on 06-09-2018 02:15 PM
I'm trying to determine whether a problem faced in a manual settlement can be avoided by settling via Pexa. This issue is one that I'm sure most practitioners are familiar with:-
We act for Mr & Mrs Singh who wish to purchase a NSW property from Mr & Mrs Smith. There is a Mortgage over the property held by ABC Bank, Mr & Mrs Smith own the property as Joint Tenants. Mr & Mrs Smith have separated, a Transfer has recently been signed by the Registrar pursuant to a court order transferring all of Mrs Smith's interest in the property to Mr Smith. A Discharge of Mortgage application has also been signed on behalf of Mrs Smith. The Transfer of the property in to Mr Smith's name cannot be registered prior to settlement of the sale. Mr Smith lacks the financial capacity to complete the re-finance that would be necessary to transfer the joint bank accounts secured by the property in to his name only. The sale proceeds are sufficient to pay out all of Mr & Mrs Smith's loans in full. Mr Smith's solicitors have requested that Mr & Mrs Singh accept two Transfers on settlement, the Transfer from Mrs Smith to Mr Smith and a subsequent Transfer from Mr Smith to Mr & Mrs Singh as Joint Tenants. Mr & Mrs Singh are happy with this arrangement in principle, however, XYZ Bank is an incoming mortgagee who, like many lenders, refuse to accept multiple Transfers on settlement as they have no recourse against Mrs Smith in the event that there is a problem with the first Transfer. Mr & Mrs Singh can't afford to settle without the assistance of a lender.
I'm wondering whether this problem can be solved by settling on Pexa, either by:-
1. having a single workspace including all parties and both Transfers; or
2. having two workspaces linked to settle simultaneously:
a) one workspace for the transfer from Mrs Smith to Mr Smith; and
b) one workspace for the financial settlement between Mr Smith and Mr & Mrs Singh including the second Transfer between those parties.
Any advice on whether one or both of these options is possible/preferable would be appreciated.
I'm also interested to hear opinions on whether practitioners think that XYZ Bank will accept this situation in an electronic format? I suspect it should be fine as their interests are considerably protected versus a paper settlement. Obviously I will also contact the bank.
I've yet to do a standalone Transfer without a financial settlement and am also unsure about Mr Smith's solicitors responsibilities with regard to electronically transacting the paper Transfer they've been provided by the court. Are they allowed to create that document electronically? They don't act for Mrs Smith, do her solicitors need to be involved in the process? Does someone need some manner of econveyancing authority signed by the registrar in order to create this document and electronically sign it on behalf of the court? Is there a VOI obligation with regard to Mrs Smith? Do Mr Smith's solicitors have an obligation to retain the original Transfer document signed by the registrar following settlement in case of some manner of audit?
Just to add a few monkey wrenches to the above situation, our clients' actual situation is further confused by the following points:-
- This NSW property actually comprises 7 lots in various DPs.
- Three of the lots each have a single caveat lodged on them, the three caveats were lodged by the same party but with separate dealing numbers. These caveats will be withdrawn on settlement.
- There is one Mortgage from ABC Bank over all 7 lots.
- There are two other Mortgages from ABC Bank variously registered over several of the other lots.
- My (limited) understanding is that the above points don't affect the ability for this matter to take place in a single workspace as long as there is a single dealing in that workspace which links all of the lots (in this instance the Transfers and the Mortgage)?
- Additionally, some of the lots are variously Qualified or Limited Titles, I'm not sure whether that affects their ability to be dealt with electronically?
I realise there's a lot of information to deal with above, if anyone's willing to give some of it a crack it would be appreciated. Our clients have not yet exchanged, we obviously want to first ensure that they will be able settle.
on 11-09-2018 03:02 PM
My understanding of the scenario is as follows.
(A+B) as Joint Tenants transfer to A as Sole Proprietor
A, as Sole Proprietor transfers to (C+D) as Joint Tenants.
The Property is comprised of 7 lots.
One Mortgage from ABC encumbers all 7 Lots
An unknown number of other Lots are encumbered by a second Mortgage (one or more) from ABC bank
Three Lots are encumbered by Caveats
There is a question if all of the Lots are eligible for electronic lodgement.
If I am correct with the above then:
Please let me @GeorgePolus know if you need more information.
on 11-09-2018 03:26 PM
Thanks @GeorgePolus for taking the time to reply.
The incoming mortgagee has agreed to take both Transfers at a manual settlement so this is now purely academic.
With regard to your point 1, I'm still interested to know whether we're allowed to create/sign that Transfer on behalf of the court?
Presumably the problem you outline in point 1 is ameliorated by the creation of two workspaces (or a split workspace) where A&B can transfer the whole 1/1 of their interest in the property to B as a sole proprietor. Obviously this can only be done in the situation where we're acting for both parties. Or, potentially, when we're able to create both parties on Pexa pursuant to Court Orders?
on 11-09-2018 04:18 PM
If the court has ordered that (A+B) transfer to B, then this transfer may be completed in PEXA (however the issue below will arise). Both A+B need to be represented and a non monetary transfer citing Court Order specified. NSW LRS require no evidence of the Court Order. Also, the signatory for your firm will be signing on behalf of A + B under a CAF. the signatory for your firm will not be signing on behalf of the court.
This transaction (despite the issue below) could be performed in PEXA today, provided you speak with SRO and they allow it through. SRO NSW are most helpful and co-operative regarding the issue below.
To clarify the issue we have at present (which will be rectified in Feb 2019 (R9.10):
The issue with the Transfer from (A+B) to B would present itself in a single transfer Workspace also.
The problem is, due to a misalignment between PEXA and the NSW OSR and arises ONLY when a Party on title is receiving in addition to their current holding. (A+B) transfer to B (B on title having 1/2 and following transfer has 1/1 however they received in this transfer only 1/2)
Until we rectify this issue in Feb 2019, PEXA will advise NSW OSR that B is receiving 1/1 and not 1/2 in this example.
Please let me @GeorgePolus know if you have more questions.