ByLawyers News and Updates

Conveyancing Victoria – Seven reasons to use the By Lawyers Contract of Sale of Land

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The By Lawyers Contract of Sale of Land for Victoria is gaining more fans among Victorian lawyers and conveyancers all the time, as it simplifies the conveyancing process.

For those still wondering what all the fuss is about, you can read below Seven reasons to use the By Lawyers contract – or you can listen to this lively and informative podcast:

 

Seven reason to use the By Lawyers Contract of Sale of Land:

  1. The contract and the vendor’s statement are combined into ONE document, with the vendor’s statement, logically, coming FIRST. The vendor’s statement is formatted to deal with the obligatory disclosures first, then to group the optional fields in a way that makes removal of those fields simple if they are not required. Part 2 general conditions in PDF form removes the need for ‘standard’ special conditions. Any genuinely special conditions can be added.
  2. Clear new approach – all pertinent details are set out in Part 1 to enable anyone to quickly understand the deal by referring to this Part.
  3. Particulars of sale include a “sunset date” for off the plan approvals. No more searching through mountains of special conditions to work out this crucial date.
  4. Non-derogation warranty. The general conditions can be amended by any special conditions BUT not so 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.
  5. General Condition 12 – deposit release – establishes a clear protocol for early release, by requiring timely objection to title. Title objections actually have very limited relevance to the Torrens system, as title is part of the disclosure in the contract. General Condition 12 allows 28 days to object to title. This offers protection to purchasers, while allowing the vendor to have use of the deposit. Again, this process is fair to both parties.
  6. General Condition 14 – loan condition – extends the time for approval to 21 days and allows for extension, subject to vendor’s ability to end the extension by notice.
  7. General Condition 25 – losses – removes any disputes relating to default losses from the settlement process and allows the parties to resolve these issues after settlement. Unless there is a legitimate objection to title, the matter is settle and disputes relating to quality and inclusions etc, follow after settlement. This removes unnecessary settlement delays.

The By Lawyers Contract of sale of Land is available to LEAP users and By Lawyers subscribers via the Conveyancing & Property – Sale matter plans, or for purchase on the By Lawyers website.

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.

Electronic conveyancing – Are you ready?

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As the timeline towards mandatory electronic conveyancing marches on, By Lawyers continues to make changes to our matter plans and precedents to make sure that you are ready and that completing your matters electronically is as easy as possible.

Our matter plans have been split after ‘Mid transaction’ into ‘Paper transaction – Through to settlement’ and ‘Electronic transaction – Through to settlement’.

Precedent letters have been updated and where necessary new precedents included to cover electronic transactions.

By Lawyers helps you make a seamless transition to the new regime.

WA – Electronic lodgement for all eligible documents

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From 1 December 2017 – Any lodgement case consisting of eligible discharges, transfers, mortgages, caveats and withdrawal of caveats must be lodged electronically. Are you E-Conveyancing ready? See our paper E-Conveyancing – Get Connected for information and implementation timelines

VIC – New conveyancing articles

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Two new articles about conveyancing in Victoria have been published.

E-Conveyancing – Getting Connected

This is a timely and practical paper about adopting and utilising electronic conveyancing. It includes  information about how to improve the process and where you can find further information and support.

Release of deposit – 2017

There has only been one reported decision on deposit release (McEwan v. Theologedis [2004] VSC 244) and that case did not consider the “condition enuring” argument.  Aurumstone P/L v Yarra Bank Developments P/L [2017] VSC 503 has now considered that argument.

 

Certificates of title in electronic conveyancing

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By Russell Cocks, Solicitor

First published in the Law Institute Journal

Proof of ownership of land has traditionally been linked to a document. Prior to the advent of the Torrens system of land ownership, proof of ownership depended entirely on possession of all prior documents establishing a chain of title and transfer of ownership was achieved by the addition of another document to that chain. The Torrens system simplified that process but still relied on documentary evidence to establish ownership.

The Transfer of Land Act is the statutory foundation for the Torrens system and that Act created an official record of ownership, being the ‘original’ certificate of title retained by the Registrar as a folio of the Register Book and a copy or duplicate certificate of title held by the owner as proof of ownership. The Land Titles Office has been moving away from this paper based system progressively over 20 years and whilst the fundamental principles of Torrens have been retained, reliance on paper has been diminished.

A major signpost in this change was the conversion of the original certificate of title from paper form to a computer based record and the consequent removal of reference to the ‘duplicate’ certificate of title. The document held by the owner to establish ownership was thereafter simply known as the certificate of title but the Act still required production of the certificate of title before the great majority of dealings could be registered. The production of the certificate of title was therefore part of the process of ‘making title’ that harked back to the obligation to produce the chain of title in pre-Torrens days.

Electronic conveyancing has now progressed to the stage that the need to produce a paper title as part of that process cannot be accommodated. To undertake an electronic conveyancing transaction the paper title (pCT) must be converted to an electronic title (eCT) and once that conversion has occurred the Registrar is not required to produce a replacement paper title unless requested to do so (s 27B). Ultimately, all paper titles will be replaced by a digital record in the Register and proof of ownership will be established by a printout of the Register. Hence the need for a strict Verification of Identity protocol.

What then of the requirement to ‘make title’? The relationship between a vendor and purchaser is principally governed by the contract of sale of land and most sales have adopted the standard contract. This in turn has adopted many of the principles developed by the Common Law; such as the doctrine of fixtures and principles relating to misdescription and liability for notices. The requirement to ‘make title’ in previous versions of the standard contract was reflected in conditions that required the vendor to ‘produce all documents necessary to allow the purchaser to become the registered proprietor’ but the current contract requires the vendor to ‘do all things necessary to enable the purchaser to become the registered proprietor’, thus removing the need to produce a document.

To fulfill this contractual obligation where the title has been converted to an eCT the vendor must ensure that the eCT will be available at the Titles Office for the purpose of registering the proposed transfer of land and associated transactions. This is achieved by an Administrative Notice undertaken in the electronic environment whereby the eCT is nominated by the party in control of the eCT to be available for registration of the forthcoming instruments.

A Register Search Statement obtained by a purchaser prior to settlement will confirm this nomination and that the vendor has thus fulfilled the contractual obligation to ‘do all things necessary’ to allow the purchaser to become registered. If the transaction is being conducted as a paper settlement, the RSS will note that the eCT has been nominated to a paper instrument and the stamped Transfer is lodged at the Land Titles Office in the normal way after settlement to meet up with the eCT and be registered. In the ordinary course, a paper title will not issue after registration of that dealing and the title will remain an eCT under the control of the registered proprietor or mortgagee.

Electronic conveyancing has been a long time coming, but it is now coming with a rush. The bulk conversion of some 2 million titles held by the major banks in October 2016 means that many more transactions will involve eCTs. Fundamental principles have been massaged to accommodate the digital world and practitioners will need to understand the changing landscape to be able to continue to service the needs of their clients.

Tip Box

Whilst written for Victoria this article has interest and relevance for practitioners in all states.

Contract – Electronic conveyancing special condition

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By Russell Cocks, Solicitor

First published in the Law Institute Journal

The much anticipated arrival of electronic conveyancing, at least in relation to settlement, is upon us, with PEXA (Property Exchange Australia) providing a platform for firms to engage electronically. The authors of the Law Institute of Victoria contract of sale of land – Murray McCutcheon, David Lloyd and Russell Cocks – have therefore drafted a special condition that may be added to the general conditions to facilitate electronic settlement.

A more detailed explanation of how conveyancing will be conducted in the electronic environment and the significance of the special condition will follow early in 2015 but the following summary will allow ‘early adopters’ to feel comfortable with the special condition.

The condition is referred to as special condition 2 as the LIV contract already has special condition 1, which deals with the consequences of release of the deposit. This condition is designed to follow that condition. The condition adopts the established practice of providing a ‘tick box’ format to signify that the condition applies to the particular contract.

Clause 2.1

Reference to the Electronic Conveyancing National Law means that the Model Operating Rules, the Participation Rules and the Participation Agreement underlay the contract and can be called into operation if required.

Clause 2.2

There may be occasions when the parties will not be able to proceed electronically. For that reason, the parties may choose to opt out of electronic conveyancing at any time without any penalty.

Clause 2.3

This clause makes parties responsible for ensuring that all participants that the party introduces to the transaction, such as a financier, are subscribers.

Clause 2.4

The vendor must open the workspace in PEXA. This is consistent with the vendor’s role of preparing the contract of sale. The subclause requires the vendor to do so as soon as reasonably possible.

The other important issue addressed in this subclause is the statement that the workspace is an electronic address for service of notices. This has significant legal and operational consequences for subscribers. A subscriber may miss a significant communication, such as a rescission notice if the subscriber does not diligently monitor the workspace.

Clause 2.5

Settlement date will be known to the parties well in advance. The workspace will need to be locked at some time on the settlement day, by which time the parties will need to be in a position to settle.

Clause 2.6

Settlement in a paper transaction is effectively that point when cheques are exchanged for documents. This concept has been carried into the electronic environment and settlement is defined as the financial settlement. Just like a paper transaction, financial settlement occurs before registration, but it is anticipated that the potential time delay between settlement and registration will be reduced from days or weeks to milliseconds.

Clause 2.7

Settlement in a paper transaction may be delayed by a computer failure or by somebody missing a tram. If that occurs, settlement must be rearranged. Likewise, an electronic settlement may be delayed by computer failure. This sub-clause requires the parties to attempt to conduct a failed transaction electronically on the next business day or as soon as possible by some other (paper) means.

Clause 2.8

Provision has been made for each party to assist any other party in the event of a mistaken payment. It is likely that this obligation flows from the general contractual duties owed by the parties to each other, but the opportunity has been taken to express the obligation.

Clause 2.9

Electronic conveyancing removes the need to exchange title for payment, but a paper settlement often involves the vendor physically handing over additional documents, such as leases. This sub-clause requires the vendor to confirm possession of such items prior to settlement and to give those items to the purchaser immediately after settlement.

The sub-clause also addresses, for the first time, the vendor’s obligation in relation to keys and requires the keys to be with the agent prior to settlement. As at present, the agent will be notified of settlement and then be in a position to hand over keys.

Clause 2.10

As payment of duty will be simultaneous with settlement, all requirements of the State Revenue Office must be satisfied prior to settlement. This will require the purchaser’s subscriber to certify via Duties Online that all documents are in order. To do so the vendor will need to provide to the purchaser any original document that is required for the assessment of duty, such as a Goods Declaration or Off the Plan Declaration and this subclause requires such documents to be provided 7 days prior to settlement date.

Systems failure

The advent of electronic conveyancing makes settlement more dependent on computers. The authors considered providing for the consequences of system failure, particularly in a time-poor environment such as rescission, but resolved to leave that issue for determination of the court in appropriate circumstances.

The special condition is available in print form via the LIV Bookshop, in electronic form from elaw publishing and for downloading from the LIV website.

Tip Box

Whilst written for Victoria this article has interest and relevance for practitioners in all states.

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