Online conveyancing may have been embraced by the property industry but the move to a paperless future has not been seamless and serious challenges now lie ahead.
First, the national e-conveyancing platform PEXA (Property Exchange Australia) was hacked in both a major and – unfortunately for PEXA - high-profile manner. Masterchef finalist Dani Venn and her family saw $250,000 from the proceeds of their June 2018 home sale disappear after hackers misdirected the funds into their own account. While PEXA maintained it had not been compromised, as the breach occurred when the hackers accessed the email account of a Victorian conveyancer used by Ms Venn, a cybersecurity clampdown for the platform swiftly followed.
A few months later, PEXA was unable to secure the support required for an IPO and was eventually acquired by Link Group and partners Commonwealth Bank of Australia and Morgan Stanley Infrastructure Partners. (PEXA, established in 2013, was previously owned by the NSW, Victoria, Queensland and Western Australian governments, alongside the big four banks, Macquarie Group, Link Group and Paul Little.)
Now the market has again attracted attention - this time from the competition watchdogs concerned about a monopoly.
Under the spotlight
In the 2019 final quarter the Australian Consumer and Competition Commission (ACCC) released an e-commerce market reform paper as part of its general focus on “regulating national services, infrastructure and markets with limited competition or natural monopoly characteristics”.
No-one is denying improvements brought by the introduction of e-conveyancing: average time saved per transaction is 7.5 hours which translates into less time spent on the road and tied up in administration. PEXA has also evolved via improvements such as PEXA Plus – a gateway that speeds up online property transactions by allowing members to manage multiple property settlements on a single dashboard, thus giving them more time to focus on customer service and growing their businesses. In short, e-conveyancing is slicker, sleeker and (now) more secure. PEXA has been growing quickly assisted by some states mandating use of the platform for nearly all conveyancing transactions.
Peter Nugent, Brisbane-based partner at national law firm Holding Redlich, says PEXA is the sort of innovation that carries big implications for its market. While the system has “compelling benefits for pretty much everyone”, Mr Nugent also points out that challenges lie ahead in its execution as well as maintaining cybersecurity as the platform evolves.
“The ACCC says that e-conveyancing is a valuable service that is now at a crucial point in its evolution,” Mr Nugent says. “If you think about the links between online real estate sales, electronic contract exchange and electronic completion, the conveyancing process will experience revolutionary changes providing greater security at much lower costs.
“Yet without market reform, the likely outcome is that PEXA will become a monopoly provider with the double whammy of high-costs and a loss of innovation in this important new area. The next big step is for regulators to knit this together by mandating sensible presales disclosure and fair and balance contracts.
“Interoperability between competing platforms is an important goal for regulators. However, it will be vital to ensure that the programming interfaces are not an opportunity for hackers.
“The various states now have to decide on whether to implement a collective response. The importance of getting this right cannot be understated. Fundamentally, e-conveyancing has to be secure and reliable or it needs to be abandoned.”
Mr Nugent’s comments reflect the ACCC’s report’s blunt observation: “The current uncertainty facing the e-conveyancing market needs to end. In light of the mandating of e-conveyancing and the emergence of competition in various state jurisdictions, the regulatory framework for e-conveyancing in Australia is no longer fit for purpose.”
Decision makers must support the market’s transition to competition - otherwise we would be left with the sub-optimal situation of a monopoly requiring robust regulation and less opportunity for innovation, lower costs and improvements.
The ACCC supports a national approach regulated by ARNECC (Australian Registrars' National Electronic Conveyancing Council) but time is of the essence, the report stating: “Given the urgency… the ACCC believes that if a national approach cannot be achieved soon then individual states and territory governments will and should progress their own preferred approach. It would be preferable that some markets rather than none benefit from facilitating competition.
“Over time, other jurisdictions could replicate the developed pro competition market model.
“The ACCC encourages action be taken now by ARNECC and each state and territory’s relevant policy makers. The ACCC is concerned that further delays in progressing the development of an appropriate market structure will fragment the national market and/or entrench a monopoly service provider model.”
Read the entire ACCC’s e-conveyancing market reform paper