David Wills, the former investment banker in charge of business development at Financial Review Rich Lister Christian Beck’s legal software group InfoTrack, is set to disrupt the $1 billion sales process for electronic conveyancing group PEXA.
Wills is expected to have a soft launch of his e-conveyancing business, which is being built in partnership with the ASX, in the next month. That will be perfectly timed to put a spanner in the works of plans by four state governments, the big four banks, Macquarie and other shareholders to sell PEXA for $1 billion plus.
PEXA is going through a dual track process with either a trade sale or an initial public offering. Potential trade buyers include Link Administration, which already owns shares in PEXA, Canadian electronic registrations company Teranet and private equity funds.
PEXA’s chief executive Marcus Price says he is not afraid of competition and he will welcome any new entrant to the market. But when potential trade buyers receive a flyer this week spruiking the opportunity to buy PEXA they will be asking lots of questions about the end of the company’s monopoly.
Chanticleer understands it will take quite a few months for InfoTrack and ASX to offer a full range of services in competition with PEXA but it will be talking about its product offering soon.
But Wills has yet to jump the first hurdle which is being licensed by the industry regulator, the Australian Registrars’ National Electronic Conveyancing Council (ARNECC), as an Electronic Lodgment Network Operators (ELNO).
The ELNO licence application process has been drawn out for far too long but Chanticleer believes that reflects the lack of experience at ARNECC and the uncertainty over the inter-operability between new entrants and PEXA.
PEXA spent years building its systems and in the process it had to abide by national data standards. It is now up to ARNECC to ensure that it is possible for new entrants to connect with PEXA and ensure a level playing field.
Price says that PEXA has not been standing in the way of InfoTrack/ASX obtaining a licence.
ARNECC, which was formed under an Intergovernmental Agreement in 2011 for the purposes of co-ordinating a national approach among the states and territories to the regulation of an electronic environment for completing conveyancing transactions, is headed by Jean Villani, who runs Landgate, which is responsible for land titles in Western Australia.
Villani said in a statement to Chanticleer on Wednesday: “The amount of time to process an application will vary on a case by case basis”.
Australia’s global leadership in electronic conveyancing has brought with it unique regulatory and technical problems not to mention strong resistance from those forced by government mandates to deal with the current monopoly e-conveyancing business, PEXA.
Villani has found herself constantly pushing back against claims that her dual role as head of Landgate and principal regulator creates a profound conflict of interest.
“There is no conflict of interest,” she told Chanticleer. “The Registrar of Titles is a statutory role and has a duty to act independently in protecting property interests in Western Australia.”
However, the dual roles of Villani and the other Land Titles Offices in NSW, Victoria and Queensland have been a source of intense criticism by those who believe PEXA’s monopoly is not good for users of the system.
There are essentially four criticisms which have been levelled at PEXA this year by its critics.
Providers of manual conveyancing services in NSW have rallied behind solicitor David Buxton to force the NSW government to rethink its timetable for mandating the use of electronic conveyancing in the state.
Buxton started a grassroots protest campaign and has attracted 500 signatures from solicitors and conveyancing specialists in NSW. He is pressing the NSW minister for finance, services and property, Victor Dominello, to delay the mandated introduction of e-conveyancing for four way property transactions until there are at least two providers.
Buxton has also called for an independent review of the e-conveyancing industry. He says e-conveyancing should not be compulsory until at least 70 per cent of all four party transactions are reached online.
Buxton says that the fact that only about 10 per cent of four way transactions are conducted through the PEXA platform shows that users do not like the system or believe it is more efficient than the paper-based approach.
Price says there will always be resistance to change. “Anyone who thinks a massive change like this will be like a dog rolling over and having its tummy scratched needs to think again,” he says.
But Buxton’s increased pressure on the minister in NSW echoes exactly what happened in Western Australia. It is clear from the successive delays in the mandating of four-party property transactions in WA that Villani moved too aggressively to force people to use PEXA.
WA had mandated four party transactions should start from December last year. It delayed this until May after being convinced it would cause a train wreck. The May deadline was pushed out to December when it became obvious it would cause disruption to the transaction of property.
No state government would be dumb enough to disrupt one of its biggest taxation money spinners in order to earn a profit on the sale of a fast growing business like PEXA.
Villani says the move to e-conveyancing has not been too fast for the industry to cope.
“The transition to e-conveyancing has been gradual, with the first electronic lodgement in Australia taking place in 2013,” she said.
In NSW the government has mandated a deadline of the middle of next year for four way transactions. There is an August deadline for stand alone property transactions.
Another major criticism of PEXA has come from solicitors forced to put up with technical glitches and crashes. A solicitor involved in large scale property transactions has been forwarding system outage alerts to Chanticleer for some time and they have been frequent.
A more damning criticism of the PEXA system came from a group of the country’s leading law firms involved in large residential property developments. Solicitors involved in selling apartments off the plan reckon PEXA is 10 times less efficient because it does not allow bulk signatures for electronic documents.
This glitch in the system will be fixed within the next two months, according to Price. He says fixing the problem required changes to the rules covering document authorisation.
It is early days but ARNECC’s role as the regulator of the industry cannot be assured. The property market is too important to the economy to be entrusted to an ecosystem that is unused to independent oversight.
The removal of the conflict between state government owners and PEXA will be welcomed. But it should only happen after the market is competitive.