‘We’re making a small change to the way property is settled. It’s called the internet.’
So proclaims the PEXA website — but exactly who or what is PEXA?
First, a little background information. A necessary operation in both buying and selling property, conveyancing is the process of transferring ownership of a legal title of property from one person or entity to another. In a nutshell, it begins when your offer on a property has been accepted and ends when you receive the keys.
The traditional, paper-based method of conveyancing includes the preparation, verification and lodgement of a range of important legal documents, conducting searches on the title of the property and arranging settlement. It is a time- and labour-intensive task that often involves delays and is prone to errors.
In 2008, due to a lack of consistent regulation across jurisdictions that caused the conveyancing process to be unproductive and imposed excessive compliance costs on business, the Council of Australian Governments committed to creating a single, national property settlements system. In 2010, with the aim of designing and implementing this system, what is now known as Property Exchange Australia (PEXA) was formed. PEXA’s electronic platform has been rolled out across New South Wales, Queensland, South Australia, Victoria and Western Australia; it is expected to be rolled out to Tasmania, the Northern Territory and the ACT by 2022.
PEXA allows members such as lawyers, conveyancers and financial institutions to lodge important documents with land registries and complete financial settlements electronically. The advantages of settling the transfer of property online through PEXA include:
PEXA has a database of well over 7,000 members who can handle the transfer of property through its platform, so you can easily find a conveyancing professional to help you through to settlement. Once chosen, the conveyancer can use PEXA to liaise with the property buyer or seller’s bank, lodge documents and transfer funds, ensuring both a fast and smooth online settlement.
Which begs the question . . .
How much does it cost?
The time savings provided by use of the electronic system for settlement and lodgement are partially offset by its fees. Practitioners have also experienced transition costs, particularly in the form of duplicate processes across the paper and electronic systems.
While estimates vary, real estate experts anticipate that buyers and sellers in an average property transaction will pay an extra $200 for using the PEXA platform. The benefits of e-settlement outweigh the nominal cost, especially for purchasers.
Is it safe?
Within the property sector, the major channels through which fraud can occur are identity theft, forged documents, fraudulent transfer, mortgage fraud and money laundering. Transitioning from a paper-based system to an electronic settlement and lodgement process will mitigate some of the fraud risks, but it has the potential to introduce new avenues for fraud.
Hackers breached the email account of one of the conveyancers involved in a recent property transaction conducted through the PEXA platform, causing one couple to lose $250,000 on the sale of their home. The hackers created fictitious profiles and changed bank account details to make the fraudulent transfer. PEXA accordingly upgraded its security with multi-factor authentication and machine-learning algorithms to detect suspicious activity.
Good news: the bulk of the misappropriated funds were recovered.
So, is it the best way forward?
The metamorphosis of the conveyancing industry through the national rollout of an electronic lodgement and settlement system is part of the broader digital transformation that is underway in the Australian economy.
Despite this and although it will eventually become mandatory, one group of conveyancers is petitioning for a delay to the PEXA rollout; this is akin to King Canute trying to hold back the tide. It is past time that routine legal tasks such as conveyancing embraced the efficiency and low cost of going digital.