Stamp Duty Madness

It has always struck me as madness that buyers pay the stamp duty. It creates enormous disincentives for people to enter, invest or upgrade in the property market.

Currently, buyers with the most discretion - first homebuyers and property investors - are almost completely inactive and stamp duty has a lot to answer for. It is time to reform Australia's worst tax.

The constant lament from the real estate and building industries is that buyer demand, which would normally drive the construction of dwellings, is weak. No wonder when we slug buyers on average about 50 per cent of their average annual wage in stamp duty.

Our state governments know how unpopular these taxes are and that is why there is at least some relief for first homebuyers and investors. Whilst investors often borrow more to cover this tax, they will eventually claim it as a tax deduction when they sell. The more obvious benefit is the first homebuyer stamp duty concessions, but all this really just adds to the complexity of this dog's breakfast that are transaction costs around the purchase and sale of property.

If only we levied the stamp duty onto sellers and not the buyers. After all, it is those already in the market that can afford to offset their capital gain with a bit of stamp duty, not today's 20 something would-be homeowners.

I can foresee the hate mail from those with scarred memories of the Carr Government's vendor exit tax. Perhaps amnesty for all those owners that have bought property in the last ten years may be the sugar that helps the medicine go down. Some will see that this scheme would also work as a quasi-death duty, but that makes this reform to stamp duty no less workable or equitable in my view. Finally the tax should be pegged to consumer price index and not the value of houses.

Posted by Michael McNamara | The Age
July 18, 2008 3:08 PM

Stamp duty - always a hot topic. You can read the numerous comments here

Non-banks' home loan share shrinks

BIG banks are routing non-bank lenders in the battle for home loan market share, winning back large chunks of business once lost to their more nimble and cheaper competitors.

In a reversal of a decade, banks are now writing 17 out of every 20 new housing loans -- close to 85 per cent -- as their mortgage competitors struggle with the burden of higher wholesale funding costs brought on by the US economic crisis.

Aussie Home Loans, once the biggest thorn in the side of the banks, this week launched a "We'll match you" advertising campaign to try to stem the loss of market share.

Executive chairman John Symond said 99 per cent of the 10,000 borrowers seen in the past two months were able to get a better deals.

It is estimated that non-bank lenders have seen their share of the total home loan market slashed by two-thirds in the past year as the global credit crunch hits home.

The bank winnings come amid a hike in lending rates, forced in part by rising world interest rates and the phasing out of 12-month introductory discount interest rate loans, more often called honeymoon deals.

All housing lending is off sharply, with lending commitments 13.5 per cent lower in May than a year ago -- the weakest annual growth in 16 years.

Bureau of Statistics data shows that wholesale lenders, mainly in the non-bank sector, provided 4 per cent of housing finance in May, down from 13 per cent a year earlier. Banks won as much as 90 per cent of the $13.6 billion home loan market in the same month, up from 79 per cent in May 2007.

CommSec Securities calculated the bank's shares at a record 86.6 per cent, up from 78 per cent 10 months ago, and said it was likely to grow.

Equities economist Savanth Sebastian said: "Banks continue to pick up market share, with the cost of borrowing for non-bank financial institutions still a lot more expensive when compared with the big banks.

"Over the last month, the cost of wholesale borrowing has started to blow out -- trending in a manner similar to when Bear Sterns collapsed in March," he said. "Banks are well placed to increase market share in coming months as less competitive non-bank lenders are priced out of the market."

Other lenders to lose share are building societies, whose share of the mortgage market has almost halved to 1.5 per cent from 2.8 per cent. Credit unions were not as hard hit.

A senior analyst with financial industry research group Cannex, Harry Senlitonga, said the non-bank share of the mortgage market had fallen as higher global borrowing costs forced them to offer fewer products.

Mr Senlitonga said non-bank lenders, which were more exposed to the global credit crunch, would have to phase out discount interest rate loans.

"Many institutions say this is not sustainable in the longer term," he said. "At the moment, it's a tough time for them because funding costs are increasing."

Non-bank lender Resi is offering the Low Start Loan, which charges 7.99 per cent interest for the first year of a mortgage. After that it reverts to 8.99 per cent.

Commonwealth Bank, which raised its standard variable lending rate by 14 basis points to 9.58 per cent last week, is offering a 12-month discount introductory interest rate of 8.55 per cent.

Warren O'Rourke, spokesman for loan broker Mortgage Choice, said global banks like ING and Halifax Bank of Scotland, which owned BankWest, were benefiting as the banks increased their share of the mortgage market.

Tim Blue | July 19, 2008 | The Australian

Additional reporting: AAP

Housing sales in major cities fall

Fiona Cameron | July 17, 2008 | the australian

RESIDENTIAL sales in the capital cities slumped 24per cent in the first three months of the year as interest rates climbed and consumer sentiment collapsed.

Figures released yesterday by RP Data show that home sales in the three months to March were lower than in any quarter since before June 1999, when the real estate research firm began compiling sales volumes nationally on the mainland capitals.

After hovering below 80,000 transactions in all quarters since September 2003, sales swung above that level in the June and September quarters last year - but then local and international economic sentiment turned abruptly in December.

House and unit sales in the March quarter showed their most dramatic slide in the past nine years, falling from just under 80,000 to 58,072.

RP Data national research director Tim Lawless said borrowers were reacting to the slower economy by moving away from fixed loans, with the proportion of new loans issued on fixed rates falling from 24per cent in March to 13per cent in May. "More borrowers are selecting a variable rate of interest, which is a sign of improving confidence that rates may be stabilising," he said.

Jason Anderson, senior economist with analyst BIS Shrapnel, said sales volumes normally fell in the March quarters compared with December, but the slowdown this year was much more pronounced than usual.

A notable feature of the market weakness was that it was uniform across all capitals rather than being concentrated in Sydney and Perth, as it was last year.

Mr Anderson said there had not yet been a sharp decline in values, but prices were "pretty close to flat or marginally down" in the June quarter.

There was a prospect of "marginal, weak gains" in housing prices in the next 12months, on the back of wages and rental growth and serious housing shortages.

Rental vacancy rates in Sydney and Melbourne were below 1per cent and would remain "incredibly tight for the next 12months".

Sydney's rental market was the tightest it had been in 30years, and as a consequence rents would rise 10per cent this year and 10per cent in each of the next three years, Mr Anderson said.

Dwelling construction had slumped in NSW, down from 37,000 in 2006 to 28,300 in the year to March.

NSW's population in the 2008 financial year would grow by 80,400.

Victoria's population would grow by 82,000, but the state was keeping up with housing construction better than NSW, with 38,000 Victorian homes to be completed this year.

Slumping residential sales volumes are biting real estate agencies hard, and the effects were being seen in staff lay-offs and agencies closing their doors, said Noel Wyett, president of the Real Estate Institute of Australia.

Such a "severe decline" was certain to bring further rationalisation in the industry.

Australian Bureau of Statistics figures show 52,000 new mortgages were recorded in May, the lowest since 2004. The total value of housing finance commitments in May was $18.1billion, down $6.5billion from the June 2007 peak.

PDF-A The long term archive standard

An excellent article on long term archiving of documents
PDF-A vs TIFF

Link to article

Victoria - drop the fee increases - now

THE Law Institute of Victoria has called on the state Government to wind back fee increases for traditional paper-based conveyancing that were introduced to drive traffic to the Government's electronic system. Despite the fee rises, the electronic system, known as ECV, has processed just one transaction since its launch last year. It is now at risk of being superseded by the single national system that the Council of Australian Governments has promised to introduce by March 2010. LIV chief executive Michael Brett Young said the original fee structure for conveyancing should be restored because Victorians were not using ECV. "They should drop the increases because their system is not going to be used until the new national system is up and running," Mr Brett Young said. "We think they are making a windfall gain that does not reflect the take-up of the scheme. "And the reason the scheme has not been taken up is because they have not been able to get the large users on board," he said. The state opposition has estimated that the fee increases will cost Victorians who buy and sell property about $6 million a year. The major banks are boycotting ECV because they believe a network of similar state-based schemes would erode the potential efficiency gains from electronic conveyancing. The LIV has been unable to recommend that solicitors use the system because of concerns that it could expose solicitors to increased liability. Those concerns were identified by the Legal Practitioners' Liability Committee, a statutory organisation that provides the first compulsory layer of professional indemnity insurance for the state's solicitors. Mr Brett Young said COAG's endorsement of a single national e-conveyancing system would produce major gains for business. But he warned that the development of a national system could still fail unless all state governments took a realistic approach to the needs of private sector users of conveyancing. "That includes banks, because the majority of conveyancing has a bank involved. If they can get the banks on board, everyone will use it," he said. "If that happens it will be cheaper to carry out conveyancing and there will be savings for everybody."

Consultant Ajilon now runs electronic conveyancing

Chris Merritt, Legal affairs editor | July 11, 2008

AN employee of the company that helped build Victoria's troubled electronic conveyancing system is running the state government agency that is responsible for electronic conveyancing.

James Walker, who is still an employee of computer consultancy Ajilon, is one of a number of private consultants who are involved in running the Government's electronic conveyancing system.

The system, which has cost Victorian taxpayers $40 million to build, has been used for just one property settlement since its launch last year.

Hundreds of mortgages have been lodged and discharged using the system but it is not being used for conveyancing due to a boycott by the key players in the industry - solicitors and the major banks. Both groups have separate disputes with the Government about the structure of the system.

The central role of Ajilon in running the e-conveyancing system came to light soon after the Council of Australian Governments triggered renewed concern about the viability of the state-based system, known as ECV.

Those concerns arose after COAG promised last week that all states would be using a single national e-conveyancing system by March 2010. Mr Walker described himself on Tuesday in an email to interstate government officials as general manager of Land Exchange and project director of electronic conveyancing for the Department of Sustainability and Environment.

As well as Mr Walker, another official with a key role in the department, Rick Dixon, is also an Ajilon employee. Mr Dixon is the project manager of the department's electronic conveyancing project. Last December, Ajilon issued a press release that referred to the company's general manager Bill Leropoulos "and his staff Rick Dixon and Jim Walker". Mr Dixon has been involved with the Government's e-conveyancing project since 2005.

The key roles of the Ajilon employees within the Department of Sustainability and Environment triggered a call from the state Opposition for an inquiry by the Auditor-General.

"These consultants appear to be running rampant," said opposition frontbencher David Davis, spokesman on the scrutiny of government.

"Millions have been clocked up and it's now time to stop the music."

Mr Walker said he had been instructed not to answer questions and to refer inquiries about his role to the department's communications office. That office did not return telephone calls.

Mr Dixon said he preferred not to discuss his role.

Ajilon managing director Giles Nunis said the company did not want to get involved and all questions about the company's involvement in ECV should be directed to the department.

The state Government declined to answer a series of questions from The Australian about the role of Ajilon, including how much it had paid the company; how many other consultants were within the department; what systems it had in place to monitor potential conflicts of interest; and whether it had any plans to transfer their responsibilities to public servants.

Instead, a spokesman for Environment and Innovation Minister Gavin Jennings issued this statement: "The Victorian Government is fully committed to the COAG agreement and welcomes the agreement for a national electronic conveyancing system.

"We are looking forward to the assessment of the Victorian system as a possible basis for the establishment of one national system.

"The Victorian Government initiated the e-conveyancing project in 2002. It has now come to fruition and has successfully processed over 500 transactions and completed the world's first electronic settlement transaction.

"The system is technically robust and utilises state-of-the-art technology.

"Ajilon won a public tender to provide services and specialists to deliver an e-conveyancing system for Victoria.

"It is a highly specialised field and Ajilon's experts have worked as an integral part of the team to deliver the project.

"Mr Walker has led the project team for the past two years and there has been no change to his role in that time."

While Victoria is a party to the COAG agreement for a single system, Mr Walker issued an email on Tuesday that indicates Victoria wants an "alternate" model to be considered.

Mr Walker sent emails to interstate government officials inviting them to a meeting in Melbourne on July 22 to discuss a "jurisdictional" or "alternate" model for electronic conveyancing.

Before COAG endorsed a single national system last week, Victoria had been urging other states to adopt its proposed "jurisdictional" model of a network of systems modelled on ECV that would differ from state to state.

At a meeting in May, officials from all states except Queensland rejected Victoria's plan. That plan would have sidelined solicitors and bankers from direct involvement in developing the national system.

Had it gone ahead, responsibility for designing and building the e-conveyancing system would have shifted to a committee of state government officials.

Victorian representatives had produced a draft agreement containing a provision that said: "ECV Technical Solution will be the basis of the system recognising that jurisdictional differences are to be accommodated through customisation."

That provision, along with others, was rejected at the May meeting. Under COAG's plan, a single national system will be developed by private and public sector users of conveyancing.

On Tuesday, Mr Walker sent government officials in other states a document headed "The jurisdictional model and considerations".

It invites them to attend a meeting at the Victoria Ballroom of the Hilton Hotel at Melbourne Airport to discuss issues of "jurisdictional importance as a forerunner to the engagement of other stakeholders".

It says members of the COAG working party on e-conveyancing have been invited to the meeting. It would consider the implications of COAG's decision as well as unresolved issues about the national business model for electronic conveyancing.

"This will include questions arising from the jurisdictional ('alternative') model, with nothing held sacrosanct," it says.

The "rationale for the jurisdictional model" would be "explained and discussed", the document says. Mr Jennings declined to say whether the Government had been aware that Mr Walker had convened the meeting to discuss the jurisdictional model.

Law Institute of Victoria chief executive Michael Brett Young said the state Government needed to accept that while ECV might have "some excellent parts" there was no guarantee that ECV would be used as part of the national system.

"If it is not taken up completely or partly in the national system, they have got to accept that. It is a consequence of moving forward," he said.

Mr Brett Young said COAG's endorsement of a single national e-conveyancing system would produce major gains for business and that needed to be supported by the state Government.

The Opposition's Mr Davis said he was particularly concerned that consultants appeared to be "calling the shots" on the state's approach to e-conveyancing rather than the Government and minister who were responsible for the project. "After six years and tens of millions of dollars somebody needs to call a stop to the madness," Mr Davis said.

"Only a single settlement has been achieved and the system is not supported Australia-wide.

"The minister must finally exercise some authority and take control of this debacle."

In a letter to Auditor-General Des Pearson, Mr Davis says COAG's decision meant Victoria's electronic conveyancing software "may or may not be used in the development of a national electronic conveyancing system, presenting the possibility of huge losses for Victoria".

"An additional aspect for examination is the issue of what compensation Victoria will receive for the costs sunk into the ECV model which now appears set to be abandoned," he wrote.

"Also worthy of investigation is the role of consultants in the projects and whether the close supervisory role they appear to have had was appropriate."

Copyright 2008 News Limited. All times AEST (GMT +10).

The dud stirs

At long last the first hint is beginning to emerge that could explain the loopy attitude of the Victorian Government to electronic conveyancing. Consider this scenario: a company develops world-class expertise in building a state based electronic conveyancing system. Its employees are given key positions inside the bureaucracy by a grateful Government. Those positions allow them to influence the attitude of the Government to the future shape of electronic conveyancing. Nobody should be at all surprised at the outcome. The Victorian Government has for years been undermining attempts to build a single national e-conveyancing system. A single system is good for the nation. But it is not, by definition, a state-based system. Victoria has been trying to persuade bureaucrats from other states that the best thing they could do is adopt the sort of system that has been built in Victoria. The company and its employees have done nothing wrong. They have fulfilled their duty to shareholders and behaved honourably within the legal framework that governs their actions. That cannot be said for the Victorian politicians who allowed this situation to develop. They have behaved like babes in the wood.

Chris Merritt | The Australian | 11 July 2008

Nation Buildng

Lessons from Victoria's wasted conveyancing efforts

THE decision of the Council of Australian Governments to build an electronic conveyancing system that spans the nation is by no means glamorous, But history will see it differently.

This is the modem equivalent of the nation-building projects of previous generations, It might not have the cachet of a Snowy Mountains scheme, but just like that great project of the 1950s, electronic conveyancing will benefit all succeeding generations.

Industry groups estimate that if this single initiative is implemented properly it will cut the cost of buying and selling homes by $250 million a year, But that all depends on whether the COAG working group that now has control of the new project is able to avoid the sort of mistakes that have crippled Victoria's state-based e-conveyancing system.

The Victorian Government appears to have wasted $40 millionby building a system that does not comply with the basic requirements of the main players in conveyancing - the big banks and the solicitors. The Victorian system, known as ECV, has been used for just one property settlement since its launch last year.

This is the direct result of two mistakes that should be avoided by those who build the national system.

1. The first mistake was the refusal to accept that conveyancing is primarily a commercial transaction, not a filing procedure for land-title bureaucrats,
2. The second mistake was to cede control of the system to private consultants, The Victorian experience shows that those skilled in computer technology are of most value when their role is confined to implementing public policy decisions - not making them, Responsibility for the national system must remain in the hands of those who are responsible to voters, not shareholders

To avoid the fate of the ECV, the national system should be designed around the business needs of the private sector, By endorsing the principle of a single national system, COAG's working group is off to a flying start. This was the core demand of the banks - a demand that was ignored by Victoria,

When the national system comes into operation in March 2010, it will reduce the transaction costs of buying and selling property, and clear the way for more competition in the conveyancing market. Once the system is in place, the banks will need to be monitored to ensure they pass on much of the, savings, State governments should also start planning to pass on the savings in the form of reduced stamp duty on property transactions,

The states have already failed consumers by pocketing the GST revenue and refusing to slash state taxes.

There will be no excuse for such intransigence once e-conveyancing reduces the costs of their land title registries. The national conveyancing system will present the states with another challenge, Once the technology is in place, the only thing that will impede the development of a true national market for conveyancing is the fact that land law differs substantially between the states.

Competition will still be possible, but harmonising the land laws would speed that process and lead to even more savings for those who buy and sell property.

Despite the promise of a bright future, Victoria looks set to pay a high price for its false start. Years of effort and $40 million have been wasted, Its state-based system has no future, The best the state Government can hope for is that ECV will be cannibalised by those responsible for building the national system.

The Australian | Opinion | 12 July 08

Property values plummet across nation

PLUMMETING property values have prompted warnings Australia is heading for a one in a 100 year slump

New figures from property analyst Residex showed house and unit prices in nearly every city and rural centre fell in June, The Sunday Telgraph reports.

The last time all states fell at the same time was just before the Great Depression. The slump is affecting the top end of the market as well as the lower end.

Residex chief executive John Edwards has warned of tough times ahead.

"It looks like we're moving into a one-in-100-year event," Mr Edwards is quoted as saying.

"It points to a situation where unless the Government and Reserve Bank take action Australia could move into a recession.

"The only other times this has ever occurred are before we have moved into severe recessions."
The Residex statistics come at the end of a gloomy week for the Australian economy.

Official figures released last week showed housing construction fell for a fourth consecutive month and demand for loans declined by a quarter in the four months to the end of May.

Higher petrol prices and interest rates, and the share market slump also saw consumer confidence drop 51 per cent to its lowest level since 1992, when the economy was recovering from recession.

Mr Edwards said housing markets in different states usually rose and fell at different times.

"To see an adjustment going on a wholesale basis across the whole of the nation is incredibly unusual," he said.

"Never in my lifetime have I seen so many converging negative events.'' Residex reports the current median house value in Sydney is $573,000, down 1.05 per cent in June compared with 1.81 per cent for the three months to the end of June.

The falls are happening all over Sydney. While property values in Sydney's battler suburbs in the west and southwest have been dropping for some time, homeowners in well-off areas are now being hit.

Among the 20 worst-performing suburbs for houses are the wealthy northern enclaves of Whale Beach, Clontarf, Palm Beach, Elanora Heights, Clareville and Mona Vale.

While Plumpton, near Mount Druitt, was the worst-performing suburb, with negative capital growth of 5.74 per cent in the three months to June and 1.96 per cent in June, Whale Beach came in as the third-worst performer, with negative growth of 3.73 per cent and 1.14 per cent, respectively.

Maria Cassarino, from Richardson and Wrench Seaforth, which covers the Clontarf area, reported fewer people had attended open houses in recent months.

"This time last year we were getting 30 people though a property and now we are getting five," she said.

RP Data's director of property research Tim Lawless said what happened in the coming months would depend on inflation.

He showed some optimism, although he said values would probably fall further in Sydney this year.

"Coming into 2009, it's likely - and it depends on what happens with interest rates - we will start to see some value improvements return to the market, albeit relatively small,'' he said.

- AAP

The Australian | 13 July 08

Bear market to sink its claws into agents' jobs

• Chris Vedelago
• The Age
  
• July 14, 2008

REAL estate agents are seeing their income fall by as much as 20% as Melbourne's property market continues to soften.

More than six months of weakening sales levels and sliding property prices are reportedly starting to take a toll on agency revenues and salaries, which are heavily dependent on the 2% to 5% commissions made on sales.

Real Estate Institute of Victoria data shows the rate of sales by auctions is down by nearly 14% so far this year, with 1265 fewer properties changing hands than in the year ending the first week of July 2007.

The clearance rate, which averaged 83% to July last year, has fallen to just 66%, the lowest it has been since the weaker market of 2005.

The financial effects of the reduction in activity are being compounded by flattening or falling prices in many of the city's suburbs.

The REIV reported median house prices fell across the metro area by 8.4% in the March quarter, while RP Data has estimated they fell by up to 2% in the three months to May.

"The industry is probably seeing a 10% to 20% drop in revenues that is mirroring the fall in the number of transactions," said REIV chief executive Enzo Raimondo. "It will be felt in some areas and by some operators more than others."

Buyer's advocate Christopher Koren, of Morrell & Koren, told The Age that some big industry players were now budgeting to reduce turnover by 30 to 40%. "It's not going to be long before staff cuts happen," he said.

One agency director, who asked to have his name withheld, told The Age that agents who were not regularly making sales — and paying back their retainer — could expect to find themselves out of a job within months.

None of the agencies contacted by The Age has admitted cutting jobs yet for financial reasons, although all reported that expenses were being slashed and some were reviewing their commission structures.

Craig Stephens, director of Jas H. Stephens, said: "In a bear market, the top four agencies in a given area will do well, with the rest left to fight over the scraps."

With NATALIE CRAIG

Conveyancing goes national

Does industry have cause to celebrate the Commonwealth government’s decision to step into the electronic conveyancing arena? COAG announced funding a national body to initiate a single settlements and registration regime starting October 2008.

The announcement is not a sweeping overhaul of the State’s land registries and state based property legislation. The announcement is not usurping the State’s control of property and property taxes. We won’t be seeing a single national property register, even if this would be the ideal outcome.

The heart of the decision is to end the long running saga of acerbic rivalry between states over the implementation of electronic conveyancing vis a vis the Registry Book of each State Land Registry.

A big part of the problem is definition. What is conveyancing and what defines electronic conveyancing? The current debate on electronic conveyancing has been led by initiatives of Victoria’s ECV project and their point of view has predominately been though the eyes of the Land Registry and in particular Victoria’s land registry. Simply put, electronic conveyancing cannot be limited by this narrow definition.

Conveyancing, moreover, covers the breadth of the property transaction –

vendor disclosure

1. vendor disclosure
2. contract
3. loan – application, credit, approval
4. due diligence by purchaser
5. transfer
6. mortgage & loan preparation & execution
7. mortgage discharge
8. settlement – one part financial, the other handing over title, discharge & transfer
9. revenue office requirements
10. registration

Traditionally for the past 150 years, since the introduction of the Torrens registration system, Land Registries role has been the custodian of land records defining parcels of land by recording Plans and recording the registered proprietor of those land parcels. These records are now electronic based records: Plans are imaged; and the registered proprietor and security interests are electronic records in the land registry’s database. Being electronic has meant a boom for the industry in gaining instant access to searching the Register. Land registries roles, however, have not been concerned with the financial or settlement aspect. One question we have to keep in mind is should land registries become involved in financial settlements?

The motion going forward is electronic conveyancing will be a series of electronic transactions. A single sale and purchase will be perhaps be up to 10 separate interlinked electronic transactions, with updating the registry electronically the final transaction. This being the case, the new National Commonwealth Body needs to define what its area of responsibility will be in the coordination of electronic conveyancing.

The key role the Commonwealth will play is providing the standard platform for a uniform approach to electronic lodgement of instruments with the State Land Registries covering: Caveats / Priority Notices; Withdrawal of Caveats; Discharge of Mortgages; Transfers; Mortgages; APRs & Survivorship Applications and perhaps Plans of Subdivisions.

The sensible starting point would be Caveats & Withdrawals followed by banks effecting refinance transactions with registration of Discharge & new Mortgages. A coordinated approach along these lines might take 12 to 24 months before you step up and tackle the registration of Transfers which carries a greater degree of risk and the issue of take up by industry practitioners. Caveats and Withdrawals are relatively low risk. By low risk, I mean the transactions don’t carry any risk associated with transfer of funds nor those risks associated with change of ownership. As well lodgement of a caveat / priority notice are relatively simple and can be effected by a single conveyancing practitioner, as they are already doing in Tasmania now.

Meanwhile Industry can deliver solutions for other aspects of electronic conveyancing ie vendor disclosure, contract, due diligence etc.

The outlier is who should deliver on the vexed question of financial settlements? Industry or Government? The middle bit. The jury is still out on this point. ECV would argue the financial settlement is a part and parcel of the Discharge / Transfer / Mortgage trilogy. COAG have flagged that financial settlement will be part of the government package. This point of view, however, ignores 150 years of history where Land Registries role is a custodian one. It is a point worth investigating further. Should the role of the Land Registry change with the introduction of electronic conveyancing by extending into becoming facilitators for the financial aspect of property settlements?

It is worth noting I believe the approach taken by ECV to the financial settlement is flawed. One aspect of ECV which really concerned me and that was their approach to disbursement of settlement funds. I can understand their decision but I disagree with the approach and that was – settlement funds can be disbursed by EFT / direct credit to any bank account or bank accounts. That is, it is an open system of payments. As a principal in a law firm, I would be entrusting my staff to enter the BSB and account details for client accounts and third parties which could be any number of accounts for any transaction. Fraud aside, I don’t believe my staff would be comfortable of entering account details as it would involve a lot of time checking and re-checking. As a principal, I am not comfortable with such an approach.

So in such an environment, how should payments be tackled? The system of payments ought to be a closed system. Disbursements of funds should only be to subscriber trust accounts registered in the system. This means payments will be disbursed to the Vendor’s mortgagee and the Vendor’s representative’s trust account. Other incidental disbursements could be made to council, water & body corporates, registries & revenue office accounts registered in the system. A closed system I personally would be comfortable with as my staff would be. It is then the responsibility of the vendor’s representative to disburse the funds due to the Vendor in the manner the Vendor directs from their trust account either by cheque(s) or direct credit(s).

I understand the money markets and share industry use a closed system of payments where payments are only disbursed to registered subscribers of the respective systems. And that seems to work well and works seamlessly.

Incidentally none of this answers the question whether Government or Industry should be responsible for the financial settlement aspect. The assumption thus far is government will take the lead. I am not convinced this is the correct approach to adopt. It is still open to Industry to take a lead in this area of what are in effect unattended settlements. In Australia, the tradition for the past 150 years has been for all parties to attend settlement and exchange payment for the title, discharge and transfer. But it has not always been the case. Many country practitioners attend to settlement by post. In New Zealand they don’t conduct physical settlements.

Industry need to explore further the question of unattended settlements. An unattended settlement might be underwritten by a title insurance policy. Title insurers would certainly be happy if this was the case. I would suspect industry insurers like the Victorian LPLC would welcome title insurance as currently legal practitioners carry the cost of mistakes (attributable to the practitioner). Under such a regime of unattended settlements, in effect you are separating the roles of settlement and registration. And perhaps this is how it should be done under an electronic framework.

All in all, the question still remains. Should Land Registries be expanding their current role beyond being the custodians of land records? The debate will continue.

The COAG decision is welcome (in fact it is great news) and I can see the role NECS has played will continue under the Commonwealth framework.

If you have a comment or a point of view, please leave a comment here.

Vic's e-conveyancing a legal dog

In David Crowe's "E-conveyancing faces resistance" (July 2) lawyers will not be likely to resist electronic conveyancing, but I'd be hugely surprised if they don't resist the system if the Council of Australian Governments meeting adopts the Victorian model, Electronic Conveyancing Victoria.

ECV is a system designed to satisfy every need of the Victorian land title authorities and not, as it should be, a system designed around the needs of the industry, including government, banks and lawyers. I have seen a demonstration of ECV and it failed lamentably to settle a discharge of mortgage (the simplest of all conveyancing transactions) during the 40 minutes or so of the demonstration.

As I understand it, some months after the launch of the actual system in Victoria, there have been no settlements. In other words, it's a legal dog. It should be set aside and a new start made. It is a system mired in the pride of its developers and wasted Victorian taxpayer funds. It is insensitive to the needs of its users and unacceptable to the majority, if not all, of the other states. Its appeal is that it exists and other systems are largely developmental.

We can only hope, for the sake of a more efficient national, property transfer system, that at COAG the government is prepared to fund NECS (the committee developing the National Electronic Conveyancing System) to enable the development of a platform that can be used more easily than the present manual system.

Letter to FinReview 4 July 08
Peter Rosier Annandale NSW

It looks like its lights out for ECV

Vic may drop its e-conveyancing system

Victoria's $30 million electronic conveyancing system is likely to be shelved following yesterday's agreement by all states and territories to push ahead with a national system for transferring land online.

The Victorian system has been operating for seven months but has so far only attracted one transaction due to a boycott by major banks. It joins other major projects that the state government has failed to keep on track and under budget, creating cost blow-outs of more than $1 billion.

At yesterday's meeting of state premiers in Sydney, the Council of Australian Governments' business regulation and competition working group seized oversight of the national e-conveyancing program. That program has been in train since 2005 but has languished for the past 18 months because of a stand-off between Victoria and other states.

Victoria has its own electronic conveyancing system, known as ECV, which it wants adopted as the underlying software for the national system, known as NECS.

The premiers said they would assess Victoria's system, but last year Victoria was unable to convince other states that its software was suitable and whether it could handle differences in how property was transferred in different jurisdictions.

A national steering committee has struggled to keep the national scheme on track in the face of opposition from Victoria, which tried to scuttle the national scheme and have each state implement its software individually - thereby creating separate online land registries for each state instead of one national registry.

The national steering committee will now be rolled into a new entity answerable to the business regulation working group. COAG aims to have the national system running by 2010.

Simon Libbis, who heads the national electronic conveyancing office charged with setting up the national scheme, said the COAG approach would dovetail with work already done.

"It should overcome concerns that the self-interest of particular jurisdictions or stakeholder groups will dictate outcomes," he said.

Major banks initially co-operated with Victoria on its e-conveyancing platform but walked out once it became apparent that ECV and NECS were headed in different paths. Shortly after, an assessment of the software by other states created doubts about whether it could handle other jursidictions' requirements.

ECV went online in November and has so far been used only once. A conveyancer involved in the transaction, Gayle Nancarrow, said it went smoothly and the only problem with ECV appeared to be a lack of interest from major banks. "It's a good system. It certainly works. There's no doubt about that," she said.

COAG has agreed to re-assess whether the ECV software can be used nationally. But Victoria's opposition government scrutiny spokesman David Davis said the new national system would in effect bypass Victoria. He plans to request the state's auditor-general to investi­gate the matter.

"How could it be that after six years and tens - of millions of dollars only a single transaction has occurred? By any measure this was a failure and needs to be investigated."



Matthew Drummond | FinReview | 4 July 08

National e-conveyancing gets go-ahead

Chris Merritt, Legal affairs editor | July 04, 2008 | The Australian

VICTORIA may be in line for a multi-million-dollar payout as part of the push to clear the impediments that have delayed the establishment of a national electronic conveyancing system.

Attorney-General Robert McClelland said it was "inevitable" that Victoria would be compensated for spending millions of dollars building a state-based e-conveyancing system.

The prospect of a payout strengthened yesterday when the Council of Australian Governments agreed that by 2010 all property transactions in the nation would be settled using "a single national electronic conveyancing system".

While this puts Victoria's state-based system at risk of being superseded by the national system, Mr McClelland said much of the Victorian system could still be useful.

"People have different views about whether the Victorian system works or won't work, but ... we should recognise that in some ways they were trailblazers in the area," Mr McClelland said.

He said the way forward on e-conveyancing would mean a new corporation would run the national system and would pay a fair price for Victoria's technology and use "that part of it that is useful".

COAG agreed that a new organisation to develop the national system should "assess the Victorian electronic conveyancing system ECV and, to the extent it is suitable, use it as the basis for the underlying software for the new national e-conveyancing system".

Victorian Minister for Innovation Gavin Jennings said this meant COAG had "accepted the Victorian model".

"COAG today accepted the Victorian model which has been developed over recent years. The model will now be assessed by a COAG committee," Mr Jennings said.

"Home buyers across Australia will benefit from this world-first Victorian innovation through time savings and ultimately financial savings," he said.

However, the state Opposition described the Victorian system as "a lemon" that had cost $40 million to develop, been used for just one transaction and had contributed to a $6 million increase in state government charges on conveyancing.

Opposition frontbencher David Davis said he would always argue in favour of additional money for Victoria.

But the prospect of compensating the state Government for ECV "sets a very bad precedent when mendicant states with hare-brained or poorly implemented schemes will be compensated for their incompetence", Mr Davis said.

"The Victorian scheme is a lemon and federal taxpayers' money will be used to salve the wounds in Victoria," he said.

COAG agreed that the new national system would be run by a new "entity" that would be owned by "all relevant jurisdictions".

However, no decision has yet been taken on whether the federal Government will have an equity stake in the new organisation.

COAG also agreed on a time line for the introduction of the new national system.

The new entity's governance and funding are due to be be settled by October. It will be established in December and any new laws will be introduced by December next year, with the system due to come into effect in March 2010.

If it works as planned, industry groups estimate it could reduce the cost of buying and selling property by $250 million a year.

THE TORRENS SYSTEM OF LAND TITLING 2 July 1858 – 2 July 2008

Wednesday 2nd July 2008, is the 150^th anniversary of the introduction of the first Torrens System of land titling in the world. In South Australia on 2 July 1858 Sir Robert Richard Torrens saw the Real Property Act 1858 (SA) come into operation.

Robert Torrens was the first Registrar-General of South Australia. Whilst in his previous position as Collector of Customs for the colony, Sir Robert had developed a strong dislike of the system of land registration in existence. His reforms replaced the system inherited from Britain and made conveyancing more efficient and more certain. The key to the Torrens System is that title to land is derived from registration – “it is a system of title by registration and not one of registration of title.”

Over time the Torrens System was adopted by every Australian state and territory and in many other parts of the world. While the fundamentals remain the same, differences of interpretation and application have resulted in some variations in the way the system now operates in each jurisdiction.

The introduction of the Torrens System heralded a major change to the way conveyancing was conducted. 150 years later the most significant development since then is now upon us - electronic conveyancing.

When the Torrens System commenced Australia consisted of a number of separate colonies. It is now one country with a central government. Technology has delivered not only the opportunity for conveyancing to be performed online but also for the creation of a single national system. This will make the process more efficient for the conveyancing industry and overcome the differences that have evolved in titling systems around Australia. Modern Australia cannot afford to repeat the mistakes of the past if we are to grow and prosper as a nation. The conveyancing industry needs and wants a single national system for electronic conveyancing.

The National Electronic Conveyancing System (NECS) that is currently being developed is a single national facility providing for settling property transactions electronically, preparing, and lodging instruments electronically with land registries and paying duty and other financial obligations electronically.

Issues currently being addressed in the development of the national system include:

• Detailed legislative requirements in each jurisdiction
• Governance issues
• Systems rules and operation
• Business practices
• Risk management strategies
• Common data standards

Sir Robert Torrens had the vision 150 years ago. The system he introduced then has served us well. By the careful and thoughtful application of modern technology, the Torrens System can remain the basis of land titling systems that meet the needs of today and into the future.

NECS Newsletter 2 July 2008

150 Years

Anyone interested, Wednesday July 2, 2008 marks the 150th anniversary of the establishment of the Torrens Title system of government guaranteed registration of titles registration in Australia.

If you want a copy of the original Act contact me.

PM's Office - Joint Media release with the Minister for Finance & Deregulation, Lindsay Tanner, A National Electronic Conveyancing System

02 July 2008

COAG has agreed to the establishment of a national platform to settle all property transactions electronically.

A single national electronic conveyancing system is a significant step towards creating a seamless national economy in Australia.

Australia’s first national electronic conveyancing system - to be operational by March 2010 - will provide an efficient online national platform to:

• Settle property transactions electronically;
• Lodge instruments electronically with land registries; and
• Meet associated duty and tax obligations electronically

The agreement to establish a national electronic conveyancing system is only possible because all states and territories have agreed to cooperate together.

A national electronic conveyancing system will mean consumers across the country will use the same electronic system to settle all property transactions.

Under the current system every state and territory has their own unique property conveyancing system with different processes and procedures, based on an antiquated system of paper-shuffling.

Industry groups estimate a national electronic conveyancing system could reduce the costs of buying and selling property by $250 million a year.

Consumers will save money by spending less on expensive legal and conveyancing fees and transaction costs such as bank cheques.

This national system will mean that whether they buy a house in Darwin or Dubbo, Bundaberg or Ballarat, consumers will use the same online system to lodge and exchange all the documents, certificates and contracts needed to buy their new house.

COAG has agreed to the following timeline for the implementation of a new
e-conveyancing system.

• July 2008 – Agree to form of legal entity for a new e-conveyancing system
• October 2008 – Settle and sign governance agreement for a new e-conveyancing entity
• October 2008 – Agree on funding for a new e-conveyancing entity
• December 2008 – Establish a new e-conveyancing entity and appoint board
• March 2009 – Agree on a nationally uniform business processes
• December 2009 – Implement any necessary legislative changes in jurisdictions
• March 2010 – Commencement of a new e-conveyancing system

This national electronic conveyancing system will require the establishment of an e-conveyancing entity which will be owned by all relevant jurisdictions.

The new e-conveyancing entity board will be skills-based and include directors with banking, conveyancing, information technology and other relevant commercial skills, as well as directors with knowledge of State and Territory processes concerning land registries, duties and taxes.

Victoria is the only jurisdiction that currently has an electronic conveyancing system that allows you to complete property transactions online.

The entity is to assess the Victorian electronic conveyancing system ECV and, to the extent it is suitable, use it as the basis for the underlying software for the new national e-conveyancing system.

The Council of Australian Governments has agreed that the COAG Business Regulation and Competition Working Group will oversee the implementation of a new e-conveyancing system.

Australia Labor Party Official Website

Vectis throws in dividend for Espreon

http://www.misaustralia.com/viewer.aspx?EDP://20080702000020853647

National system for property deals

Home buyers will save an estimated $250 million a year under a national electronic conveyancing system the Rudd Government and state premiers have agreed to.

On the eve of the next meeting of the Council of Australian Governments, Prime Minister Kevin Rudd and Finance Minister Lindsay Tanner announced what they branded ''a significant and beneficial step towards creating a seamless national economy''.

''Industry groups estimate a national electronic conveyancing system could reduce the costs of buying and selling property by $250million a year,'' they said in a statement.

The president of the Real Estate Institute of the ACT, Michael Wells-more, welcomed the move, but said the security and legality of transactions must remain paramount.

''Conceptually the idea is good, but it then needs to be able to be implemented,'' he said.

Contracts had to be properly executed and recorded, transfers thoroughly documented and mortgage discharges and registrations legally sound.

The new system is to be up and running by March 2010, only months before the next federal election, allowing Government MPs to sell the benefits of reduced legal and conveyancing fees and transaction costs such as bank cheques.

''I think it can be helpful,'' Mr Wellsmore said, while also expressing some reservations about the size of the projected savings, noting that it would probably be in the order of hundreds of dollars for most home buyers.

However, the stamp duty burden remained in the thousands, and he urged COAG to complete the long-promised removal of various state taxes and charges in exchange for the rivers of revenue that flowed from the introduction of the GST.

''They never quite seem to have made it,'' he said. ''We would get far more excited if COAG discussed the removal of stamp duty.''

The electronic conveyancing system is to come into effect in seven stages:

1. Agreement to form a legal entity for the new e-conveyancing system (July 2008).
2. Signing a governance agreement for the new entity (October 2008).
3. Agreeing funding (October 2008).
4. Establishing the new e-conveyancing entity and appointing its board (December 2008).
5. Agreeing nationally uniform business processes (March 2009).
6. Making any necessary legislative changes across jurisdictions (December 2009).
7. System begins (March 2010).

Under the current set-up, every state and territory has its own conveyancing system with different process and procedures, which the Federal Government said was ''based on an antiquated system of paper shuffling''.

''This national system will mean that, whether they buy a house in Darwin or Dubbo, Bundaberg or Ballarat, consumers will use the same online system to lodge and exchange all the documents, certificates and contracts needed to buy their new house,'' the ministers' statement said.

The development and implementation of the electronic conveyancing system will be overseen by the COAG Business Regulation and Com-petition Working Group.

ANDREW FRASER, POLITICAL CORRESPONDENT | Canberra Times

New found optimism - here we go again

Courier Mail | Renee Viellaris and Melissa Ketchell | July 02, 2008 12:00am

HOMEOWNERS have been promised significant savings when buying and selling real estate under a new scheme to be announced by the Rudd Government.

After homeowners were yesterday warned that lenders may increase interest rates despite the Reserve Bank leaving its cash rate on hold, Prime Minister Kevin Rudd will today reveal that agreement has been reached on a national electronic conveyancing system.

The Government predicts the system could reduce the total costs of buying and selling property by $250million a year, and end the mismatched system across states and territories.

The Council of Australian Governments, which will meet tomorrow in Sydney, has agreed to start the new system in 2010.

Conveyancing is the process of transferring the legal ownership of real estate from one person to another. It costs up to $800 for an average priced home.

The new system will settle property transactions, lodge instruments with land registries, and meet associated duty and tax obligations - all digitally.

"A single national electronic conveyancing system is a significant and beneficial step towards creating a seamless national economy in Australia," documents from the Prime Minister's office say.

"Consumers will save money by spending less on expensive legal and conveyancing fees and transaction costs such as bank cheques."

The Australian | Phillip Coorey | July 2, 2008

MUCH of the expense and hassle involved with selling property will be eliminated under a uniform national system of electronic conveyancing.

The states and the Commonwealth will formally agree at tomorrow's Council of Australian Governments meeting in Sydney to establish the system.

The Prime Minister, Kevin Rudd, will spruik the achievement as "a significant and beneficial step" towards his goal of creating a seamless national economy in which differing rules and regulations between the states are standardised.

The Government has earmarked about 27 areas that need reform.

The national electronic conveyancing system will be operational by March 2010. It will be used to settle property transactions anywhere in the country and is expected to save $250 million a year in fees and costs.

"Consumers will save money by spending less on expensive legal and conveyancing fees and transaction costs such as bank cheques," Mr Rudd said.

Currently only Victoria has such a system and other states and territories had their own "with different processes and procedures, based on an antiquated system of paper-shuffling".

In an open letter sent yesterday to the Prime Minister and the premiers and chief ministers, the Business Council of Australia said progress towards a seamless national economy was critical.

"Failure to achieve the promised reforms will leave us locked in a state-based approach more suited to the 19th century," it said.

"As they meet tomorrow, the BCA urges all members of COAG to set aside parochial differences, grasp the opportunity and lead us forward."