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How the National Electronic Conveyancing System (NECS) will work

The proposed NECS focuses on the lodgment and settlement stages of conveyancing.  Using NECS, practitioners would electronically:

  • prepare dealings and related instruments to register changes in ownership and interests
  • settle financial transactions (including payment of duties, taxes and any disbursements)
  • lodge their dealings with the appropriate Land Registry
  • receive confirmation of dealing lodgment and registration.

Below is an overview of the Model, covering: 

Click here to download the full National Business Model which  sets out how the NECS could work. The Model has been discussed by the National Consultation Forums in depth to ensure it works for practitioners and government alike. 

Click here to go to a set of pdf fact sheets about the NECS.



NON-SETTLEMENT TRANSACTIONS
 IN NECS

A "non-settlement transaction" is the lodgment of a dealing with a Land Registry where there has not been a financial settlement between the parties to that dealing.

Preparation

As happens now, a client involved in a property transaction will engage a lawyer or conveyancer to represent the client in the transaction. The lawyer or conveyancer will be a subscriber to  NECS.  Subscribers can certify and sign instruments and settlement instructions on behalf of their clients.

The subscriber creates a workspace with NECS for the transaction. This will be done via the Internet. The subscriber may choose to use the services of a Licensed Service Provider but can access NECS directly. The subscriber enters the jurisdiction, title references and the instrument type required. NECS then retrieves the relevant information recorded with the jurisdiction’s Land Registry and populates the workspace with that data.

The subscriber confirms or changes the information as necessary, and provides any other information required. Once this is done, NECS presents a formatted instrument and requests the relevant certifications and signing on behalf of the client. A subscriber then uses a digital signature certificate to certify and sign the instrument.

NECS verifies that the digital signature matches the subscriber, and if necessary, that the subscriber is qualified to make the certification. If verification fails, the subscriber is prevented from certifying and signing the instrument.

Lodgment

After being verified by NECS, the instrument is sent to the Land Registry for lodgment. The workspace remains available for 90 days to make any changes or re-lodgments necessary as a result of any requisitions raised by the Land Registry.

On receipt of the instrument the Land Registry verifies the digital signature, the accreditation status of the subscriber, the integrity of the data in the instrument. If any of these verifications fail, the Land Registry will  not accept the instrument for lodgment and NECS is notified.

The subscriber is notified by email when the instrument is registered or a requisition is raised. NECS is also notified and the information is added to the workspace. Following registration, the instrument is made available by the Land Registry for public searching.

Payment of fees

NECS will require the subscriber to nominate the method of payment of any fees, taxes and duties, as there is no electronic settlement to facilitate such payments. 

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SETTLEMENT TRANSACTIONS IN NECS

Preparation

Preparation of instruments using NECS follows the same steps as for non-settlement transactions (see above). While more than one subscriber may access the workspace in non-settlement transactions, there will invariably be multiple subscribers sharing the workspace in a settlement transaction. 

When a purchaser is obtaining finance for the transaction, the financial institution supplying the funds will need to certify the availability of pre-approved funds. Financial institutions do this via a subscriber accessing the NECS workspace and completing the NECS requirements for pre-approved funds certifications.

Once all the instruments and instructions are certified and signed, NECS moves on to settlement.

Settlement

At the agreed time for settlement, NECS asks the relevant Land Registry to confirm that the instruments are acceptable for lodgment. Once this is confirmed, the Land Registry records that a settlement is imminent. This has the effect of preventing registration of any other instruments.

NECS assembles a schedule of confirmed settlements which includes all the payments to and receipts from individual financial institutions in the batch. NECS then passes this schedule to the Financial Settlements Manager (FSM) with instructions to settle.

The FSM then completes the financial settlements and notifies NECS that the settlement was successfully completed. 

Lodgment

Once NECS has received the confirmation from the FSM that the batch has been settled, NECS forwards the instruments to the relevant Land Registry for lodgment. The Land Registry verifies the instrument and then proceeds with its normal processes for lodgment, examination and registration. If the verifications fail for an instrument, NECS is notified. 

The Land Registry notifies NECS and the subscribers of successful registrations.

Payment of fees

All fees, taxes and duties that have not been paid prior to settlement are also provided in the financial settlement as disbursements. 

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NECS BUSINESS RULES

The business rules for NECS are the key to making the NECS work. They have been the main topic of discussion throughout the 2006 consultation phase leading to the confirmation of the National Business Model by the National Steering Committee in March 2007 for implementation in the following years. 

The business rules are structured in sets, in order to separate requirements which are specific to individual jurisdictions from the requirements which are common to all.  The sets are:

  • Registration of NECS users (including subscribers)
  • User administration and support
  • Registration and authentication of subscribers
  • Assembly and execution of financial settlements
  • Creation and handling of instruments on behalf of Land Registries
  • Ensuring a Land Registry’s requirements for instruments are satisfied
  • Ensuring a Revenue Office’s requirements for duty and tax compliance are satisfied
  • Ensuring fees, taxes and duties are collected

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RISK MANAGEMENT IN NECS

The correct allocation and management of risk is critical to the success of NECS. The NECS design is based on, as far as possible, maintaining the existing risk allocations and management philosophies in the paper-based conveyancing and settlement processes. 

To ensure that all aspects of the issue are carefully considered in building the NECS, a comprehensive risk assessment and regulatory review of the Business Model has been undertaken. Risk allocation and management will be key topics of discussion by industry and government members of the Consultation Forums.

The risk assessment recommended a risk management regime consisting of:

  • Risk Mitigation Measures: these consist of each role minimising its risk exposures through adequate and well documented practices and procedures.
  • Risk Transfers: these primarily involve a comprehensive set of participation rules implemented as bilateral contracts between Subscribers and the NECS and back-to-back indemnity arrangements with service providers to the NECS.
  • Liability Insurances: these involve Subscribers, and some Certifiers, having adequate professional indemnity cover and the NECS securing market insurance for its residual risk in any transaction.  A fallback position, if NECS is unable to obtain market insurance, is a compensation fund separate from each of the jurisdiction's existing Torrens Assurance Funds.

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WHAT NECS DOES NOT COVER


The proposed NECS does not cover:

  • preparation and exchange of contracts for sale
  • pre-settlement investigations
  • procurement of any insurances required by purchasers
  • creation of loan documentation
  • processes for examining and registering instruments once lodged with a Land Registry.

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