Impacts of e-Conveyancing on the conveyancing industry - Deloitte
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Impacts of e-Conveyancing on the conveyancing industry May 2018
Proposal title goes here | Section title goes here 01
Impacts of e-Conveyancing on the conveyancing industry | Table of contents Table of contents Executive Summary 1 Glossary 3 1. Introduction 5 2. Current state of play in the industry 7 3. Benefits of current electronic system 20 4. Benefits of a 100% electronic system 28 5. Other impacts of an eletronic system 32 References 36 Appendix A - Data collection 37 Appendix B - Modelling methodology for current images 38 Limitations of our work 41 General use restriction 41 02
Impacts of e-Conveyancing on the conveyancing industry | Executive Summary
Executive Summary
The conveyancing industry is undergoing The estimated benefits to practitioners in e-Conveyancing allows
a digital transformation with the national the 2016-17 financial year were $3 million,
roll-out of an electronic lodgement and with 2% of lodgements completed on
practitioners, financial
settlement system. This system allows the platform. The industry take-up rate institutions, and
practitioners, financial institutions, and affects the probability of a practitioner
government bodies to lodge documents being able to transact electronically.1 For
government bodies to
and complete settlements electronically. example, if 30% of all practitioners have lodge documents and
This is part of a broader digital the system and are willing to use it, the
transformation underway in the Australian probability of a transfer transaction being
complete settlements
economy. completed electronically is less than 10% electronically. This is
or one in every 10 transactions.2 This is
In 2008, the Council of Australian further reduced if a transaction is unable
part of a broader digital
Governments (COAG) committed to to be conducted electronically due to the transformation underway
creating a single, national e-Conveyancing required forms being unavailable.
solution to the Australian property
in the Australian economy.
industry. In 2010, National e-Conveyancing While the new system is generating
Development Limited, now known as benefits, the experiences of practitioners is
Property Exchange Australia (PEXA), varied. Firstly, some practitioners are not
was formed. PEXA has now rolled out its achieving time savings due to productivity
electronic platform across New South losses from learning a new system.
Wales, Victoria, Queensland, Western Secondly, even when practitioners are
Australia, and South Australia.
achieving these time savings, there is often
the perception that time savings are not a
Previous research into the implications
real benefit.
of electronic lodgement and settlement
estimated there are significant benefits
There are also costs to practitioners
to stakeholders in the process, including
under a digital lodgement and settlement
practitioners. However, practitioners have
system. In 2016-17, costs to practitioners
indicated the industry is not achieving
were estimated at $2.1 million including
the estimated benefits under the current
$0.7 million in transition costs. The largest
system.
contributor to this figure is duplication
of work across the paper and electronic
PEXA commissioned Deloitte Access
processes. This occurs when one side of
Economics (DAE) to undertake
the transaction is not willing or able to use
independent analysis of practitioner’s
the electronic system, requiring all parties
experience with the electronic system,
to revert to the traditional paper process.
and to model the potential benefits to the
When these costs are taken into account,
industry under a 100% digital lodgement
the net benefit to practitioners in 2016-17
and settlement process.
1
Impacts of e-Conveyancing on the conveyancing industry | Executive Summary
was just $0.2 million. This is consistent with
the anecdotal evidence collected through
consultations and more broadly in the in-
dustry. Net benefits of
around $0.2 million
The industry is likely to experience in 2016-17
increased take-up of the electronic system
in coming years as many state governments
introduce compliance dates for various
instruments. According to PEXA’s April
data, take up the system has already
increased since 2016-17, especially for
transfer transactions in Victoria (27%), New
South Wales (20%), and Western Australia
(17%). The introduction of compliance 2% take-up of the
dates in other international jurisdictions, electronic platform
such as New Zealand, resulted in improved in 2016-17
uptake and increased satisfaction with the
electronic conveyancing process.
Practitioners will benefit from increased
take-up of the electronic system, with the
industry likely to realise around $89 million
per annum in net benefits from a 100%
digital lodgement and settlement process
in 2021-22.3 This figure is higher than Transition costs
previous research due to the expanded of $0.7 million in
scope of transactions, with the industry 2016-17
focussed on reaching a 100% digital
process.4,5
The electronic lodgement and settlement
platform also provides benefits to
stakeholders outside of practitioners,
such as consumers and government
bodies. For example, our consultations
$89 million
with practitioners found that electronic
potential benefits
platform has, on average, reduced the
to conveyancing
frequency of delayed settlements. Just as
industry in 2021-22
with practitioners, the potential benefits to
stakeholders in the conveyancing process
will not be fully realised until the industry
reaches 100%.
1
This refers to the share of instruments lodged on the electronic platform for NSW, VIC, WA, QLD and SA only
2
30% is an estimate of the current take up using actual electronic transaction data in 2016-17 and an estimate of the current industry size.
3
This assumes a 100% digital lodgement and settlement process is reached by 2021-22 in NSW, QLD, WA, QLD, and SA.
4
PwC (2010) and PwC (2015)
5
Previous studies only considered electronic lodgement and settlement for the five main instruments, which accounted for around 80% of total transactions.
2
Impacts of e-Conveyancing on the conveyancing industry | Glossary Glossary Acronym Full name ACT Australian Capital Territory ARNECC Australian Registrars’ National Electronic Conveyancing Council BCR Benefit Cost Ratio CAF Client Authorisation Form CBA Cost Benefit Analysis CAGR Compound Annual Growth Rate COAG Council of Australian Governments DvP Delivery vs Payment ELN Electronic Lodgement Network ELNO Electronic Lodgement Network Operator NSW New South Wales NT Northern Territory OECD Organisation for Economic Co-operation and Development PEXA Property Exchange Australia PwC PricewaterhouseCoopers QLD Queensland SA South Australia VIC Victoria VOI Verification of Identity WA Western Australia 3
Electronic settlement and lodgement for conveyancing | Glossary 4
Impacts of e-Conveyancing on the conveyancing industry | Introduction
1. Introduction
The conveyancing industry is currently Growth in electronic lodgement and currently deployed. These states include
undergoing a digital transformation as settlement is expected to increase sharply New South Wales (NSW), Victoria (VIC),
players in the industry seek out efficiency in the next couple of years due to the Western Australia (WA), Queensland
gains through the use of technology. required use of the electronic platform (QLD), and South Australia (SA). This report
Property Exchange Australia’s (PEXA’s) for various transactions in Western excludes analysis on regulatory changes,
electronic platform enables lodgement Australia, New South Wales, Victoria, and potential implications to the structure
and settlement activities to be performed South Australia. There are concerns in the of the industry, and implications for
digitally. This provides a number of conveyancing industry that the benefits of government policy.
benefits to parties involved in a property electronic lodgement and settlement are
transaction, including a reduction not being realised by practitioners, and this Our modelling found that the industry
in manual activities and increased has implications for the industry under a likely achieved around $0.2 million in
transparency. 100% digital system. net benefits in 2016-17. Approximately
$3 million in benefits were offset by $2.1
The Council of Australian Governments PEXA commissioned Deloitte Access million in costs, including $0.7 million in
(COAG) recognised the potential efficiency Economics (DAE) to undertake analysis of transition costs. We estimate that the net-
benefits of an electronic lodgement and current and potential future benefits of benefits to the conveyancing industry will
settlement system, introducing electronic electronic lodgement and settlement to the increase to around $89 million per annum
conveyancing as part of the Seamless conveyancing industry. under a 100% digital lodgement and
National Economy deregulation priorities settlement process in 2021-22.
in 2008. National e-Conveyancing This report provides independent analysis
Development Limited (now known as PEXA) of the implications of the digital transition The rest of this chapter outlines the
was created in 2010 to deliver a single, for practitioners, including experiences approach undertaken for this analysis and
national electronic conveyancing solution of practitioners to date and under a likely the structure of the report.
to the Australian property industry. future where 100% of transactions are
conducted electronically. The analysis 1.1 Approach
Despite the potential benefits from is focused on understanding the
electronic lodgement and settlement, implications of a digital lodgement and Quantifying the impact of an electronic
take-up of the PEXA platform reached settlement system for practitioners, and lodgement and settlement process is
just over 1.1% for lodgement of transfer therefore does not include analysis of undertaken by comparing the time and
instruments in 2016-17.6 This is due to high benefits flowing to government, financial cost differences between the electronic
transition costs for practitioners, notably institutions, or consumers. In addition, we and paper processes, both under current
around the steep learning curve and need do not analyse how practitioners utilise conditions and 100% digital uptake.
to run multiple processes. According to benefits in terms of changes to profit There is also consideration given to
PEXA’s April data, take up the system has margins or customer prices. the interaction between the paper and
increased since 2016-17, especially for electronic processes, in particular, the
transfer transactions in VIC (27%), NSW Our analysis focuses on the time and cost relevant transition costs associated with
(20%), and WA (17%). savings for different types of practitioners having both processes operating at the
in the states where PEXA’s system is same time and moving to 100% electronic.
5
Impacts of e-Conveyancing on the conveyancing industry | Introduction
The benefits examined in this model are There are also additional monetary costs, 1.2 Report structure
focussed on benefits to practitioners. notably the PEXA fee.
Certain transactions are therefore not The rest of the report is structured as
included in our analysis, such as refinancing Transition costs associated with having to follows:
or a standalone discharge of mortgage. use the paper and electronic processes
•• Chapter 2: Current state of play in
in conjunction with each other, are also
the industry– provides context to the
To inform this analysis, we use a incorporated into the model. This focusses
project including information on the
combination of publicly available data, on duplicated work, which occurs for
conveyancing process, industry trends,
previous external research and information a proportion of cases that involve a
and previous research.
gathered from practitioner consultations, practitioner setting up a workspace but
workshops and an online survey. having to revert back to paper due to at •• Chapter 3: Benefits from current
least one other party to the transaction not electronic system– outlines the
In order to model the impact of an being on PEXA. benefits achieved to date under the
electronic settlement and lodgement current electronic lodgement and
process, this report compares activities A 100% digital lodgement and settlement settlement system. This incorporates
undertaken by practitioners in the paper process means that activities in the transition costs and focusses on the
and electronic processes. settlement and lodgement stages, as well 2016-17 financial year. Detailed results,
as some activities in the preparation and including by state, are presented.
Data used as inputs to the model post-lodgement stages, are conducted
•• Chapter 4: Benefits from 100%
were collected from consultations and through an electronic lodgement network
electronic system – outlines the
workshops with practitioners, survey data, (ELN) for all transactions. This includes not
benefits that could potentially be
and external sources of research. We only transfers and refinancing, but also all
achieved under a 100% digital settlement
conducted a total of 11 consultations with other types of transactions.
and lodgement system. This analysis
practitioners in NSW, VIC, QLD, WA, and
assumes that all instruments are
SA.7 In addition, we undertook workshops We do not make assumptions on how
completed under the electronic platform
with a total of 12 practitioners in WA and practitioners will use the benefits they
for states in scope. Results by state are
NSW. The culmination of these inputs were gain from a 100% digital lodgement and
also presented.
used to calculate the total benefits, total settlement process. This includes whether
costs and transition costs of electronic the cost to consumers will change, how •• Chapter 5: Other impacts of an
lodgement and settlement. practitioners use their time savings, electronic system – explores broader
or the nature of any potential industry implications of an electronic lodgement
In the model, a benefit arises when the consolidation. and settlement system. This includes
cost (time) required for a particular task implications for fraud, settlement delays,
under the electronic process is less than and broader benefits to the economy.
that required under the paper process.
Therefore, a cost arises when the opposite
occurs. Monetary benefits arise when a
fee can be excluded under the electronic
process, such clerk fees for settlement.
6
This figure is based on lodgement of transfer instruments in the states where PEXA is currently deployed.
7
Practitioners varied in terms of locality and firm type.
6Impacts of e-Conveyancing on the conveyancing industry | Current state of play in the industry
2. Current state of play in
the industry
A property transaction is a property related preparation, settlement, lodgement, and and other relevant government authorities
deal that involves the lodgement of one post lodgement (Figure 2.1). Contract are notified of the transfer during the post-
or more instruments with a land registry involves preparing the relevant contract lodgement stage.
in a single lodgement case. A transaction documents, that are then exchanged
may involve multiple parties and include between parties in the preparation The rest of this chapter outlines trends
financial settlement. The statutory and stage. Once the relevant documents are within the industry, including the evolution
legal process associated with transferring exchanged and completed, settlement of electronic lodgement and settlement,
the ownership of a title of land from one occurs as the property and property and previous studies on the benefits of
entity to another is known as conveyancing. payment are exchanged. The conveyancing such an electronic system.
process is finalised when the settlement
The process of conveyancing can be documents are lodged with the relevant
broken down into five stages: contract, government bodies in the lodgement stage,
Figure 2.1 The conveyancing process
Contract Preperation Settlement Lodgement Post-lodgement
Prepare contract All parties prepare Property and Transfer documents Notifications of
documents relevant money is are lodged with settlement
documentation exchanged government completion
bodies
OUTSIDE PEXA – allSet up work space Settlement funds Done immediately Notices and reports
Source: invite all parties. Chart
Deloitte Access Economics
in paper and 2.1 Totaland
reserved transactions bywith
state, 2016-17 in
settlement can be accessed
A’s
This can be done by released for payment PEXA from PEXA
any of the immediately after
1.6
participants. lodgement through
Millions
PEXA
2.1 Overview of conveyancing industry 1.4
In 2016-17, there were 1.5 million 1.2
transactions nationally (see Chart 2.1.)
NSW, VIC and QLD undertook the majority
1.0
of transactions (approximately 80% of the
total market).8 The states covered by this
report, which include NSW, VIC, QLD, WA 0.8
and SA, accounted for 96% of total national
transactions in 2016-17. 0.6
0.4
0.2
0.0
AUS NSW VIC QLD WA SA
Source: BIS Oxford Economics, State Land Registries, Deloitte Access Economics
8
This figure uses BIS Oxford Economics estimates of events and dealings to calculate national transactions.
7Impacts of e-Conveyancing on the conveyancing industry | Current state of play in the industry
Transactions have been growing at Chart 2.2 Growth in transaction volumes
compound annual growth rate (CAGR) of
4.4% since 2011-12. This has been driven Year-on-year change
by strong housing activity in NSW, VIC and
QLD (below Chart 2.2). Growth in total
15%
transactions nationally decelerated to 1.2%
in 2016-17, with demand for housing and
10%
subsequent transactions volumes in these
three states slowing in the latter half of the
year. 5%
The underlying driver of transactions 0%
is population growth and subsequent
household formation. As the population -5%
expands and the number of households
grow, the level of property demand and
-10%
transactions follow. The housing cycle also
provides short-term, cyclical fluctuations
-15%
to underlying demand. This is driven by
changes to employment, income, interest
rates, investor sentiment, and foreign -20%
exchange rates. These changes impact a 2008-09 2010-11 2012-13 2014-15 2016-17
AUS NSW VIC QLD
household’s ability to borrow and purchase
property, flowing through to demand for
Source: BIS Oxford Economics, State Land Registries
conveyancing services.
Conveyancing requires a number of legal
forms/documents or instruments to be
completed for a property transaction. For
example, common instruments in the sale
of a property include a transfer, discharge
of mortgage and mortgage (Figure 2.2).9
9
It is important to note that transactions and instruments are treated differently in PEXA’s reporting. Transactions within the PEXA system typically refer to individual billing
events and means that in one workspace, the purchase of a property can lead to 4 PEXA transactions because there are four parties involved (two practitioners and two
financial institutions). The transactional data sourced from PEXA in this report reflects these differences.
8Impacts of e-Conveyancing on the conveyancing industry | Current state of play in the industry
Figure 2.2 Transactions and instruments
Transactions
A transaction is a property-related deal that involves a number of parties and activities
Main transactions
Sale/transfer Refinancing
A sale/transfer is the legal process of changing the ownership of a Refinancing is the process of revising the terms of a mortgage or loan.
property from a seller to a buyer. Revising terms typically relates to changing banks, the interest rate
Common instruments involved in this transaction include a transfer, charged and the repayment schedule on a loan.
discharge of mortgage and mortgage. Common instruments involved in this transaction include a discharge
This type of transaction represents 50% of total transactions in of mortgage and mortgage.
Australia. This type of transaction represents 17% of total transactions in
Australia.
Instrument
An instrument is a form lodged with the Land Titles Office which changes information on a property’s title. Multiple
instruments are typically completed each transaction.
Main instruments
Transfer Mortgage Discharge Caveat Other
Transferring the
Assigning a Releasing a Notice that an Includes change
rights of a property
mortgage against a mortgage assigned interest on a of name, death
between two or
property to a property property is claimed notice, etc.
more parties
Source: Deloitte Access Economics
9Impacts of e-Conveyancing on the conveyancing industry | Current state of play in the industry
Sales/transfers and refinancing are the two discharged. In addition, there are a number have appropriate infrastructure in place
main types of transactions in conveyancing, of government bodies involved in the to offer the same service at a lower cost,
accounting for 67% of total national process, including the land titles office, the has placed downward pressure on the
transactions in 2016-17 (Chart 2.3). office of state revenue, and local councils. profitability of conveyancing services
(Rose, 2012). Conveyancing has a lower
Each transaction typically involves one In QLD and the Australian Capital Territory profit margin compared to other services
or more instruments, with transfers, (ACT), conveyancing work can only be provided by legal firms, but the continuous
discharge of mortgage and mortgage undertaken by a lawyer under state laws. flow of work provides an ongoing stream of
instruments accounting for the largest There are around 12,000 businesses which revenue that supplements more profitable
share of instruments in 2016-17, at around undertake conveyancing work across activities undertaken by the firms (DAE
85% (Chart 2.4). Australia, with the industry characterised practitioner consultations, 2018). While
by a large number of small operators the continuous flow of work and short
Generally, there are four key players in a (IBISWorld, 2017). timeframe provides incentives to perform
transfer; the purchaser’s conveyancer and conveyancing work for operators in the
bank, and the vendor’s conveyancer and A gradual expansion in the number of industry, there is a focus on streamlining
bank (Figure 2.3). The financial institutions firms operating in the conveyancing activities to improve efficiency.
are involved when a mortgage is created or market, especially larger law firms that
Chart 2.3 Volumes by transaction type, 2016-17 Chart 2.4 Volumes by instrument type, 2016-17
10.7%
2.4% 25.4%
1.5%
33%
50%
29.3%
30.7%
17%
Sales/transfers Refinancing Other Transfers Discharge of mortgage Mortgage
Withdrawal of caveat Caveat Other
Source: BIS Oxford, State Land Registries Source: BIS Oxford, State Land Registries
10Impacts of e-Conveyancing on the conveyancing industry | Current state of play in the industry
Figure 2.3 Key players in a transfer 2.2 Development of electronic •• Lodge settlement documents in person
conveyancing at the land titles office.
Purchaser’s Vendor’s •• Notify other relevant authorities of the
conveyancer conveyancer Under the traditional, or paper based
transaction. In the case of a transfer,
method of conveyancing, a practitioner is
this will likely involve sending a notice of
required to undertake the following high-
acquisition and rates payments to the
level tasks (Figure 2.4);
council and water authority, respectively.
•• Complete verification of identity (VOI)
The tasks are time intensive, with
and client authorisation form (CAF),
practitioners potentially spending
and prepare, negotiate and exchange
45 minutes on the phone to financial
Property contract with client. The CAF enables a
institutions and up to an hour travelling to
transfer practitioner to act on behalf of a client by
settlement (DAE practitioner consultations,
signing and approving documentation.
2018). In addition, there are often delays as
•• Prepare and exchange relevant the process of exchanging physical forms
documents with other parties involved in can take, on average, 4.25 hours in a sale/
the transaction. transfer.
•• Book settlement time, provide
adjustments and confirm financial
Purchaser’s Vendor’s
bank bank
settlement details with other parties.
Source: Deloitte Access Economics
Figure 2.4 Conveyancing process under traditional paper method
Contract Preperation Settlement Lodgement Post-lodgement
Prepare contract All parties prepare Property and Transfer documents Notifications of
documents relevant money is are lodged with settlement
documentation exchanged government completion
bodies
Complete verification Parties prepare Confirm and Lodge settlement Notifying other
and authorisation documents – exchange money document with land relevant authorities
Main
forms, and prepare, contracts, loans, land and settlement title office of transfer and
activities
negotiate and transfer, other documents providing final report
exchange contract relevant instruments to client
Source: Deloitte Access Economics
11Impacts of e-Conveyancing on the conveyancing industry | Current state of play in the industry
In the mid-2000s, both the Victorian conveyancing process was not productive The Australian Registrars’ National
and New South Wales Governments and imposing excessive compliance costs Electronic Conveyancing Council (ARNECC)
began to work on improving the time on business (ARNECC, 2011). Former was established in 2011 to implement
and cost efficiencies of the conveyancing Chairman of COAG, John Brumby, is and manage the regulatory framework
process. VIC developed the Electronic quoted as saying: “The origins of this for electronic conveyancing in Australia.
Conveyancing Victoria (ECV) solution, process are all about transforming the All dealings conducted through electronic
while NSW established the National way governments and business work. conveyancing are regulated by the Model
Electronic Conveyancing Office (NECO). [E-conveyancing] will transform and reduce Participation Rules, as set by ARNECC.
These initiatives motivated the call for a regulatory burden, the amount of time with These rules set out a range of obligations
national initiative to improve the overall lawyers, conveyancers and the like: really that conveyancers must follow when
conveyancing process for all participants. modernising the system.” (PwC, 2015, p.24) engaging in electronic conveyancing,
stipulating that subscribers must comply
In 2008, the Council of Australian As a result, a commercial entity was with these rules at the time of applying and
Governments (COAG) agreed to introduce established in 2010, now known as whilst being a subscriber to the electronic
electronic conveyancing as one of the 27 Property Exchange Australia (PEXA), with conveyancing system.
Seamless National Economy deregulation the aim of designing and implementing a
priorities. Electronic conveyancing was national e-conveyancing platform. PEXA
identified as one of these priorities operated this ELN as Australia’s first
because the lack of consistent regulation electronic lodgement network operator
across jurisdictions meant that the (ELNO).
12Impacts of e-Conveyancing on the conveyancing industry | Current state of play in the industry
2.3 The PEXA platform The use of PEXA’s platform for completing
lodgement and property settlements
Since its establishment, PEXA has focussed means that lawyers, conveyancers, financial
on developing an online platform for the institutions and land registries can interact
settlement and lodgement of land transfers and share information online, removing
nationally. The platform provides a secure the need for bank cheques and physical
online portal to an electronic workspace exchanges of documents. This addresses
where registered parties can complete and inefficiencies in preparation, settlement
lodge documents, verify duty and transfer and lodgement activities. An overview of
funds, and settle the transfer of a property PEXA’s role in the conveyancing process is
in real time. outlined in Figure 2.5.
Figure 2.5 The conveyancing process under digital lodgement and settlement
Contract Preperation Settlement Lodgement Post-lodgement
Prepare contract All parties prepare Property and Transfer documents Notifications of
documents relevant money is are lodged with settlement
documentation exchanged government completion
bodies
Outside PEXA – all in Set up work space Settlement funds Done immediately Notices and reports
paper and invite all parties. reserved and with settlement in can be accessed
PEXA’s
This can be done by released for payment PEXA from PEXA
role
any of the immediately after
participants. lodgement through
PEXA
Source: Deloitte Access Economics
13Impacts of e-Conveyancing on the conveyancing industry | Current state of play in the industry
Currently, PEXA is the only electronic The use of the PEXA platform will reduce enabled in NSW and VIC by 2019. Although
lodgement and settlement platform er- rors that can lead to unexpected the ACT is not a party to the COAG
available with the possibility of competing delays in settlement. Practitioners noted agreement, PEXA has started engaging the
platforms being introduced in coming during con- sultations that conveyancing local land registry. PEXA expects to roll out
years. The system is focussed on electronic services are being delivered with fewer its platform to TAS, NT and ACT by 2022.
lodgement and settlement, with some postponements and buyers can prepare However, this target relies on relevant state
minor activities within the preparation to move into prop- erties within agreed government funding.
stage also able to be conducted via the timeframes with greater certainty
electronic platform. It is available in NSW,
VIC, QLD, SA and WA, jurisdictions which Figure 2.6 illustrates the intended timeline
account for 96% of Australia’s lodgement for the rollout of PEXA’s electronic platform.
volumes (PEXA, 2017). Digital lodgement for all transactions will be
Figure 2.6 Indicative timeline of electronic platform rollout
Enable
residual 100% digital
All existing lodgement
PEXA documents in
instruments all states for enabled in
Mortgage/ QLD
Transfers in SA + digital Rollout of
Discharge in VIC Priority lodgement existing
in NSW & Notices Rollout of PEXA
VIC Caveats existing PEXA instruments
in VIC instruments in in TAS & NT
ACT
2013 2014 2015 2016 2017 2018 2019 2020 2021
Transfers in Simultaneous
NSW Settlements
RBA All existing Mortgages
Settlement PEXA nationally 100% digital
instruments lodgement
in QLD & enabled in
WA + Transmissions
and Notices of NSW & VIC
Settlement
Notices Death in Qld,
(QLD) NSW, SA &
VIC
Source: PEXA (2017)
14Impacts of e-Conveyancing on the conveyancing industry | Current state of play in the industry
Uptake of electronic lodgement and Chart 2.5 Take-up rates of PEXA platform by instrument type*
settlement has risen significantly for many
transactions. For instance, caveats lodged
25%
electronically accounted for 20% of all
caveats lodged in the selected states in
2016-17, led by VIC. However, transfers,
which account for over 50% of total 20%
transactions in the industry and have the
most opportunity for lower costs, had an
electronic take-up of only 1.1% in 2016-17
(see Chart 2.5). According to PEXA’s April 15%
data, take up the system has increased
since 2016-17, especially for transfer
transactions in VIC (27%), NSW (20%), and
10%
WA (17%).
The steep learning curve for practitioners
has deterred many conveyancing operators 5%
from transitioning to the electronic
process. In addition, with both the paper
and electronic processes operating at the
0%
same time, if one party is not on the PEXA
Caveat Mortage Discharge Transfer Others
system, then the transaction must be
performed through the paper process. This
Source: PEXA data request, Deloitte Access Economics
creates inefficiencies within the system,
and limits the number of transactions that *Take-up rates are for conveyancers and solicitors only
can occur electronically. For example, if
30% of all practitioners have the system
and are willing to use it, the probability of State governments continue to pursue some state governments have required
a transfer transaction being completed efficiencies in the conveyancing industry certain instruments to be lodged
electronically is less than 10%.10 Not all through electronic settlement and electronically. The timeline in Table 2.1
instruments are available on the system, lodgements, but recognise the problems outlines the various compliance dates for
and this further reduces the probability of a a dual system creates. In a bid to improve these instruments.
transaction being completed electronically. take-up and maximise efficiency gains,
10
This example uses 30%, which is an estimate of the current take up using actual electronic transaction data in 2017 and an estimate of the current industry size
15Impacts of e-Conveyancing on the conveyancing industry | Current state of play in the industry Table 2.1 Compliance timeline for electronic lodgement and settlement Instrument WA# VIC NSW+*** SA Standalone mortgage discharges Aug-16** Aug-16** Mar-17** Apr-17 Standalone mortgages (consumer) Aug-16** Aug-16** Mar-17** Apr-17** Standalone mortgages (commercial) Dec-17 Aug-17** Aug-17** Q4-17* Refinances Dec-17 Aug-17** Aug-17** Q4-17* Standalone caveats Dec-18 Dec-17^ Jul-18 - Standalone withdrawals of caveats Dec-18 Dec-17^ Jul-18 Non-ADI discharges, mortgages and - Dec-17^ - - refinance Standalone transfers Dec-18 Mar-18^ - - Standalone survivorships - Mar-18^ Jul-19 - All combinations of discharge, transfer and - - - mortgage transactions All combinations of transactions in PEXA Dec-18 Oct-18^ - All transactions - Aug-19^ - - Source: PEXA (2017) *Dates still to be confirmed **Where the mortgagee is an Authorised Deposit-taking Institution only +Excludes mortgages with bespoke terms over 4,000 characters ***Excludes out of scope titles ^If a party is a subscriber or is represented by a lawyer/conveyancer # In-scope transactions only 16
Impacts of e-Conveyancing on the conveyancing industry | Current state of play in the industry
2.4 Previous analysis of electronic benefits through Computable General experiences as other international
conveyancing Equilibrium modelling. It was estimated jurisdictions. These experiences are drawn
that the PEXA platform would result in upon in this report. For example, in New
The benefits of an electronic conveyancing a 0.05% increase in productivity for the Zealand, forcing practitioners to transition
platform have been explored previously, financial institutions sector, resulting in a through compliance dates improved
both here in Australia and internationally. $259 million gain in real GDP, $314 million the uptake and proficiency of electronic
increase in total annual national household conveyancing.
2.4.1 Previous Australian analysis income, and a $182 million increase in total
annual national wages (in 2013-14 prices). New Zealand’s electronic conveyancing
PwC (2010) updated the size of the system was introduced in 2002 after
potential revenue opportunity for a Both of these PwC studies focussed recognition that the expanding number
national e-conveyancing platform, and the on estimating benefits for a subset of of paper-based systems were becoming
potential intellectual property that could transactions, accounting for approximately “increasingly cumbersome” (Muir, 2007).
be leveraged. The report estimated that a 76% of all transactions annually. Initially, the uptake of the digital system
national electronic conveyancing business was slow, due largely to the upfront
(including booking, preparation, settlement A report by KPMG (2018) focused on investment in training and IT that was
and lodgement) could provide stakeholders analysing potential benefits to practitioners required. However, from 2009, the
with ~$220m-$248m of potential gross in NSW from electronic conveyancing, government required all lodgements of title
benefits, shared across consumer, providing a quantification of current time transactions to be made electronically with
practitioners and banks. Of these benefits, costs and benefits under the paper and limited exceptions.
approximately $60 million accrue to electronic processes to conveyancers
practitioners. This analysis did not take into and lawyers. The report estimated that The response from practitioners was
account any additional costs for using the for a vendor’s (purchaser’s) lawyer or positive with satisfaction levels increasing
electronic system. conveyancer using the electronic system, from 48% in 2005 to 80% in June 2009
3.25 (4.25) hours could be saved per (PwC, 2010) and by 2012-13, only 2% of
PwC (2015) updates these findings, with transaction in the post-preparation stages transactions were conducted through the
the net benefits of fully implementing PEXA of the conveyancing process. This meant paper process (PwC, 2015). As a result, New
to consumers, business and government that post-preparation activities could be Zealand is considered the most efficient
estimated at $184 million in 2017-18. The performed in 60-70% of the time observed global economy for registering property in
direct net benefits to practitioners was under the paper process. terms of cost and time (World Bank, 2017).
forecast as $20.1 million in 2017-18, with In comparison, Australia is ranked 51st.
approximately $72.7 million in benefits and 2.4.2 International experience
$52.6 million in costs. In addition to the Canada also experienced similar
direct benefits to the various stakeholders, The Australian conveyancing industry improvements in the uptake of electronic
PwC also examined the broader economic is currently going through the same conveyancing. The electronic land
17Impacts of e-Conveyancing on the conveyancing industry | Current state of play in the industry
registration system in Ontario 2.4.3 The scope of this report
was first developed in the 1990s
and quickly gained traction, with Our analysis expands on previous
99.9% of transactions conducted studies by providing an in-depth
electronically by 2011 (Teranet, 2014). analysis of the benefits to date
Although government legislation and potential benefits from 100%
which pushed practitioners to move electronic lodgement and settlement
away from the paper process was in Australia. In particular, our analysis
important, the integration of the differs from previous studies in the
platform with related services from following ways:
the state revenue office and financial
•• Capturing the current time and
institutions proved equally effective
monetary costs and benefits for
(GhostDigest, 2011).
NSW, as well as VIC, QLD, WA and
SA.
These examples are primarily
e-lodgement platforms. It is •• Identifying and quantifying the
important to note that PEXA has transition costs associated with
delivered a national e-settlement having the paper and electronic
and e-lodgement platform for processes running at the same
real property. The platform offers time.
Delivery vs Payment (DvP) with no
•• Estimating the total net benefits
person holding funds and title at
of a 100% digital lodgement and
the same time, delivering benefits
settlement process by 2021-22 for
and efficiencies not realised in these
practitioners in the states identified
other jurisdictions.
above.
18Impacts of e-Conveyancing on the conveyancing industry | Current state of play in the industry 19
Impacts of e-Conveyancing on the conveyancing industry | Impacts of current electronic system
3. Impacts of current
electronic system
The current electronic platform for The relatively small net benefits are
settlement and lodgement provides consistent with survey findings from
a number of benefits to practitioners practitioners.12 Despite significant benefits
compared to the paper based process, for completing a transaction on the
mostly in the form of time savings, which electronic platform, the low take-up rate
are partially offset by the platform’s fee. has prevented access to these benefits
Practitioners have also faced transition (see Table 3.2). Benefits are further limited
costs from moving towards the electronic by transition costs, mostly related to dual
system, mostly in the form of duplicate processes.
processes across both the paper and
electronic systems. This remainder of this chapter explores
these results in more detail, including state
Our modelling indicates the conveyancing analysis.
industry achieved a net benefit of around
$205,000 in the 2016-17 financial year
from the current electronic conveyancing
system (see Table 3.1).11
Table 3.1 Economic modelling results for current electronic system, 2016-17
Benefits Costs Transition costs Current net
benefits
$3.0m $2.1m $0.7m $0.2m
Source: Deloitte Access Economics analysis
Table 3.2 Instruments lodged in selected states, 2016-17
Total number Electronically Platform take up
of lodged lodged rate
instruments instrumentd
2.2m 42,655 2.0%
Source: Deloitte Access Economics analysis, BIS Oxford Economics
11
Analysis on benefits and costs was undertaken for NSW, VIC, QLD, WA, and SA only. This represents 96% of the total market.
12
The survey found 78% of conveyancers reported the cost of electronic lodgement and settlement was around the same level as the manual process.
20Impacts of e-Conveyancing on the conveyancing industry | Impacts of current electronic system
3.1 National results financial institutions ensuring funds are practitioners choose to pay for junior
available before settlement date. Our clerks or external settlement agents
Time savings throughout the preparation, consultations reveal that a practitioner to attend settlement on their behalf.
settlement and lodgement stages of the can spend up to 30 minutes on the Consultations and workshops revealed
conveyancing process contribute heavily phone to confirm that loan funds are that the use of settlement agents was
to these net benefits. Our results suggest available from a mortgagee. extensive, and therefore modelled
that for a transfer, an average of 3.7 hours explicitly. However, these costs were
•• Time editing documents within
is saved by practitioners per transaction estimated at around the same cost of
the platform. The current system
nationally under the electronic process. staff members attending.
requires information from all parties to
be matched before a transaction can •• Time spent travelling and attending
The time savings also depend on whether
be completed. This reduces the amount to lodgement. Lodgement of transfer
the practitioner is on the purchaser or
of errors requiring rework, as fields of land title, mortgage and discharge
vendor side. The average time savings per
are matched before proceeding to the takes place automatically through the
transaction for a purchaser’s practitioner
next state in the process. Practitioners electronic platform. In our consultations,
is 4.0 hours and 3.3 hours for the vendor’s
estimated that 10% of paper transactions an average of 30 minutes was spent
practitioner.13
involve a minor error that can prevent travelling to and from the land titles office
settlement from taking place on the as well as submitting relevant documents
3.1.1 Benefits
same day. This can be a result of difficulty to the land titles office.
making the edits to the documents
The benefits of the current electronic
and rebooking settlement, especially There are also financial benefits from
system are just over $3 million in the
for metropolitan-based practitioners. moving towards the electronic system
2016-17 financial year. This is based on time
Reduced settlement delays also provides with a reduction in the cheque fees. For a
savings of the electronic system compared
benefits to consumers however this is number of practitioners, a certain amount
to the paper based process and includes
out of scope for our analysis. of cheques – around 3 – are included
the following activities:
in their fees to their client. However, a
•• Time travelling to settlement. This
number of practitioners did still require
can be a significant investment of
•• Time spent on the phone to financial additional cheques if there were more
time, especially for regionally located
institutions and other practitioners payments required. The average number
conveyancers. In our consultations, for
booking settlement. There can be of cheques required for a transaction is 7
example, conveyancers located outside
significant time waiting on hold for at about $10 per cheque which diminishes
of metropolitan areas were travelling an
financial institutions to set dates for the margin for each transaction (KPMG,
average of 2 hours there and back for
settlement and coordinating with other 2018). Consultations revealed that this
settlement.
parties to ensure availability. In our cost was often borne by the practitioner.
consultations, for example, we found that •• Time spent attending settlement. Through the electronic system the need
conveyancers and lawyers can spend This can involve waiting at financial for these cheques is not required. The time
up to 45 minutes on hold with financial institutions or settlement locations saving benefits are partially offset by time
institutions. Even though work can still for other parties and completion of spent by practitioners entering information
be completed while on hold with financial settlement, which can take up to 30 into the electronic system and sending
institutions, there is a productivity minutes for the average practitioner. across workspace invitations. Although
decline expected during this time. Yet if one party does not show up and these activities only take an average of
the parties in attendance have other 10 minutes, they have reduced the time
•• Time spent confirming loan funds
settlements to attend to, the settlement savings included in the analysis.
are available from mortgagee.
will need to be rescheduled to the
Under an electronic system, there is no
afternoon or on another day. Some
need to spend time on the phone to
13
These are a weighted average based on the number of PEXA lodgements completed by each state.
21Impacts of e-Conveyancing on the conveyancing industry | Impacts of current electronic system
3.1.2 Benefits realisation electronic lodgement and settlement A number of transactions revert to a paper
process. The electronic process involves process after initiating the electronic
Experiences of using the electronic signing documents by senior staff, a process. Through our consultations, this
platform are varied, and there are a level of oversight that was not required was estimated at over half of all electronic
number of factors that are preventing in the paper based system. Consultation transactions. This figure does vary
some practitioners from fully realising revealed that this may be partially offset substantially for individual practitioners.
the benefits. A key factor is that at as the electronic system becomes more Industry consultations revealed that
current low levels of take-up of familiarised. some practitioners will not begin activities
electronic lodgement and settlement, on the platform until all parties have
with only 2% of eligible lodgements 3.1.3 Costs accepted the invitation to the electronic
being completed on the platform in workspace. Others will send invitations
2016-17. The lack of ongoing exposure to The current costs for practitioners using for all transactions and will run both the
the electronic platform means that the electronic platform are the platform electronic and paper based process to
efficiency gains from mastering the fees. Currently these are $110.55 for a mitigate any risk of reversion back to
system are not fully realised even when transfer title, which make up the majority paper process that could cause delays to
a transaction is completed via the of electronic lodgements for practitioners settlement.
platform. (19%). There are other fees, such as
caveats and withdrawals of caveats, which Another transition cost for conveyancing
Another significant factor is that other cost $29.92 and $15.51 respectively and practitioners is learning to operate the
related parties to the conveyancing have been included in the analysis. These platform. PEXA provides support services
process, such as financial institutions, instruments make up 50% of instruments face-to-face or over the phone for those
are not prepared for the demand in lodged through the platform. completing transactions. Consultations
transactions conducted through the with industry practitioners and support
platform. This means there can be Consultations revealed that fees for staff report that learning to operate
delays for practitioners when waiting for mortgages and discharges are often the system requires regular use of the
documents such as discharge documents borne by financial institutions. These may system. When there is regular use of the
or loan contracts. Ultimately this means be passed onto purchasers and sellers. system practitioners state that it takes
practitioners are spending additional time For the purposes of this report, fees for 2-3 transactions to know the system
following up financial institutions to receive mortgages and discharges therefore not proficiently. This transition cost is not
documents, reducing the time savings included in the analysis, which is focused included in the model as the delay was
benefits. on the implications for conveyancing considered minimal.
industry only.
Consultations also highlighted that Providing assistance to practitioners on
many practitioners do not perceive time 3.1.4 Transition costs the other side of the transaction is another
savings as a monetary benefit. A common transition cost cited by practitioners.
response during discussions was that Our modelling indicates that transition While PEXA provides support services for
practitioners are looking forward to costs of moving to the electronic system practitioners, many proficient practitioners
“getting their evenings back” when digital amount to $0.7 million, or 23% of the will provide assistance to new users of the
conveyancing is implemented fully. In benefits from using the platform. Transition system. This is especially true when the
this sense, practitioners are not explicitly costs are the costs of moving towards the practitioner advocates using the platform.
valuing the time they spend during the electronic platform. For practitioners that This was not quantitatively captured by the
evenings as a cost. have currently adopted the platform, this model as it substantially varies depending
includes an average cost of $69 each time on the case.
A fourth factor that can affect realisation a practitioner begins a transaction in the
of benefits is the share of tasks completed platform but needs to revert back to the
by junior staff compared to more senior paper process.
staff in the paper process compared to the
22Impacts of e-Conveyancing on the conveyancing industry | Impacts of current electronic system
3.2 State results electronically, which results in significant •• Differences in take-up rates of the
time savings for practitioners. Meanwhile platform;
Table 3.3 presents the modelling results for there are only small benefits for SA and
•• Slight variations in the conveyancing
practitioners currently using the electronic QLD. This is unsurprising given the size of
process between states which results in
system in each state. the market in each of these states.
different time savings; and
NSW and VIC, the two largest property The industry in WA is experiencing no net •• Differences in share of lodgements
markets in Australia by lodgement volume, benefits from electronic lodgement and completed electronically by conveyancers
account for the largest share of the current settlement, with industry net benefits of or lawyers.
net benefits of using the platform. Victoria -$36,000 for the 2016-17 financial year.
has a higher share of current benefits due The main reasons for the variation in state
to a large share of caveats being lodged benefits include:
Table 3.3 Economic modelling results for current practitioners using electronic platforms by state
State Benefits Costs Transition Current net
($’000s) ($’000s) costs benefits
($’000s) ($’000s)
NSW $1,314 $934 $356 $23
VIC $1,204 $816 $198 $189
SA $128 $89 $24 $15
QLD $83 $55 $16 $15
WA $315 $251 $101 -$36
Total $3,045 $2,144 $696 $205
Figures may not add due to rounding
Source: Deloitte Access Economics analysis
23Impacts of e-Conveyancing on the conveyancing industry | Impacts of current electronic system
3.2.1 Variation property Chart 3.1 Share of electronic lodgements by state
transactions and take-up
7% 2%
Take-up rates of the platform are a key
5%
determinant of net benefits across the
states. Table 3.4 below shows large
variation between states in these take-up 32%
rates.
The highest take-up rate of the platform
is in VIC, NSW and WA with the three
accounting for 93% of in-scope electronic 54%
lodgements (see Chart 3.1). These states
have implemented compliance dates for
certain instrument types to be completed
on the electronic platform which has
encouraged growth in the take-up of NSW VIC QLD WA SA
electronic lodgements.
Source: PEXA data request and Deloitte Access Economics analysis
Table 3.4 Total and electronic lodgements by state
State Lodged Electronically Platform
instruments lodged take up rate
instruments
NSW 683,294 13,753 2.0%
VIC 625,853 23,237 3.7%
SA 147,181 975 0.7%
QLD 518,898 1,960 0.4%
WA 205,641 2,922 1.4%
Total* 2,180,867 42,846 2.0%
Figures may not add due to rounding
*Instruments lodged are for conveyancers and practitioners
Source: PEXA data request, BIS Oxford Economics
24Impacts of e-Conveyancing on the conveyancing industry | Impacts of current electronic system
3.2.2 Variation in time savings For instance, SA has the largest time
savings of any state with almost 4 hours
Part of the variation in benefits faced saved through the process in total (Table
by each state is determined by the time 3.5). This is partly attributable to the
saved during a transaction through using fact that SA only has one location for
the electronic platform. These variations settlement, so any delays or errors prior to
in time savings were developed through settlement are exacerbated given limited
consultations with practitioners in each availability for re-booking.
state and confirmed through the survey.
Table 3.5 Average time savings for using electronic platform
State Time saving Time spent Net time savings
(hrs) transitioning (hrs)
(hrs)
NSW14 3.8 1.2 2.5
VIC 3.6 1.1 2.6
SA 4.7 0.9 3.9
QLD 3.6 0.7 2.9
WA 3.5 0.8 2.8
Source: Deloitte Access Economics analysis
3.2.3 Difference in lawyers and difference in the average salary for a lawyer allows practising lawyers to operate in
conveyancers undertaking the compared to a conveyancer was over their state and does not allow licensed
transaction $22,000.15 This leads to differences in the conveyancers from interstate to operate
dollar value of time savings for the types of within their jurisdiction. On the other
The type of practitioner completing the practitioner. end of the spectrum, the majority of
conveyancing transaction can have an electronic lodgements completed in WA are
impact on the size of benefits derived by For each state, there are varying shares completed by conveyancers, or settlement
each state. This is a result of the difference of lawyers and conveyancers completing agents.
in hourly wages between a lawyer and lodgements through the platform (Chart
conveyancer. For instance, in NSW the 3.2). The Queensland Government only
14
Previous research estimates that NSW average time savings was 3.25 hours for vendors’ practitioners and 4.5 hours for purchaser’s practitioners. with an average time
approximately the same as the average estimated in our modelling
15
Payscale (2018). Payscale salary survey. Available at: https://www.payscale.com/my/survey/choose.
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