Leo Cussen Property Law Conference 2017
By Leonie Jarrett
I started doing property settlements and Titles Office work in Victoria way back in 1983.
The Titles Office then was up the road on Queen Street and was a rabbit warren of rooms and towers of paper. It was like something out of “Harry Potter”!
Titles were pieces of parchment and detailed the history of the property, often over several pages.
You would wait a couple of days for a Title to be located and photocopied then colour in the photocopy by hand as per the duplicate Title and drop it back in the bin to be re-filed.
Titles sometimes were “lost” and searching for a “dealing” meant working out what room and building to venture into.
Now, all we need do is go online, pay and voila – there’s the Title search.
Stamping and lodging was similarly paper-centric. I spent many an hour queuing with my pile of documents to be stamped at the Stamps Office and then queuing again at the Titles Office to lodge.
If I didn’t have all the documents I needed or I had been given the wrong cheque amount, then I carried those documents and Titles around all day and back to the office.
My “city work” as it was called finished when I finished my Articles year and I worked as a solicitor for a number of years. I took a break from the legal industry and I worked in the business world for 13 years.
A few years ago, my legal firm - First Class Legal – came into being and I found myself working in property again.
What did I find? What had changed in the intervening years?
Very little had changed.
So much was still manual and paper-centric.
Preparing property contracts was still the same old school process as it always had been and required a huge amount of time and effort from our employees.
We do so much online in our personal lives – we use internet banking, we shop online, we plan and book holidays online, we shop for houses online, many of us use social media…
We all use the internet daily in our professional lives too. We are getting used to having everything accessible on our phones.
Our kids grow up “googling” the answer to anything that pops into their heads.
My parents who are in their mid 70s use the internet daily.
This digital age is not just for the kids. It has transformed and is transforming our daily lives.
Why then should selling and buying property and the conveyancing process be stuck in the “Harry Potter” paper-centric days?
But back to the beginning of my experience….
I attended a regional conveyancing event nearly four years ago and I heard a speaker from PEXA talk about this exciting platform coming soon where settlements could be done electronically. Having done settlement work years ago when I did the “city work” I described, the concept of settling electronically rather than exchanging paper and cheques on settlement day and hoping that there were no last minute errors was very attractive.
As an employer now, anything that achieves more accuracy and efficiency is a plus.
At First Class Legal, we are early adopters of electronic conveyancing. From that first PEXA talk we heard, we made a conscious decision to start to use PEXA and we started lodging Caveats as soon as that was possible.
We also made a conscious decision to settle electronically where we could. Our first Transfer was the first one done by an Incorporated Legal Practice in Melbourne back in April 2015.
We followed that up by being the first firm to do a fully paperless end to end electronic conveyance in Greensborough, Victoria in January this year.
The Section 32 was signed electronically by the two vendors, the auction contract was signed electronically in September 2016 and the settlement happened via PEXA in January.
How did we do this paperlessly?
We use InfoTrack’s SignIT technology which is underpinned by Docusign.
The signing process is simple and intuitive.
Clients are walked through the process with yellow sticky notes where they need to sign.
The contract cannot be completed until all boxes for signatures and initials have been marked. It also cannot be changed without detection.
Docusign uses secure technology and provides an audit trail report post-transaction so you know when and where the contract was signed and the order of signatures on each document signed.
Let’s discuss some of the more obvious advantages of electronically signed s32s and Contracts:
- No need to waste reams of paper (there are cost and environmental benefits here).
- No more worrying about printer jams and breakdowns.
- No more worrying about missing pages when several contracts are collated.
- You can compile the entire contract from multiple sources into a single PDF with one click.
- No more worrying about contracts being delayed or lost in the mail.
- No more time-consuming binding of contracts.
- No more days of waiting for contracts to be delivered, signed and returned.
- A quick signing process.
Some advantages of electronically signed s32s and Contracts which you may not have thought of:
- Avoids the possibility of a contract being fully executed where the s32 has not been signed by the Vendor – the only s32 in circulation is the signed one.
- Of course, if an unsigned s32 purports to underpin a contract, that gives rise to an ability for a Purchaser to avoid the Contract. This is a very real possibility when unsigned s32s are emailed to prospective purchasers.
- Avoids inaccuracies on handwritten documents. There is only one master contract so there is only one lot of data entry.
- No re-keying of data.
- Amendments to the documents are a cinch; and
- There are fewer errors in the signing stages of the contract.
- If you use the same electronic system to order your title searches and to generate your contracts, then the accuracy improves further as the contract generates directly from the information on Title.
- If you use a practice management system which stores information in the cloud, then the contract documents are stored securely in the cloud, eliminating the need and expense of storing sensitive client documents in your office.
- The parties’ location no longer matters. The world is smaller and we are all travelling a lot more for work and pleasure.
- No longer do all parties need to be in the same room at the same time (or have a real estate agent drive between them) for a contract to be signed. Parties can even be in different countries!
- Anyone with a smartphone or tablet device and access to the internet and email can sign electronically.
In short, the benefits of electronic contracts are:
- They are Faster
- More secure
- More efficient
- Better quality control
- Better for the environment
- They create time efficiencies
- They create cost efficiencies
All these advantages are advantages for us as property practitioners and for those of us who are business owners as well.
To give a real life, recent example…We had a client living in the US who sold his Blackburn property in June. He watched the auction live on FaceTime courtesy of his real estate agent, he spoke with the auctioneer mid-auction when the bids weren’t flowing as he would have liked and then, when the property sold, the purchaser signed electronically in the house and our vendor client signed electronically in his lounge room in the US.
Shortly after the auction, the purchaser, the vendor, the parties’ legal representatives and the real estate agent all had a fully executed contract of sale in their email inbox.
Before this technology existed, the vendor had two choices – come to Melbourne for the auction (an expensive choice) or execute a Power of Attorney.
Signing the s32 and the auction contract electronically gave the client complete control over the signing process without the expense of travelling to Melbourne.
He was one happy client (and his property sold way over reserve so he was extra happy!)
I thought that I would just touch on e-stamping as you are all likely to be familiar with it.
I remember the “old days” of queuing up and paying over cheques in exchange for a cash register imprint on the documents stating that duty has been paid.
Now, it is almost completely an electronic process.
Duties Online (DOL) is a relatively new initiative of the State Revenue Office (2011) yet it has transformed the SRO.
Close to 90% of all duty transactions are now completed via DOL.
With the new Digital Duties Form applying to all Contracts from 1 July this year, our dealings with SRO are now electronic and paperless.
Of course, unless you are a DOL user, you cannot sign the Digital Duties Form. As this is compulsory for Contracts dated from 1 July 2017, you need to sign up without delay.
Electronic settlement – the final piece in the puzzle:
Once the s32 and Contract are signed, the other element that can now be done electronically is the settlement.
Not only can it be done electronically, it MUST be done electronically from 1 August 2019 in Victoria.
By that date (2 years exactly from today!), you need to be using PEXA or you will no longer be able to practise in conveyancing.
Using PEXA will not happen overnight so, if you want to continue working in property, my advice is to subscribe to PEXA and to start creating workspaces and sending invitations.
There are PEXA Direct Specialists who will help you and you will need help for the first few transactions at least.
There will be hiccups – it takes some time to subscribe and to obtain your digital token, it takes time to set the token up…
We have had problems signing on occasion, we had issues the first time we needed to link our Trust account, we have some amount of hesitation every time an employee uses PEXA for the first time.
These problems take time to iron out so start using the PEXA system.
A cash purchase is the most straightforward so maybe start with that?
We have been settling via PEXA for over 2 years.
Experience breeds confidence.
As a policy at First Class Legal, we are now looking at every file as a PEXA file ie trying to settle via PEXA every time. The more of you who subscribe and who are willing to give it a try, the easier that will be.
We have not had a single client object nor push back on the idea of settling electronically. Even older clients say they wonder why this could not happen before.
What are the key advantages of settling via PEXA?
There is greater certainty that the settlement will proceed on time.
Settlement will not be derailed because there is a wrong digit or a spelling mistake on a cheque.
All parties sign off before the agreed settlement time and, at settlement, the electronic workspace is locked and settlement automatically proceeds.
For vendor clients, the advantage of having their money available as cleared funds within hours of settlement is very attractive.
It doesn’t make sense that, in today’s modern world, you have to wait days to access your settlement proceeds.
For purchaser clients, being registered on Title within minutes of settlement is also very attractive.
It doesn’t make sense that, in today’s modern world, you have to wait weeks before your name is registered on Title (and remain vulnerable in that intervening period).
Purchasers no longer have to worry about the time and expense of bank cheques.
The whole process is transparent to all parties. Clients can even download a free app – SettleMe – and watch the process live.
Like PEXA or not, like change or not, it will be compulsory in 2 years so embrace it or be left behind.
Why not make the move to paperless conveyancing?
A recent InfoTrack survey profiled the views of 300 lawyers and conveyancers and found that less than 30 per cent are using electronic contracts of sale and under 40 per cent currently use PEXA for a digital property exchange.
I can only assume that the reasons for this are based on fear of the unknown and also the time that it takes to learn a new way of doing things.
With paperless conveyancing, though, different parts can be adopted and trialled. There is no need to go “cold turkey” and eliminate paper all in one hit.
Maybe try an electronically signed s32 or an electronically signed contract or try a settlement on PEXA?
Test the waters.
Cost is not a barrier.
There is no significant investment that you need to make.
Joining Duties Online is free.
Joining PEXA is free.
Generating electronic s32s and contracts is free. There is only a charge once an electronic signature is added and that charge is minimal.
It is understandable to be wary however sitting back too long will cost you in experience and I believe in market share for your business.
PEXA is compulsory as of 1 August 2019 so you may as well start using it.
Why is paperless conveyancing better for my business?
I am here today in the spirit of professional co-operation. Not to preach nor tell you what to do but rather to openly share my experiences in being at the forefront of this fast-changing, new legal world.
Why is paperless conveyancing (and, indeed, electronic processes generally) better for my business?
At First Class Legal, conveyancing is what we do. 95% of our business is residential “Mum and Dad” conveyancing. We do thousands of settlements each year and, in almost 4 years, we have grown from a single office to 5 offices and from half a dozen staff to just under 40 staff.
As you all know, you cannot charge mega bucks for conveyancing in Victoria. In fact, for what we do, the price is way lower than it should be but that’s a topic for another day.
In order to do our job properly and to be more profitable, we need efficiencies.
Efficiencies with cost and efficiencies with time.
The more productive our staff are, the better my business is.
The more automated our processes are, the better my business is.
The more streamlined our workflows are, the better my business is.
If I don’t have multiple staff compiling a contract – printing, photocopying, collating, binding, mailing – but I can have one staff member compile the contract electronically and another check it, then we are more efficient. My business is better.
If I don’t have key staff doing tedious tasks (such as printing, photocopying, collating, binding and mailing), they can be doing more stimulating tasks which makes them happier. My business is better.
The fewer mistakes we have in contracts (often caused by human error in re-keying data entry for example), the less unbillable time we have. My business is better.
In my experience, clients love the efficiency of electronic processes.
Let’s face it, people go house-shopping online, they may look for a mortgage broker online, they may use an online mortgage calculator, they may use the online SRO stamp duty calculator….they are happy for the legal process to be electronic too.
One thing to keep in mind is that, whilst the legal industry may be slow to adapt to technological change, other industries are not so our clients are quite often tech-savvy (more so than we are) and embracing of anything that is electronic, easier and more efficient.
The experience at First Class Legal is that there has been no resistance from clients to electronic processes.
The part of the process clients seem to like the least and complain about the most is Verification of Identity!
Change can be confronting.
Change can be scary.
Electronic signing technology is fast, secure, simple and intuitive.
Electronically signed s32s and Contracts are more accurate and more efficient.
Electronic settlement is mandatory in 2 years and is also more accurate and more efficient.
There are time and cost efficiencies in moving to electronic platforms. You can increase productivity from your desk!
Times are changing fast – we do more and more online. On our smartphones in fact.
Adapting to and embracing change is more essential now in property practice than ever before. Refusing to adapt (or even merely lagging behind) is a detriment to a property practitioner but also to the efficiency and margins of our businesses.
Try paperless conveyancing, embrace it (or at least parts of it) or be left behind.
© Leonie Jarrett, First Class Legal, 1 August 2017