NZ - Is it true? No transfer stamp duty

In researching New Zealand's electronic dealings regime I asked myself what about payment of stamp duty on the transfer of property. After a google search an investment property website had this to offer - its too good to be true

"Imagine I told you that there was a Western country where there was:"

• no capital gains tax


• no estate or death taxes


• no wealth tax


• no transfer tax or stamp duty


• unlimited deductibility of losses (paper or real) in one enterprise against profits in another


• no limit to the amount of mortgage interest you can deduct against income


• and generous depreciation rates based on purchase price

Transfer duties and capital gains tax are the two biggest hurdles preventing property freely turning over like stocks and bonds. One is a large ingoing impost. And the other is irrationally imposed differentiating between your private home and investment. And Australian governments are always looking for ways to screw you further. Also dont forget about the ludicrously high transfer registration fees we also cop. Australia is talking about ridding transfer stamp duty on commercial transactions but leaving it on residential. Australia, take a leaf out of New Zealand's tax regime.

New Zealand Inland Revenue website
Instruments executed after 20 May 1999 no longer attract conveyance duty or lease duty ("stamp duty") and do not need to be submitted to the Department for stamping.

Query the implication of NZ GST on property sales?

Take stamp duty out of the equation, a No Transfer Stamp Duty regime makes electronic dealings much simpler indeed.

New Zealand - Settlement Procedures eDealings

This is an extract from the workflow practice manual for NZ solicitors to conduct a property settlement (handing over the cheques) and the following e-registration of the property instruments (the transfer and the discharge mortgage) - quite similar to performing a settlement by mail that occurs between city and country practitioners.

Step 7 – Settlement Arrangement
Settlement processes are very similar in the e-dealing environment to the manual environment, except reliance is on the electronic transaction rather than physical paper and there are no copies of documents to be faxed backwards and forwards. This step also involves checking that settlement funds have been deposited as expected, which is critical before moving on to the next step.
7.1 Process Description
Settlement of an e-dealing is conducted outside of Landonline. The only part of the process performed in Landonline is releasing instruments. This is covered in step 8.
7.2 Process Flow
Normal manual processes apply.
7.3 Workflow Impacts
No copies of faxes are required for this step. In face-to-face settlements there is an opportunity to see the documents being released on the screen at the Vendor’s solicitor’s office when handing over the cheque.

Step 8 – Release instruments
At this point in the process, the vendor’s PC (Primary Contact) releases each instrument to indicate that settlement has been completed. This process is similar in the manual environment to sending documents by DX or mail.
The CP (Conveyancing Professional) does not need to be involved in this step of the process. This is similar to the manual environment, where the CP will often leave the legal executive to settle and register without the need of supervision.
Note: It is important to check that settlement funds have been transferred correctly before completing this step. Firms may need to consider revising internal policies that govern settlement to ensure that instruments are only released once authorisation of settlement has been obtained.
8.1 Process Description
Any user from the same firm with the appropriate privileges can release an instrument. Before you can release an instrument it must first be certified and signed.
8.2 Process Flow
Once all instruments have been released in an edealing, it is ready to be submitted to LINZ for registration.
Editing a released e-dealing
If any party who has edit access to an e-dealing, edits an instrument that has been released, Landonline clears all certifications and signatures and provides an appropriate warning message. In this situation, each edited instrument must be re-certified and re-signed.
8.3 Workflow Impacts
• There is greater trust in the system as visibility of the transaction and its progress is high.
Reliance on the other party (as is the case in the manual environment) is reduced.
• There is no risk of physically losing documents.
• There is no risk of documents being un-registerable.
• Fewer settlements need to be delayed due to original documents being unavailable, as faxed documents can be relied upon.
• There are no agency charges on the discharge.
• There are no resubmission fees if an e-dealing is rejected.
• Pre-validation ensures that there is no chance of missing something required for registration.
• There is no chance of being fooled by ‘twink’ at the last minute!

Step 9 – Submit dealing
Once the purchaser’s PC has released all instruments, the e-dealing can be submitted to LINZ for registration.

Termininology
Primary Contact (PC)
This is the person responsible for the day-to-day management of the e-dealing. Normally, this would be a Legal Executive.
Conveyancing Professional (CP)
This is the person responsible for certifying and signing a specific instrument. They must be legally authorised to perform conveyancing services and hold a current practising certificate or be a licensed land broker. Normally, this would be the solicitor responsible for the dealing.

New Zealand 100% e-lodgement 2008

The New Zealand Government has announced that 100% electronic lodgement will be phased in by 1 July 2008.

There appears to be encouraging signs of wider adoption of electronic dealings as more firms are making the transition.

Here's the link to the announcement and feedback

Roadmap for 100% e-lodgement

Key dates

The withdrawal of paper-based lodgements, and move to 100% electronic lodgement via Landonline, will be phased in gradually, commencing with Discharges:
1 May 2007 Discharges
1 Aug 2007 All Transfer & Mortgage types currently e-dealing capable
1 Sep 2007 Survey lodgements
1 Jul 2008 All remaining Title transactions

Recently published by the New Zealand Law Society Property Section are e-dealing worklow guidance for solicitors April 2006. This gives a overview of the NZ system of which the Australian NECS model will have many similarities.

NZ Property Law Section e-Dealing links to useful papers

Electronic Transaction Act 2002 New Zealand

New Zealand has adopted the International Protocols for electronic commerce with the enactment of the Electronic Transactions Act 2002

world’s largest property database

Land Registry UK holds the world’s largest property database of over 20 million titles. Land Registry guarantees ownership of many billions of pounds worth of property. Around £1 million worth of property is processed every minute in England and Wales.

"The e-conveyancing programme will be introduced incrementally to the property market and initially on a voluntary basis. It will, nonetheless, be a massive change for everyone involved which makes it important that we proceed in manageable steps and in accordance with a clear timetable. Stakeholder feedback has helped us to identify a preferred date for implementing compulsory use of the electronic system by 2009 or 2010. We will continue to listen to the stakeholder community and to refine our plans as appropriate." Land Registry Chief Executive, Peter Collis

The Universal Electronic Conveyancing System ?

There is certainly no single universal digital / electronic conveyancing application. The fact is there will be many. But one thing is for sure. If they cannot interlink with the process that precedes it or that is next in line that application won’t form part of the digital conveyancing chain that will be a linear end to end digital conveyancing system. The systems by nature have to be collaborative. One black box has to be able to talk to the black box before and after it in the chain.

What will be common to all these systems – XML digital standards. Standard vocabularies. Standard schemas.

Electronic conveyancing has been with us for a while. The first application that is in use today are applications not being used by lawyers or the legal industry. No. The legal industry is yet to adopt digital or electronic conveyancing. The first application of electronic conveyancing which is XML based that is now being used widely is electronic lodgment of credit applications by mortgage brokers to financial institutions. Roughly 38% of all applications industry wide for mortgage finance are being lodged by mortgage brokers electronically. It used to be all applications were paper based and lodged via the fax. Not any more. Westpac has a policy of giving priority to electronic lodgment over faxed applications. Westpac’s average for electronic lodgment is close to 60% therefore being way ahead of the industry average.

Credit has to be given to LIXI an industry standards body being a non-profit organization whose membership are financial institutions, mortgage brokers, technologists and any entity interested in inter-company straight-through processing for mortgage and conveyancing. This body wrote the first standard for Credit Application Language (CAL) that has been the foundation for electronic credit application lodgment.

Credit applications and approvals are the first step. The standards established by the first step will form part of the cornerstone for intermediate applications to be established to ultimately interlink with the final step of NECS (stamping and registration as well as online settlements).

As I said at the beginning there will not be one single universal digital / electronic conveyancing application. There will be a handful of applications that will all be capable of interlinking, all based on the XML standard for data and document interchange. The technical standards are being formed. It is now important to create the business applications based on the technical standards. 247legal is an example of one application that deals with vendor disclosure and creates a digital conveyancing network between lawyers & estate agents, vendors & buyers. There will be many more applications to appear that will create the next link in the daisy chain.

Re-Launch Hayton Kosky website

Hayton Kosky Lawyers has recently updated and re-launched their website. The site looks fantastic. The thought behind the production was to create a professional looking presence on the web, tell customers what we do and provide quality informative content especially in the area of property conveyancing. The site also works well as a tool for the lawyer and staff. As an example when confirming instructions to act and quotations , full referencing in the email or letter is made back to the website. The site also complements the drive towards full digital and electronic conveyancing. Clients, new, current and potential, know exactly what the scope of services that the lawyer is providing and is fully informed on process. There are selling and buying instructions forms for clients to complete and submit. All in all it is more than just mere brochure-ware and links to useful sites which what most legal websites tend to be.

A lot of the credit belongs to Matt Ling of Ling Design for production and design values. Any law firm wanting a website designed or re-designed can look no further. Matt only does bespoke design and stays away from formulamatic template driven websites. Matt can be contacted on 0401-440-395 or by email

Post Settlement Hangover

In a recent discussion I flagged the issue I have with our current settlement, stamping and registration regime. I made the observation that we hand over clear funds in exchange for title and a registrable instrument (ie the Transfer) and it is up to the lodging party to stamp and register the transfer with no guarantees.

Well this week we have had a shiny example of what can go wrong and the consequential repurcussions of delays in registration through requisitions from the State Revenue Office and caveats being placed on title before our client's Transfer could be lodged and registered.

Our client was a purchaser of an off-the-plan apartment in Docklands which he managed to on-sell to a subsequent purchaser.

First we looked at the possibility of flicking the Contract by way of nomination to the subsequent Purchaser (without profit). This would have meant substantial cost savings in stamp duty and mortgage set up costs. Timing issues prevented this happening. I could see the State Government was going to be the winner with two lots of stamp duty payable.

Our client settled his purchase. Problem one. State Revenue Office had a problem with the land & building statutory declaration as prepared by the Head Vendor. As all Victorian lawyers & conveyancers are acutely aware this is not surprising, given its complexity not just to practitioners but to clients as well. Result more stamp duty had to be paid. Winner State Government. Loser Client and Practitioners. Delay - 3 weeks.

Proceed to lodging with Land Titles Office. Problem 2. Registration refused. Intervening caveat had been lodged by subsequent purchaser. LTO had long abandoned policy of rejecting such caveats when no nexus being caveator and registered proprietor exists. Then we had legal practitioner for subsequent purchaser demanding $3000 for their consent to be given to registration of our transfer !@#? 100 / 100 for most silly stupid demand I have heard in a long time. Stupid demand for $3000 was withdrawn. Now her client is sitting / stranded in a hotel waiting for registration of our Transfer and our mortgagee to arrange discharge so she can settle and move in.

As I pointed out there needs to be a two phase settlement process.
1. Stamping & registration (in escrow) and then
2. handing over settlement funds upon which registration becomes absolute.

Such problems and other such like problems just disappear.

From a digital / electronic conveyancing perspective such as NECS there is probably merit to such an approach. Separate the processes. Less complexity and greater flexibility.