12 months ago, the question “What is a settlement?” would have been a relatively easy question. For the past 150 years when completing a property settlement, it has been necessary for lawyers and banks to meet up to exchange documents and hand over cheques. The party that ended up with the documents then had to lodge them at the Land Registry Office who then notified government authorities of the new registered proprietor’s details.
Many of you would have been involved in a settlement where they were selling one property and buying another, and the settlements had to occur simultaneously (had to be finalised before you were able to get the keys to your new home).
This question, however, is now far more complicated and complex with the privatisation of the Land Titles Office (or Land Registry Services as it is now known) and the introduction of e-settlements. A settlement can now be any number of confusing physical and/or electronic systems. Here at InfoTrack, we try to offer new products and services that support the industry as settlements become more complex.
So, buckle up readers, things just got interesting!
WHAT HAPPENS ON SETTLEMENT DAY FOR A PHYSICAL SETTLEMENT?
A property settlement is a process that involves your legal and financial representatives and those of the seller (in general, simple cases), ownership then passes from the seller to you. These representatives attend the settlement. They ensure all the documents are correct and the cheques drawn are disbursed as required.
Your lender will:
- register a mortgage against the title of your new property;
- provide the funds to purchase the new property, and;
- register the property in your name.
Your agent, solicitor or conveyancer checks that:
- any existing mortgage on the title to the vendor is discharged;
- any third party or person who has rights over the property (a caveat) is removed;
- all clauses on the sales contract are fulfilled;
- ensure stamp duty is paid on or before settlement, and;
- they do a follow up after settlement to ensure your bank has registered the title.
The transfer of land and mortgage is registered with the title office in your state or territory.
Just make sure you’ve had an opportunity to complete a final inspection of the property.
WHAT HAPPENS AFTER A PHYSICAL SETTLEMENT?
After the settlement, your lender will draw down on your loan; this means that they’ll debit the amount they’ve paid at settlement from your loan account then attend to have the title registered in your name. The seller is responsible for rates and other council fees up to, and including the day of settlement, but after this, the purchaser needs to pay these costs – the Notice of Sale or eNOS (for electronic versions) advise the council of these changes. These forms are handed over to the LRS when registering the transfer and title. Once settlement is completed, you can collect the keys from the agent and take possession of the property. It’s time to move into your new home at last, and start paying off that mortgage!
WHAT HAPPENS AT AN e-SETTLEMENT?
Now… we come to the new way to complete a settlement, electronically via an e-settlement platform such as Sympli, Australia's newest e-settlement platform.
How does it work? What are the risks?
Well, to start the whole process your Solicitor/Conveyancer will create a workspace on your e-settlement platform, upload the party’s details, create an electronic version of the documents, i.e. Transfer, Consent, NOS, etc., and invite the other side into the workspace. If you have a discharging or incoming bank, they too will be invited. All parties in the transaction play a different role, and each one of them needs to input their information into the workspace. If no banks are involved and the purchaser is a cash buyer then the purchaser is required to deposit funds into your e-settlement platform source account and, these funds need to clear before the settlement can proceed. Completing an e-settlement is pretty much a step by step process and won’t allow you to proceed to settlement if all steps have not been completed. Once all steps have been completed the workspace status will click over to “ready,” which indicates that settlement is ready to proceed.
The following 7 steps provide an outline of the settlement process and the information provided in the Workspace Summary:
Step 1:
- The workspace must be in “READY” status before settlement time.
- All documents must be signed.
- Financial Settlement Schedule must be signed and balanced.
Step 2:
At settlement time, the following happens:
- The Workspace locks.
- The Financial Settlement Status moves to Settling.
- If a trust account is involved, a Source Funding instruction is sent to the bank.
- Once Source Funding is complete, reservation is sent to the RBA (runs every 2 minutes).
Step 3:
- Once an RBA Reservation is received:
- Lodgement Request is sent to the Land Registry.
- Lodgement status moves to Lodging.
Step 4:
- Once Lodgement is complete, the Lodgement status moves to Lodged.
- Note: The Land Registry will commence reviewing documents.
- Once Lodgement status is Lodged, Settlement Response is sent to the RBA (runs every 2 minutes).
Step 5:
- The RBA will send a response once the Settlement Request has been processed.
- When the Settlement Response has been received Financial Settlement status will move to Settled.
Step 6:
- Once Settlement at RBA is complete, disbursement will commence, Financial Settlement status moves to Disbursing. Disbursement batch runs every 10 minutes.
Step 7:
- When the Land Registry has completed reviewing the documents and has provided a final status for the documents (e.g. registered or rejected) the lodgement status will move to Completed.
- When all banks involved in settlement have returned Disbursement responses, the Financial Settlement status will move to Disbursed.
Hopefully, these tips can be your secret weapon for improving how your lodgements & settlements are conducted, smooth out any rough patches and maybe even make your office a better place to work!
Don’t forget that InfoTrack can also take care of all your lodgement needs, both manually & electronically as well as settlements. No job is too big or small. So, what are you waiting for? Contact the SettleIT team today.
(NSW) 02 9099 7490 | (VIC) 03 8609 4750
