ByLawyers News and Updates

A brief explanation of the move to e-conveyancing – PEXA settlements

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Electronic conveyancing is coming

The conduct of a sale and purchase up to and including exchange can and will remain unchanged for some time as practitioners adapt to conducting matters electronically using emails and software that is currently being introduced into the market.

It is in fact possible today to prepare, submit, negotiate, sign and exchange contracts without the use of paper. Those practitioners interested in joining this move away from paper will find the means to do so within the By Lawyers conveyancing guides.

Electronic settlement has already arrived

However, the focus of this explanatory paper is the electronic settlement process – currently available via PEXA, but soon also via SYMPLI, a joint venture of Infotrack and the ASX.

So, how does PEXA work?

The PEXA process that follows exchange requires all participants in the transaction to have been identified, be registered and have a PEXA digital certification that entitles them to transact electronically in what is known as a ‘workspace’.

A workspace in the electronic conveyancing platform is opened by the vendor, or failing the vendor any other party, for each transaction and a date and time for settlement is entered. When the workspace is created the vendor ‘invites’ all other parties to the workspace via PEXA.

The workspace is where the transaction occurs. As the transaction progresses, each party can add, remove 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 vendor’s discharging mortgagee only.

The vendor and purchaser sign a paper Client Authorisation allowing their practitioner to sign for them, as it is the practitioner who has the authority through their Digital Certificate to sign for clients. Therefore, the Client Authorisation is a critical document and must be retained for 7 years as they may be audited.

Outgoing and incoming mortgagees 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.

How does settlement occur?

The workspace is locked automatically once 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.

The way of the future

 

The electronic settlement process is remarkably efficient and easy once you get used to it. As it seems inevitable that electronic settlements – and ultimately electronic conveyancing – will become standard practice, it is well worth becoming familiar with it and its really not so hard to do. By Lawyers conveyancing guides can assist you.

By Lawyers Contract of Sale of Land – Victoria

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A new form of contract, co-authored by Russell Cocks, providing a vendor’s statement and contract in one document.

The contract is specifically designed for residential conveyancing transactions and seeks to smooth some of the traditional road blocks that arise in these transactions.

The By Lawyers Contract of Sale of Land is located in the Contract folder in the Sale of Real Property Guide.

Seven reasons to use the By Lawyers contract

  1. The Contract and Vendor’s Statement are combined into ONE document, with the Vendor’s Statement, logically, coming FIRST. The Vendor’s Statement is formatted in such a way as to deal with the obligatory fields first and then group the optional fields in way that makes removal of those fields simple if they are not required.
  2. Particulars of Sale in the Contract includes a “sunset date” for off the plan approval. No more searching through mountains of Special Conditions.
  3. Non-derogation warranty. General Conditions can be amended by Special Conditions BUT not such as to reduce the rights created by the General Conditions. No more contracts that say one thing on page 1 and reverse that on page 15. This Contract is fair to both parties; if someone wants to create an unfair contract they cannot hide it within this contract.
  4. General Condition 12 – deposit release. Establishes a clear protocol for release by requiring timely objection to title.
  5. General Condition 14 – loan condition. Extends time for approval to 21 days and allows for automatic extension, subject to vendor’s ability to end the extension by notice.
  6. General Condition 25 – losses. Removes disputes relating to default losses from the settlement process and allows the parties to resolve these issues after settlement.
  7. General Conditions 27 & 28 – default and rescission notices. Divides the process into two steps with specified legal cost in respect of notices.

There are also other improvements, such as simple off the plan and electronic conveyancing conditions, a requirement that a vendor produce a copy lease at settlement and a clause passing ownership of abandoned goods to the purchaser. This Contract continues the quest commenced by the 2008 Contract (remember Requisitions?) to simplify conveyancing by ironing out the speedhumps.

NSW – Contracts for the Sale of Land

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The Conveyancing (Sale of Land) Regulations 2017 will come into force 1 September 2017 affecting contracts for the sale of land.

The main changes are to the disclosure obligations requiring the following to be annexed to the contract:

  • both the sewer mains and the connections diagrams  are now required; and
  • for a strata or community plan property ALL by laws must be attached including the model by-laws.

Changes to contract warnings include:

  • a new warning about loose fill asbestos; and
  • the swimming pools warning has been removed.

Commentary, precedents and the By Lawyers Contract for Sale of Land have all been updated.

Contract for Sale of Shares – Extensive

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A new precedent has been provided. The Contract for the Sale of Shares – Extensive covers many of the issues that may arise in complex transactions. It may be found in our Companies, Trusts and Partnership Guide in the Companies section within Deeds and agreements.

FAQs – By Lawyers Contract for the Sale of Land NSW

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By Lawyers introduced a new contract for the sale of land for New South Wales earlier this year and have hosted a number of informational webinars about it for solicitors and conveyancers. Those webinars raised a number of questions which we have published here.

If you have any questions not covered here, please email us at askus@bylawyers.com.au.

2016 edition of the contract was released in May.

General FAQs

Q: Can this contract be used in practice now?

Yes, and its use continues to grow as practitioners become aware of its existence and benefits.

 Q: Given it is alternative to Law Society Contract for Sale, what if the purchaser’s solicitor/conveyancer refuses to use this version?

There is no prescribed contract for the sale of land.

It is for the vendor to decide the contract not the purchaser and it is not for the practitioner acting for the purchaser to jeopardise the transaction due to his personal preferences.

The Law Society contract is not the only one used. Several major firms use their own contract. The Barangaroo contract is an example which we understand has also adopted electronic execution to cater for the Chinese market.

Q: Is this contract available in LEAP Documents if we haven’t changed to LEAP Conveyancer yet?

Yes.

Q: Will LEAP take away access to the Law Society contract at any time?

Most unlikely. This is a matter for LEAP.

Q: Is there a time frame suggested that all parties should move to use the 2015 contract or Law Society contract rather than 2005?

We understand that the Law Society will cease providing 2005 contracts in January. You will need to confirm with them.  The By Lawyers contract is immediately available.

Q: Does the contract include the standard conditions from the law society as well (blue pages)?

No. This contract is a new contract quite separate from the Law Society contract.

Q: Can this contract be used for sale/purchase of properties in Queensland? 

No.

 

FAQ – Email and exchange questions

Q: Even if you do the exchange via email, can’t you still just mail out the contracts to the other side to “formally” complete the exchange and so you are holding the original signed Contracts…

This is a misunderstanding of the process. The exchange takes place when the vendor’s signed contract is emailed back to the purchaser. That emailed contract is the original and the one actually signed and retained in the office is a copy of the electronic original.

Q: If the contracts are exchanged via email do you still send the original paper contract to the other side?

No. The original is the electronic contract.

Q: If part of an exchange is ensuring that the contracts are identical, how is that carried out if they are emailed as part of the exchange and not physically checked in-house?

The purchaser’s electronic contract is checked against the vendor’s before returning the counterpart which can also readily be checked by the purchaser if they wish.

Q: When sending a contract by email on behalf of the purchaser, do you date it before sending and the vendor’s representative dates it when returned?

If the contract is to be exchanged the day that you send it then date it before you scan and send it. The vendor will do likewise. If the exchange may be on another unknown day then send it undated and the vendors copy returned to you will be dated that day and that is the date of exchange. The vendor may print and date the purchaser’s print version if he so chooses.

Q: Further to question about what date to list on contact for electronic exchange, do we list the cooling off date from date vendor send back signed copy?

Exchange is effected on email delivery to the purchaser’s solicitor which is the start of the cooling off period.

Q: What about when the agent does the exchange and it is incorrect, i.e. things which have been agreed between the parties have not been changed in the contract prior to exchange. Do we email a subsequent amended contract? Normally after exchange there are no changes.

The usual rules apply that any changes must be agreed and included in writing in the contract or in a separate document referred to in and supplemental to the contract.

Q: Is there a facility to electronically amend the document to add the date of exchange to the contract signed by the purchaser?

If that was considered necessary then it is printed dated and scanned in.

 

FAQ – Deposits

Q: Normally a deposit is released only if the vendor is purchasing a property; however it appears this contract allows it for any reason, what is the background for this?

Because it can be difficult to recover the deposit paid in a second transaction to which the purchaser is not a party it is not uncommon for such a request to be met by the response – get a deposit bond.

Sometimes the vendor is in need of cash urgently and the deposit is released to secure a price reduction.

As there are many reasons for release it is considered best left to the parties to negotiate.

The important part of the condition is the creation of a charge on the property securing repayment if it is released.

It is worth noting that the deposit release clause, like some other clauses in the terms and conditions, is activated by checking a box in the summary.

Q: With reduced deposits, are you suggesting or recommending that if the vendor will accept a 5% deposit, you just show that as the amount on the front page, rather than 10% and have a special condition dealing with a claw back in the event of default?

Yes. We doubt that a court will see a payment made after the exchange as an earnest for the transaction. There are a number of cases on this issue.

Q: If the release of deposit is ticked, can the deposit be released for any reason? Normally it’s only released for the purchase of another property.

Once the release of the deposit has been negotiated then all that is required is to tick the box which triggers condition 3 (c) in part 2 of the contract. If you wish to add any other conditions to the release then it would be necessary to draft a condition for inclusion as a special condition on page 4 of part 1.

 

FAQ – stamping questions

Q: Can you tell us again what the Office of State Revenue attitude will be to PDF documents.

OSR are well acquainted with stamping documents signed electronically. When sending it to them simply state that it is an original electronic contract.

Q:  If you have a provider who stamps can they stamp a PDF?

Yes.

Q:  You say the PDF exchanged copy becomes the original. For the purpose of stamping, can this be printed and the stamp applied to the printed version?

Yes.

Q: To stamp contract in house under EDR do we just need to print the PDF original and stamp it?

There is little point in doing so as long as the electronically stored contract is available if required by OSR.

Q: You mentioned the OSR requiring the original document for stamping. So how do we deal with that when contracts are exchanged electronically?

The OSR stamps a print version of the original electronic contract.

 

FAQ – Warranties, inclusions, and conditions

Q: What happens if you do not have a survey and have no way of knowing if there is encroachments on the property? One of the warranties appeared to warrant that there was no encroachments, from memory.

This is normally the subject of a special condition which is now included as a warranty in the contract. If the vendor knows of an encroachment and discloses it then the purchaser must accept it. If the purchaser does not get a survey then caveat emptor. If the purchase gets a survey after exchange showing an encroachment other than fencing then the purchaser may rescind the contract provided it is a material breach not known to the purchaser and the purchaser would not have purchased the property had he known of the encroachment and the vendor fails to remedy the encroachment.

Q: There is not much room for additional inclusions, I suppose we would have to have an annexure?

The space expands as words are added.

Q: If we want to amend some of these conditions for example insert a specific interest rate, how do we do that?

Type in the special condition or annex one. See page 5 of the summary.

Q: What about swimming pool clause regarding non-compliance SPA 1992 and Local Government Act and Regulations disclosure and purchaser taking as is and P not entitled to requisitions, objection, etc.?

See the warranties both statutory (reproduced in the summary) and contractual (clause 6). See clause 19(f) for taking as is.

Q: Off Plan Contracts form large part of our work and yet there is no section in LEAP conveyancing precedents or 2015 contract deals with off plan. What our options in this regard?

Within the library of special conditions are precedents for real property subdivision and strata development.

 

Can I copy the contract?

Q: Are we able to copy the contract without affecting the copyright provisions?

The contract is available as one of our precedents to those that use LEAP Conveyancer or subscribe to our Conveyancing Guide through our website.

Q: You said anyone can use the contract and that there is no breach of copyright. Does this apply whether or not you are a LEAP subscriber?

No. you must be using LEAP or have subscribed to our publication. Apologies for any misunderstanding.

 

 

 

 

Conveyancing NSW

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Conveyancing updates

JANUARY 2017
  • ALERT – Requisition Fees – From 1 January 2017, LPI will charge fees for requisitions sent in relation to documents, plans and associated instruments lodged for registration. The fee for a requisition in relation to a dealing, application, request or caveat will be $50. The fee for a requisition in relation to a plan or associated instrument will be $100.
DECEMBER 2016
  • Contract for sale of land – By Lawyers 2016 – Part 1 of 2 – Included Co-Agent on the front page
NOVEMBER 2016
  • Update information regarding strata schemes for commencement of the Strata Schemes Management Act 2015 the Strata Schemes Development Act 2015 and their accompanying regulations on 30 November 2016. Expand commentary on priority notices which can be lodged via PEXA from 28 November 2016.
  • Include reference to OSR Purchaser Declaration on required precedents
OCTOBER  2016
  • Retainer instructions – Sale and Purchase of real property – added s. 47 requirements
  • Costs Agreements
    • Included reference to time limit for bringing costs assessment included total estimate of legal costs section with provision for variables and included authority to receive money into trust.
    • Disputes section improved, fields for client and firm details added, trust account details added, solicitor’s lien added, execution clauses for individuals and corporations added and general formatting and grammatical improvements.
  • Purchase of Real Property – clause added on payment of fees when purchaser not proceeding
SEPTEMBER 2016
  • Purchase of Real Property
    • added case law concerning off the plan contracts for sale
    • reviewed Detailed Cover Sheet to include Mortgagee
  • Sale of Real Property
    • content added in discussion of case law concerning off the plan contracts for sale
AUGUST
  • Sale of Real Property
    • Retainer Instructions – clarify home building warranty for owner builders
    • commentary has been expended to include discussion of circumstances where co-ownership of property can be brought to an end via partitioning
  • Purchase of Real Property
    • commentary on caveat after exchange moved and new commentary on priority notices added
    • further content added on Foreign Resident Capital Gains Withholding Payments
    • Retainer instructions – include reference to purchaser declaration and surcharge duty. Update home warranty information.
MAY
  • By Lawyers Contract for Sale of Land has been updated to 2016 Edition.
  • Included foreign resident capital gains withholding payments when over $2 million to all necessary precedents, commentaries and contracts.
  • Added to Commentary – Verification of identity including new RPA Conveyancing Rules.
APRIL
  • New ‘to do list’ item – Foreign resident CGT withholding payments check.
  • File Cover Sheets for all publications have been completely re-formatted for a better look.
MARCH
  • Alert for swimming pool certificates required from 29 April 2016 added
  • New section included in the commentary on powers of attorney for land transactions to accompany power of attorney precedents.
FEBRUARY
  • Making life a little easier for practitioners – look out for Blank Deed, Agreement and Execution Clauses folder in the matter plan at the end of each Getting the Matter Underway.
JANUARY
  • Added commentary in Purchase on declarations of trust and a potential double stamp duty pitfall.

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