Australia: Electronic certificates of title (eCTs): the next step towards full electronic conveyancing in NSW

Electronic conveyancing commenced in NSW in 2013, allowing (but not requiring) lenders to electronically lodge mortgages and discharges of mortgages through Property Exchange Australia (PEXA). The functionality of PEXA was widened in 2014 to allow financial settlement of transactions (such as purchases and refinances).

In subsequent years there has been a continued drive towards making electronic conveyancing compulsory in NSW. For mortgagees that are Authorised Deposit Taking Institutions (ADIs) – which effectively captures all banks and major lending institutions – several important changes have come into effect in recent months:

• Since March 2017, all ADIs have been required to lodge standalone discharges of mortgage through PEXA.
• As of 1 August 2017, where the mortgagee is an ADI, all refinancing transactions and standalone mortgages must be transacted through PEXA. This requirement has also been introduced for ADIs dealing with transactions in Victoria, effective from the same date.

Also from 1 August 2017, ADIs have seen another significant step in the move towards a completely digital system – the introduction of mandatory electronic certificates of title (eCTs).

Move to mandatory eCTs

Previously in NSW, users of PEXA have been able to nominate whether to receive their certificate of title in physical or electronic form. Further, where paper transactions have been lodged in person with Land and Property Information (LPI), physical certificates of title have been issued.

Now, ADI mortgagees will only receive certificates of title in electronic form. While this transition is new for NSW, it will be familiar to ADIs operating in other States – for example, mandatory eCTs have been in place for many years in Queensland and in Victoria since 22 October 2016 for the four major ADIs and 22 July 2017 for four other ADIs.

Implications of eCTs on future conveyancing transactions

The most common conveyancing transaction is a transfer transaction, where ownership is being transferred from one person to another and there is a discharging mortgagee as well as an incoming mortgagee.

Where an eCT has been issued to an ADI, the title will indicate who holds the 'Control of the Right to Deal' or CoRD for that title (effectively the authority to deal with the eCT).

The critical thing for ADIs to bear in mind when dealing with transfer transactions is that the discharging mortgagee will need to lodge a CoRD Holder Consent via PEXA before settlement can proceed (and this cannot be lodged as a paper dealing at the LPI). The CoRD Holder Consent will give comfort to the incoming transferee and its mortgagee that the control of the right to deal with the eCT will pass on settlement.

Implications of eCTs on record keeping

As ADI mortgagees will no longer receive physical certificates of title in NSW, it will be important to assess all record keeping processes to ensure there is a good system in place for receiving and storing eCTs. This is important not only from a management or 'housekeeping' perspective, but also to ensure that any audits can be dealt with swiftly and satisfactorily.

This article is intended to provide commentary and general information. It should not be relied upon as legal advice. Formal legal advice should be sought in particular transactions or on matters of interest arising from this article. Authors listed may not be admitted in all states and territories