Costly delay on e-conveyancing

Chris Merritt, Legal affairs editor | March 20, 2009

Article from: The Australian

FEDERAL and state governments have decided to delay the national rollout of electronic conveyancing in a move that is set to wipe out cost savings for homebuyers worth hundreds of millions of dollars.

The decision, which follows eight months of inaction by state governments, will put back the start date for e-conveyancing by almost two years.

Instead of introducing e-conveyancing nationally by March next year, all governments have decided that the new system should now be made available by the end of 2011.

The delay of up to 21 months means governments have abandoned the schedule announced last July by Kevin Rudd and Finance Minister Lindsay Tanner.

At the time, the Prime Minister and Mr Tanner said the annual cost savings associated with e-conveyancing had been estimated by industry groups to be worth $250 million.

Based on that figure, a delay of 21 months could wipe out $437.5 million worth of cost savings on property transactions.

In November, Mr Rudd said e-conveyancing could save homebuyers hundreds of dollars on every house they purchase.

The delay, which is understood to have been caused by the states, has triggered urgent talks between Mr Tanner and representatives of the Law Council and the Australian Bankers Association.

Solicitors and bankers, along with non-lawyer conveyancers, are the key players in most property transactions.

Mr Tanner put pressure on the states last week to move faster on e-conveyancing. "I have recently met both the Australian Bankers Association and the Law Council of Australia and both have expressed a strong desire for more rapid implementation of electronic conveyancing," Mr Tanner said.

"I have just written to state and territory treasurers asking them to consider the possibility of earlier implementation and asking for advice as to whether that would be feasible in their jurisdiction."

Law Council president John Corcoran said the e-conveyancing project had been plagued by setbacks and the latest delay meant "we are back to square one".

The Australian Bankers Association warned the new plan meant there would be an 18-month hiatus before the states created the organisation that will run the national e-conveyancing system. "If we lose momentum in the current environment, it might be very difficult to get key stakeholders back into the process," said Ian Gilbert, the ABA's director of retail regulatory policy.

Details of the delay are contained in an implementation plan for the reform of 27 key areas of the economy that has just been made public by officials of the Council of Australian Governments.

The original timetable, which was published after last July's COAG meeting, had required the states to take five key decisions before the end of this month about the organisation that will run the national e-conveyancing system. None of those decisions have been taken.

In July, the states failed to meet their commitment to agree during that month on the form that the new organisation would take.

In October they failed to meet a commitment to settle and sign a governance agreement that month concerning the new entity. They also failed to agree on how the new entity would be funded.

In December, they failed to meet a commitment to establish the new organisation and appoint its board.

This month they failed to reach agreement on nationally uniform business processes for the new entity.

Under the revised timetable, these decisions are now due to be taken between the middle of 2010 and September of that year.

But concerns have already emerged that the delay in establishing the new organisation -- and a lack of seed funding -- might make it difficult to meet the revised start date of late 2011.

The development of a national system has now been incorporated into a broader COAG project for the development of a "seamless national economy".

The states are to receive up to $550 million from the federal Government for introducing reforms in 27 areas covered by the agreement. Most of this will be paid to the states after they make the reforms. But $100 million will be made available as a "facilitation" payment this financial year.

Because the e-conveyancing body is not due to be established until September 2010, it will be too late to gain access to the Government's $100 million.

The COAG agreement provides a strong financial incentive for the states to make progress on 10 priority areas listed in the agreement.

E-conveyancing is not among them.

If the states again fail to meet their commitments on the e-conveyancing project, they could still receive their full reward payments from the commonwealth so long as they make progress in the other areas covered by the agreement.

The ABA's Mr Gilbert said creating the new organisation by September 2010 and giving it 12 months to introduce the new network "is an extremely ambitious thing -- particularly where there has been little work done in the interim".

He was also concerned the federal Government had decided not to provide any "seed money" for the new organisation and was leaving its funding to the states.

"Seed funding is absolutely essential," Mr Gilbert said.

"You cannot set up a company and have it conduct business, including hiring contractors and remunerating staff, unless it is absolutely certain of its funding sources.

"If this was addressed now by the commonwealth putting in the seed funding, there would be no reason why the steps to set up the entity could not be expedited.

"We could see that entity in place in a matter of months, rather than 18 months," Mr Gilbert said. The Law Council's Mr Corcoran said the most alarming aspect of the new approach was the requirement that funding for the new organisation would depend on the states reaching agreement.

"This is exactly where we were in 2005," he said. "We see this as a very backward step."

The COAG agreement also shows that federal ministers are to have less responsibility for overseeing the introduction of e-conveyancing.

Last July, all governments had agreed that responsibility for overseeing the implementation of the new system should be vested with COAG's business regulation and competition working group.

This group is co-chaired by Mr Tanner and Small Business Minister Craig Emerson.

But the latest COAG agreement makes the introduction of e-conveyancing a state responsibility.

The agreement says the states and territories will have responsibility for working with each other and the commonwealth to implement a co-ordinated national approach on e-conveyancing and several other areas.

Those areas that are commonwealth responsibilities are listed separately.

However, Mr Tanner and the BRCWG are expected to continue to have a role in checking the timetable is carried out.

Australian