to enable the stamping process with SRO and lodgement with Land Registry takes place. In Victoria, you must pay stamp duty at settlement as most transactions are conducted electronically. There are some residual transactions that are still in paper, such as company shares property, where stamp duties can be stamped and paid after settlement.
And where to put the funds for settlement if no incoming mortgagee (Bank) involved.
If purchasers have no mortgage (no banks), they must transfer the funds for settlement to either the PEXA Source Funds account (if the purchaser’s representative does not have a trust account) or the purchaser representative’s trust account. Bank cheques are not accepted in an electronic settlement.
However, Clients should still be warned to take reasonable steps in checking and verifying bank accounts before transferring funds to the practitioner’s trust account to avoid cybercrime risk.
Electronic Conveyancing means that the conveyancer will sign the documents on the clients’ behalf, and there are strictly complied requirements in verifying clients’ identity and right to deal. Clients’ Authorisation form signed by a wet signature must be obtained and kept by conveyancer/lawyer for 7 years after settlement completes.
At HN Conveyancing, we conduct settlements electronically. We are a PEXA member. Don't hesitate to get in touch with us via 0412770215 or hanh@hnconveyancing.com.au for more information. We have varied options in conducting your verification of identity. We use new technology to provide you with a new experience of transferring properties and ensure you have a smooth transaction.
