Contracts Settling Electronically – The Verdict is in and Everyone Loves it

We have now been completing the settlement of contracts electronically for several months and the feedback has all been positive. Our clients like it. The real estate agents involved like it and our staff like it.

“What’s to like?” you may be wondering. Plenty.

With an electronic settlement, instead of the lawyers and financial institutions meeting in person on the settlement date to exchange paper transfer and release of mortgage documents for bank cheques, that now happens electronically. For an electronic settlement, a digital workspace in created on PEXA, transfer documents and release of mortgage documents are signed digitally and a time is set for settlement. If all the participants (the lawyers for each side and the financial institutions, where applicable) mark the electronic workspace as ready for settlement then at the agreed time the workspace locks and the funds are disbursed.

Advantages

There are many advantages that we have identified with settling a contact electronically including:

• Sellers, real estate agents and other recipients of the settlement money receive their money directly into their nominated bank account as cleared funds within minutes of settlement taking place. That means that bank cheques no longer need to be drawn for settlement, delivered to/collected by the recipients after settlement and deposited into bank accounts with the usual several day wait for the cheque to clear.
• The fact that cheques are no longer required for settlement removes the risk of a bank cheque being drawn incorrectly and settlement having to be delayed for that reason.
• The difficulty for the lawyers and lenders to agree on a suitable time to meet in person for settlement can be avoided. That is because there is no longer a physical meeting for settlement.
• The risk of lenders or their agents being too busy (over booked) at a preferred time to settle and that delaying settlement is no longer an issue.
• There is greater opportunity for settlement to happen in the morning rather than the afternoon thereby assisting buyers with having furniture and other belongings delivered on the day of settlement. With paper settlements, banks typically prefer to settle in the afternoon to allow time to arrange their paperwork.
• If there is a last minute issue affecting settlement, the time for settlement can automatically “rollover” by half an hour (until 4pm on the Settlement Date) and provided everyone has marked the electronic workspace as “ready” by that time then settlement will automatically take place at that time. That removes the need for the bankers and the lawyers all having to liaise with each other to schedule a new settlement meeting which can cause settlement to be delayed even further.
• Upon settlement taking place the transfer documents are automatically lodged at the Titles Office for registration. There is no waiting for the bank or lawyers to lodge the documents physically. Buyers are appearing on the title on the same day as settlement, often within minutes of settlement having taken place.

What’s the catch?

To settle a contract electronically, both lawyers (buyer and seller) and both lenders (incoming and outgoing, where applicable) must agree to an electronic settlement. If any of those parties do not agree then settlement must be completed in the traditional way, that is, signed paperwork being exchanged in person for cheques on the settlement date. Most financial institutions now want to settle electronically so whether a contract can settle electronically will usually depend upon the willingness of the lawyers. We are both willing and wanting to settle electronically when we can.

Do you want to settle electronically?

If you and your clients want to settle electronically you will need to ensure the lawyers for both the buyer and seller are willing and able to settle electronically. We are so we encourage you to have your buyers or sellers engage us to handle their conveyancing for them.

If you would like to know more about e-conveyancing please contact David Patton or one of our other property lawyers. We would be happy to discuss it with you and your clients.

What is e-conveyancing? Read more.