Consumers and the real estate industry in general across Australia will benefit from a proposed more competitive and inter-operative electronic conveyancing market, due to the Electronic Conveyancing (Adoption of National Law) Amendment Bill 2022 which has been approved by the NSW Parliament. The Bill provides for providers of the platform to co-operate together. At present, there are two providers, but you can only use one of them for transactions. This has limited options and favoured the major provider, PEXA. Attwood Marshall Lawyers Property and Commercial Law Graduate Mieke Elzer explains the reforms and how they will impact real estate agents and the process of buying and selling property.
On 12 May 2022, the Electronic Conveyancing (Adoption of National Law) Amendment Bill 2022 (ECNL) was passed in the NSW Parliament.
The legislation amends the national law, introducing a requirement for electronic lodgement network operators (ELNOs) to “interoperate” with each other.
While key bodies such as The Law Council of Australia, and the Australian Institute of Conveyancing (AIC) are broadly supportive of the bill, considering interoperability an important development, both have criticised the Bill with the AIC fearing it is not ‘fit for purpose’ and the Law Council of Australia Law Council noting that ‘further amendments will be required to the ECNL before interoperability is fully achieved during 2023’. While the amendments are a crucial evolution in creating a more competitive and robust property market, the emerging landscape calls for increased caution on the part of solicitors and conveyancers as ELNO’s and regulators iron out their systems and processes.
Key amendments include:
- The directive for all ELNOs to interoperate with each other;
- Expansion of the Registrar’s authority to make operating requirements that will identify matters that must be included in interoperability agreements – so that necessary consumer protections are included;
- Permit Registrars to require ELNOs to participate in an industry code that will provide effectual regulation of the financial element of an e-Conveyancing transaction;
- Expand the statutory reliance regime for digital signatures to apply to interoperable transactions; and
- Permit Registrars to exchange information about compliance with ECNL requirements.
Property Exchange Australia or PEXA as it is commonly known, is Australia’s first e-conveyancing platform. It was created in 2010 as a result of the Council of Australian Governments’ commitment to creating a single national e-conveyancing solution for the Australian property industry. Since 2019, the NSW Government begun mandating e-conveyancing with the aim to streamline the conveyancing process for buyers and sellers, lawyers and conveyancers, and financial institutions. The shift to a wholly electronic conveyancing system was completed in NSW on 11 October 2021. This date, known as cessation day, was the day that all paper Certificate of Titles in NSW ceased to be legal documents and all NSW land transactions now must take place electronically. There are currently two ELNO’s authorised by the Australian Registrars National Electronic Conveyancing Council (ARNECC) to provide these services in Qld and NSW, however, an absence of interoperability in the platforms has meant that solicitors and conveyancers must be subscribed to and be using the same ELNO for the settlement.
The net effect of this has resulted in PEXA having monopoly over the e-conveyancing market space. Economics experts from the Yale Tobin Center for Economic Policy note, when ‘competition occurs for the market rather than in the market: the network effects form an entry barrier that requires a new entrant to unseat the incumbent monopolist and become the new monopolist… Interoperability can play a key role in enabling and enhancing competition in the market.’
Smaller e-conveyancing provider and PEXA rival Sympli’s chief executive Philip Joyce points out that a monopoly leaves consumers vulnerable to very real technical risks, such as when, on 30 June 2021, PEXA’s system crashed. Joyce, who has welcomed the passage of the Bill, states ‘interoperability is the golden opportunity to ensuring resiliency for the industry’.
The concept of interoperability is not a new one. For example, in the telecommunications space, Telstra customers can call Optus customers without needing to set up an Optus account. Regulators in networked industries commonly establish interoperability standards so as to remove this barrier to new entrants allowing a competitive market to emerge. Yale economic experts note ’when multiple firms are competing directly for the business of consumers and/or business users, all users are likely to experience lower prices, higher quality, and supercharged innovation, regardless of which firm they use.’
“This is such a vital piece of legislation for the entire industry as we work towards interoperability by 2023, in line with the mandated ministerial timeline…. More competition means more value for customers and a more innovative service to conveyancers and legal practitioners working in the sector’ Now it has been passed by the NSW Parliament it will automatically be passed by the other states,” Mr Joyce said.
The Minister for Customer Service and Digital Government, Victor Dominello, said that the changes mean ELNOs will be required to work together to support customers anywhere across Australia. The reform will result in additional choice and fairer prices for customers and improved efficiencies in the property and financial sector.
The impact of interoperability on real estate agents
Real Estate Business (REB), Australia’s leading news source for real estate agents has echoed the AIC’s fears that the Bill ‘could do more harm than good’. Quoting the AIC’s national president Michelle Kent, REB queries whether the Bill might ‘leave many homebuyers and sellers vulnerable to a lack of support in the event their funds were misplaced’.
Ensuring that Vendors and Purchasers have legal representatives who are well versed in the potential pitfalls of e-settlements ought to be a key concern to real estate agents when referring Vendors and Purchasers. While the introduction of an interoperability standard is ultimately for the betterment of consumers and the real estate industry, it is imperative that solicitors and conveyancers remain vigilant to the dangers. It may take some time before ELNOs master the interoperability standard and in the meantime, Vendors, and Purchasers want assurance that their matter is going to settle successfully without any mistakes.
Knowing that the legal professionals you work with are meticulous in satisfying their compliance requirements and have the expertise to traverse the changing and evolving marketing place of e-conveyancing is peace of mind for real estate agents, vendors, and purchasers alike.
Attwood Marshall Lawyers – Delivering fast and stress-free property transactions
At Attwood Marshall Lawyers, we believe in doing everything possible to ensure seamless property transactions. Our Property & Commercial department are extremely experienced in using the PEXA platform having settled thousands of transactions since the inception of e-conveyancing in 2014. We are extremely knowledgeable when it comes to subscriber compliance and are committed to working cooperatively in the settlement space to ensure that every transaction is completed seamlessly.
Here at Attwood Marshall Lawyers, we are optimistic that the move towards interoperability will help to enhance the process of e-conveyancing for solicitors, real estate agents, and consumers. We support the ongoing improvement and innovation of the e-conveyancing industry.
To obtain property and conveyancing advice, contact our team by calling our Property and Commercial Department Manager Jess Kimpton on direct line 07 5506 8214, email firstname.lastname@example.org or mobile 0432 857 300.
Our Property and Commercial Lawyers are available for appointments at our Coolangatta, Kingscliff, Robina Town Centre, Brisbane, Sydney and Melbourne offices. If you need assistance outside standard business hours, our Robina Town Centre office is also open Thursday evenings until 9pm and Saturday mornings until 12noon.