11 August 2023

Residential real estate in Canberra is the seventh most expensive of any national capital city in the world1. Canberra has the biggest homes of any capital city anywhere, with median house size being a whopping 36% larger than the city in second place, Cairo2. The now-completed mixed use Republic development in the Belconnen town centre, which attracted Australia’s and the world’s best known architects and financiers, including Fender Katsalidis and Goldman Sachs respectively3, was reputed to have been the largest single apartment project in the southern hemisphere during its construction.

On the commercial side, Canberra’s property investment importance is underscored by the Federal Government’s departmental lease footprint. At 1.3 million square metres, Canberra exceeds the next highest footprint, which is that of New South Wales, by over 150%4. These leases offer Australia’s most valuable, long term, secure lessee covenants. Charter Hall’s government office building acquisitions here in Canberra over the past three years sit just shy of AUD1.2 billion5.

Securing title to such expensive real estate, and doing so safely and efficiently, is a key concern of property investors. In that respect, Canberra’s slow and clunky uptake of electronic conveyancing has not been ideal. Moulis Legal senior associate Caroline Faeh outlines the problems that have been encountered.

National transition to non-paper conveyancing

e-Conveyancing was added to the agenda of Council of Australian Governments (now “National Cabinet”) in 2008. Since then, Australia’s state and territory-based land title registration systems have been transitioning away from paper transactions and towards full online settlement capability. The Electronic Conveyancing National Law, meant to enable “the digital completion of conveyancing transactions including transferring property ownership”6, has been progressively implemented across all jurisdictions.

Land registries of the states and territories have demonstrated different readiness and varying levels of accessibility for electronic conveyancing. Of these, Canberra’s jurisdiction, the Australian Capital Territory, appears to be “in limbo” more than the others, with one foot in the world wide web, and the other still in the wide world of paper.

Utility of electronic conveyancing

When conducting transactions online via an electronic platform, parties, documents, payout figures and funds required to ensure contractual and mortgage compliance and to “balance” a workspace are able to be lodged beforehand and updated as the settlement day progresses. The convenience offered removes the carbon footprint of physical settlements. It is meant to reduce the prospect and actuality of settlement failure through document error and different understandings amongst the many parties of completion requirements and the precise transactions involved (both as to substantive matters and monetary amounts). The obstacles of traditional “bank cheque direction” cut-off times, spelling errors on cheques, and “I’ll just go back to the office to get that document” are removed. If there are any hold-ups or missing details, all parties can see what they are, in the electronic platform, and do something about them. A failure to settle at any given time is not fatal, with the completion time automatically kicking into every next half hour until 4.30pm, unless vetoed by one of the participants. And, moneys are transferred immediately completion occurs.

Interested parties are able to participate and to watch transaction progress in real time. Multiple settlements on the one day can be uploaded into the platform in excel format, saving time and reducing the chance of error. Large developments and refinances can be linked through various workspaces. For example, in our busiest two weeks during the last 12 months, we directed just under AUD100m to mortgagee clients in repayment funds from 264 apartment sales across two residential towers, all without leaving the office.

But, e-Conveyancing is not always e-Z

Despite its usefulness when it does work, our perception of the roll-out of electronic conveyancing in Canberra, in terms of its coverage and functionality, gained from discussions with our interstate colleagues, is that it has been slower than elsewhere in Australia. If a transaction requires more than simply transferring a crown lease or unit lease, discharging a mortgage, and/or registering a new mortgage, the stark collision between the new and the old becomes all too apparent.

For example, the electronic platform does not have the capability to accept a mortgage that has terms exceeding a paltry 500-word limit. Sure, this can be overcome by registering a separate “memorandum of provisions” prior to the scheduled settlement date in person at the ACT Land Titles Office, however not all transactions are at the retail level. Residual stock refinancings more often involve one-off special purpose documents than off-the-shelf consumer mortgages. National Mortgage Form mortgages, designed to standardise registration fields and execution requirements across Australia, must be submitted, in paper, to the ACT Land Titles Office7.

Similarly, fairly regular and always important documents such as caveats, easements, plans and encumbrances cannot be registered online. When a transaction entails more than just a transfer of a leasehold interest and a financial settlement, the parties need to be acting in both the physical and virtual spaces.

Electronic by-products - shoe leather, red tape, and escrow

A transaction that needs to be completed half online and half offline provides interesting and risky challenges. Although electronic registrations are quick, registration of physical documents is much slower, and processing delays in either domain can mean that a party reflected in one document is no longer the party reflected on the titles register. Coordination difficulties are exacerbated by the different operating hours of the electronic platform compared to those of the land titles office itself. Electronic conveyancing computer systems operate 24/7, instantly ensure only digitally correct documents and document details are uploaded, and settle repeatedly up to 4:30pm each working day. In contrast, non-electronic human systems are there to receive documents only during some hours, on some days, and do not accept documents for registration until having undertaken the requisite quality assurance checks.

When construction financiers are paid out and residual stock financiers move in, the timing of outgoing and incoming mortgagee registration is particularly troublesome. As high volume unit settlements continue, the lag between financial close and mortgagee registration causes a mismatch between the details in the platform and those in the transaction documents. In such cases workarounds of varying complexity need to be implemented, such as holding pre-signed physical documents, signing escrow deeds, and coming to internal arrangements between outgoing and incoming mortgagees for funds transfers from “wrong” accounts to the “right” ones.

Improvements on the horizon?

The lack of availability of electronic uptake for key documents, such as the National Mortgage Form, and for many other land title documents, including forms relating to change of name, notice of death, subleases, building covenant restrictions, caveats, withdrawals of caveats and transmissions, causes complexities in conveyancing practice in the ACT. Perhaps, the situation here is not unique when compared to other places, and none of this is meant to reflect poorly on ACT land titles staff, who are always approachable, helpful, and as prompt as they can be. Nonetheless the problems remain. Clients require accuracy and assurance that title is guaranteed, and that their funds are secured – essentially, that they’ve got what they’ve paid for.

Hopefully, additional electronic conveyancing functionality for the ACT is just around the corner. An Access Canberra update, released in November 2022, advised that the first tranche of additionally available documents would be online in May of this year, and would include non-dutiable caveats, withdrawals of caveats, and transmission applications8. This has not occurred as yet, but cannot be too far away. No announcements have been made regarding improved electronic functionality of National Mortgage Form mortgages, which we believe should be a priority.

This memo presents an overview and commentary of the subject matter. It is not provided in the context of a solicitor-client relationship and no duty of care is assumed or accepted. It does not constitute legal advice.

© Moulis Legal 2023