E-conveyancing plan thrown a $2m lifeline

The Australian
Chris Merritt, Legal Affairs editor | June 19, 2009

THE push to establish a national electronic conveyancing system gained fresh impetus this week when the NSW government allocated $2 million to the project.

The extra funding, which was made available in the state budget, comes soon after NSW, Victoria and Queensland were given the leading roles in planning the national system on behalf of the Council of Australian Governments.

It also comes soon after Kevin Rudd was warned that the project was at risk of collapse because no funds had been allocated to establish the company that would run the system.

NSW Lands Minister Tony Kelly said his government had long been a supporter of a national e-conveyancing system and the extra $2m would help pay for its contractual and logistical expenses.

The extra funding has been allocated to the Lands Department, but if the company that will run the national e-conveyancing system is established before July next year, the $2m from NSW will be redirected to support the new entity, Mr Kelly said.

"A single national electronic conveyancing system would be a significant step towards creating a seamless national economy and NSW is working with Victoria and Queensland for it to be operational from 2010," Mr Kelly said.

He said an independent study by KPMG had indicated that the potential annual cost savings in NSW from a single national e-conveyancing system (NECS) would amount to $50m.

"Costs for the average conveyancing transaction are expected to fall by $170, providing both home buyers and sellers overdue cost relief," Mr Kelly said. "The process efficiencies available to industry as a result of NECS include less data entry and document preparation, settlement and lodgment savings, courier and bank cheque savings, and lower process administration costs generally."

The extra funding for the national system comes soon after the Victorian government was asked to hold an independent audit into why its state-based e-conveyancing system had cost an estimated $50m to build yet had been used for just one completed property settlement.

State opposition frontbencher David Davis called for the audit after telling parliament that the state government was continuing to spend about $6m a year on its e-conveyancing system, which is known as Electronic Conveyancing Victoria.

Consultants had made "tens of millions of dollars" from the project, but there had been no return for the Victorian community, Mr Davis said. "It seems a very expensive approach given the very small number of transactions that have been achieved with that system."

In the 18 months since the system had been available for use, it had been used for one transaction and had not been endorsed by key industry groups such as the Law Institute of Victoria and the Australian Bankers Association, he said.

Mr Davis said the national approach to e-conveyancing, which had been endorsed by COAG, seemed like a significant step forward because it would provide a low-cost approach.

He said there was "enormous resistance" from other states and the federal government to the idea of using the Victorian system as the proposed national system.

"ECV would have to be massively adapted and would not necessarily work in a simple way," he said. "But the key thing here is that ECV has seen massive expenditure by the state government and has been a massive opportunity for consultants, who have made tens of millions of dollars."

The Victorian government declined to answer questions from The Australian about whether ECV had in fact cost $50m, as alleged by the state opposition.

The government also declined to say whether it would allow the expenditure on ECV to be audited.

Innovation Minister Gavin Jennings, who is responsible for ECV, said in a statement that the government was continuing to work with state and federal governments and believed ECV "provides the basis for a national approach to electronic conveyancing".

His statement said ECV had "successfully processed over 600 transactions".

When asked through his spokesman if all but one of those transactions concerned the lodgment of documents rather than property settlements, Mr Davis declined to answer. He also declined to provide a breakdown showing the type of transactions that had been processed by ECV.

"Victoria is an active participant in the COAG process and is continuing to work with all jurisdictions and industry groups in the development of a national EC system," the statement said.

While Victoria is one of the three states with a key role on the national project, the state government has a significant financial commitment to its own state-based system, a government document shows.

The same document shows the financial plan underpinning the government's expenditure on ECV could be at risk unless most property transactions go through the state-based system.

A regulatory impact statement, dated July 2007, for new fees on land transfer says: "... the government has provided over $29.4m toward the development of the electronic conveyancing project".

Although that figure only covers expenditure up to July 2007, the regulatory impact statement shows the government was expecting to spend a further $49.5m on the project between 2007-08 and 2013-14.

The figures contained in the regulatory impact statement indicate ECV could cost the Victorian government $80m by 2013-14. The document shows also it had been planning to spend a significant amount of that money employing contractors and consultants.

It says the state government "has indicated that the full implementation and ongoing operational costs should be recovered from users of the services of Land Victoria".

But it warns that the amount of revenue generated by ECV will depend on how many transactions are processed using the system and it says the expected take-up rate for ECV is 26.5 per cent of all property dealings in 2009-10, rising 69.8 per cent in 2013-14.

The year in which expenditure on ECV would be greatest was expected to be 2008-09 when the system was expected to have cost Victorian taxpayers $9.7m, the regulatory impact statement says.

The year with the smallest government expenditure on ECV was expected to be 2012-13 when the system was tipped to cost $5.7m.

Over the seven years covered by the regulatory impact statement, the biggest single item of expenditure was expected to be "application development and support", which was predicted to cost the state government $18.5m over that period.

This includes the costs of developing and supporting the software that underpins the system and of a contract with what the document refers to as an "application development and support service provider".

Salaries for public servants and contractors working on the project were expected to be $18.1m over the same period. According to the document, 10 contractors were working on ECV in various roles.

"Major items comprise project management, business operations, user acceptance testers and the roll-out team that will train potential users and provide support," the regulatory impact statement says.