Is conveyancing keeping up?
In the 40 years I’ve been involved in conveyancing, the one thing I have noticed is how technology is increasingly a key feature of how we do “things”. This has been of enormous benefit to our clients and it has been a significant factor in limiting cost increases!
With this in mind, it is interesting to note how certain parts of the conveyancing process have not changed.
The “42 day” settlement period.
For as long as I can remember there has been a view that this is the “standard”.
When this period was suggested as the “norm” – it was necessary to allow time for “enquiries” to be made. These were checks that the property was not affected by any government body that could have rights to the land – and that all rates and taxes were paid up to date. These enquiries were ordered by completing a form by hand, attaching a cheque and posting it to the appropriate government authority. Several weeks later a response would arrive by post.
Today, the same information is requested online. The response is either immediate or within a few days.
Another reason why “42 days” was perceived to be necessary was the time taken by the banks and other lending institutions to approve and then process loan applications. This was also very much a “manual” process.
Today the lending institutions have streamlined and modernised their processes and can comfortably take a loan application right through to completion in just 3-4 weeks.
It is not unusual for a seller to require settlement be done in 3-4 weeks. It may very well be the case the purchaser wants to settle earlier! But, we are often met with resistance from conveyancers/solicitors acting for those purchasers – insisting that the time period must be “42 days”. Their reason? “Just because that is what it should be!”
Traditionally, on the day of settlement, all parties would meet around a table. Documents and cheques then pass between them. Once everyone was happy and had the documents/cheques they needed (fingers crossed) settlement was completed! The problem is that, more often than is understood, issues would arise at that time (spelling mistakes on cheques, documents not witnessed correctly, etc.) and settlement would be cancelled. With a little bit of luck, the settlement could be re-convened for later the same day – but not always.
One would not need to look too far to find someone who has been stranded outside their new home, with a truck load of furniture, waiting for the go-ahead to move in – only to get news of the failed settlement.
For over 3 years now, we have had the ability to complete the settlement process “on-line” (known as PEXA). This new platform eliminates the possibility of settlement not proceeding on a technicality. If the on-line settlement is booked for (say) 2.00pm, then it happens at that time (title changed to the new owner, money paid by EFT, council and other authorities notified immediately).
And yet, at the time of writing this, no more than 1/3rd of settlements are completed by “PEXA”. The traditionalists just cannot come to grips with the modern way of doing things.
I even recently saw a letter from a major legal firm stating that their fee would increase because of “a requirement to use the new PEXA system”. There is no additional cost to settle by PEXA. The additional fee is no more than that being charged by the legal firm!
The on-line settlement process will be compulsory in July 2019. It will be interesting to see how the conservative practitioners react to this. Many in the profession have their heads firmly planted in the sand and continue to resist the “PEXA” system. I suggest that their efforts would be better spent embracing conveyancing technology of the 21st century!
Again, there is a commonly held belief that the deposit on a purchase of property must be 10% of the purchase price. With the significant increase in property prices in recent years, it is now quite common place for a 5% deposit to be agreed.
And yet, the profession still clings to the view that the deposit must be “10%” – and insist that the full 10% be written on the contract and that a condition is inserted in the contract requiring the payment of 5% on exchange and the other 5% on settlement or default by the purchaser. It is well known in the conveyancing world that such a clause was held by the NSW Court of Appeal to be unenforceable – over 10 years ago! Even so, many practitioners ignore this ruling and continue to advise their clients that they can sue for the balance of the 10% deposit in the event of a default by the purchaser.
5% is still a significant amount of money and no purchaser is going to recklessly risk the forfeiture of that amount.
Cheques – what are they?
I wonder how many people actually possess a cheque book nowadays?
In the digital world that surrounds us, the world before “Electronic Funds Transfer” is so “last century”. And yet, elements of the conveyancing profession still cling to the concept that payments must be made by “bank cheque”.
Previously, when we needed to complete a settlement with a conveyancing professional who was outside of the Sydney area, we would request they act as our “agent”. We would be directed, by that person, to draw bank cheques and post them to their office. This would all need to be done 2-3 days prior to the actual settlement date. They would not always arrive on time!!
It is now our suggestion that we “EFT” the funds to that other person’s trust account on the day before settlement – thus avoiding the expense, time and risk of procuring “bank cheques” and sending them by post. All sounds very sensible!
Amazingly, we are often met with a response insisting that the “bank cheques” must be forwarded by mail.
This is more costly, inconvenient, unsecure and hazardous (what happens if the mail goes missing?). Then the seller must wait for 5 days for the bank cheque to “clear”.
I see another challenge – with a bit of common sense and agreement on a protocol - being the elimination of the massive quantities of paper that our profession consumes.
It is not unusual for contracts to comprise many hundreds of pages – the vast majority of which are of no consequence. Surely the profession can come up with a protocol whereby these additional pages can be incorporated in a contract as a digital record.
Anyone visiting any of our offices would not see mountains of archive boxes containing file records of sales and purchase which have been completed. It has been our practice for well over 10 years now to scan all of these records shortly after finalisation of the transaction and retain them as a digital record. Each fortnight a large SULO bin is removed for our office and the contents securely destroyed. To think, we previously retained all of these records – usually to never refer to them again.
It would be great if we did not have that volume of paper to deal with in the first place.