Certificates of Title in Electronic Conveyancing

What happens to Certificates of Title when electronic conveyancing is introduced?

This is one of the key issues to be resolved in developing the detailed arrangements for electronic conveyancing in NSW.

In the existing arrangements for conveying a property, the Certificate of Title (or CT) plays an important role in identifying the person entitled to deal with the property – either the proprietor (if the property is unencumbered) or a lender (if the property is mortgaged) – and in retaining control over the registration of subsequent interests that may affect the lender’s security. The CT is brought to the settlement by either the vendor or a discharging lender and handed to the purchaser or a new lender together with the instruments necessary to transfer ownership and, if necessary, discharge an existing mortgage and register a new mortgage. While holding the CT after settlement, the purchaser or new lender can be confident no other transfer or mortgage will be registered before they lodge their instruments for registration.

In an electronic conveyancing environment the role of the CT must change. With settlements taking place electronically without the physical meetings held today, a CT cannot be handed over to a purchaser or new lender in the same way. What happens to the CT in the future will depend upon what is agreed among all key stakeholders on three roles the CT plays in the current paper-based conveyancing system. These roles are:

1. as an indication to practitioners that their client is entitled to deal with the property


2. as an indication to purchasers and lenders at settlement that they are dealing with the person or business entitled to deal with the property


3. as an assurance to purchasers and lenders after settlement that another purchaser or lender cannot register a competing interest in the property ahead of them. The CT gives purchasers and lenders time to lodge their transfers and mortgages without fear of being beaten to the Register by another purchaser or lender.

There are a number of ways these roles can be maintained in an electronic conveyancing environment. Over coming months this will be one of the issues widely discussed in National Consultation Forums about to be set up by the National Electronic Conveyancing Office and the most desirable outcome will be a common arrangement in all States and Territories.

One approach could be for:

• a CT to be issued only for unencumbered properties and not issued where the property is mortgaged. Persons dealing with the owner of an unencumbered property would still need to ensure that they receive a valid CT at or prior to settlement. Practitioners and authorised officers of lenders would certify to holding the CT and retain it with other documents supporting the transaction.


• where a CT has not been issued, the controlling party (the party having the right to deal, usually a lender) would be clearly indicated on the Torrens Register for the property and would appear on all public searches of that title. This would ensure that anyone searching a title record can readily identify who is entitled to deal in the property and whether or not a current CT has been issued.


• where a transaction involves land for which a CT has not been issued, the controlling party would be able to transfer the right to deal electronically. This may require the inclusion of a new document type in electronic conveyancing.

The future arrangements for the CT need to be thoroughly explored to ensure that whatever decisions are made the current integrity of the conveyancing process is preserved and electronic conveyancing is convenient and easy to use.

Source: Electronic Conveyancing in NSW #16
Please Note - The above is provided with a view to elicit comment and generate discussion. It is not intended to prescribe Lands position in respect to the manner in which the issue(s) discussed will be managed in an electronic conveyancing environment

My personal view - I believe we need to embrace a system of No CT. It is up to us and Government to design and devise a system with No CT with the checks and balances as part of the system to reduce the incidence of fraud. How much fraud exists under today's current paper system and in the past? How much fraud has occured under CHESS? Should a compensation fund be created? Should the system be underwritten by Title Insurance? This will be the hot topic going forward. Brett Hayton