My guess would be that the LRS are incorrectly advising you that it is a PEXA issue.
My understanding is the LRS have to verify the validity of titles to provide the correct information to PEXA. So the PEXA workspace would be 'asking' the LRS to search their registry for the title reference, and once the reference is 'found' the LRS registry sends back the particulars (registered proprietor, dealings etc). It would only not be valid for electronic transactions if the LRS did not have their system updated (like with pre-2004 Titles).
I would start by checking the LRS Online 'Find Records - CT enquiry" to make sure the LRS website has the right edition details for your CT, and if not go back to LRS and ask them to update their system to the correct details ?
If the LRS Online shows the correct details, then maybe it is a PEXA issue (but I don't know what the issue would be - PEXA doesn't care how the proprietor came in to possession of a title) or perhaps there is a limitation on your client's title.
Either way, I would be interested to know the outcome of this issue.