PEXA electronic settlement for Victorian buyers: what happens on the day
Settlement is set for 2pm next Tuesday. You have had your offer accepted on a townhouse in Officer, the contracts are signed, and your conveyancer’s last three emails have all mentioned PEXA. You nodded along each time without asking what it meant. Now it is three days out and you have no idea what is about to happen.
Here is what PEXA is, what happens at 2pm on Tuesday, what you need to do (and not do) on the day, and what the warning signs look like if something goes off track. The article is for buyers across the Pakenham to Warragul corridor who already have a conveyancer, but sellers face the same workspace and the same questions.
What PEXA is in plain English
PEXA stands for Property Exchange Australia. It is an Electronic Lodgment Network used for Victorian property settlements. In Victoria, the Registrar of Titles requires specified conveyancing instruments to be lodged electronically, subject to applicable exceptions. PEXA is not the only Electronic Lodgment Network operating in Victoria.
That is the short version. The long version sits behind the Electronic Conveyancing National Law and the rules that the Australian Registrars’ National Electronic Conveyancing Council (ARNECC) and Land Use Victoria publish. You do not need to know any of that to settle. Your conveyancer does.
What happens inside the PEXA workspace on settlement day
For transactions completed electronically, settlement does not require a physical settlement room or the physical exchange of bank cheques and transfer documents. Limited circumstances in which transactions are dealt with outside the ordinary electronic process still exist.
The days leading up
In the lead-up to settlement, the parties’ representatives open or join the electronic workspace and the relevant lenders participate as required. Under the current standard LIV/REIV contract, the vendor is responsible for opening the electronic workspace as soon as reasonably practicable. Transfer, mortgage and discharge instruments and the financial settlement details are then prepared for settlement.
- The transfer of land
- Discharge of the seller’s mortgage and registration of the buyer’s new mortgage
- Land transfer duty is assessed or finalised through the State Revenue Office’s Duties Online process. Verified duty information is then sent electronically to the Electronic Lodgment Network before settlement.
- The settlement statement, with rate adjustments for council rates, water and any owners corporation fees
Settlement figures are normally prepared and finalised before the scheduled time, but changes can require documents or the financial settlement schedule to be updated and re-signed. PEXA currently makes financial settlement in Victoria available from 9.30 am to 5.30 pm Monday to Friday, subject to its published holiday exclusions and reduced operating hours.
On settlement day
Before the scheduled settlement time, the participating representatives and lenders complete the required documents, signatures and financial settlement information so that the workspace is ready.
At the nominated time, if the required readiness steps have been completed, the settlement process proceeds and the workspace locks. The participants do not ordinarily wait until the scheduled time to log in and sign all of the settlement documents.
Financial settlement then occurs electronically in accordance with the payment directions in the workspace. Incoming lender funds and any required purchaser source funds are applied to the required settlement destinations, which can include the seller’s mortgage payout, transfer duty and other statutory payments or withholdings, and the seller’s proceeds. A deposit still held by an estate agent, lawyer or conveyancer as stakeholder is dealt with under the contract and applicable trust or deposit arrangements and does not necessarily pass through the PEXA financial settlement.
After financial settlement, the transfer and any associated mortgage or discharge instruments are lodged electronically with Land Use Victoria. Registration is a separate land-registry step. Many standard electronic transfers are registered very soon after lodgment, but registration is not guaranteed to occur at the exact moment financial settlement completes. Once settlement is confirmed, keys are ordinarily released in accordance with the contract or the parties’ arrangements.
What you need to do (and not do)
- Be reachable by phone for the hour either side of settlement.
- Do not move settlement shortfall funds or change source or destination account instructions without first speaking with your conveyancer or lender. Independently verify any changed bank details through a secure channel before acting on them.
- Confirm with the selling agent the day before how and when the keys will be released. The agent hands the keys over once they have confirmation that settlement has completed. PEXA itself does not handle keys.
What can go wrong with a PEXA settlemen
Electronic settlements are reliable, but they are not bulletproof. The shift from paper to digital removed a lot of manual handling errors. It also removed the slack that used to exist for last-minute fixes. Most of the failure modes in a PEXA settlement come down to one party not being ready in the workspace at the agreed time.
- The other side has not signed. The seller’s conveyancer has not uploaded a document, or has not signed off on the figures. Settlement waits until they do, or it gets pushed to the next business day.
- Your lender’s funds are not in the workspace. The bank’s PEXA team has not released the loan in time. Often resolved within an hour, sometimes longer if the bank’s queue is backed up.
- An identity or authority requirement is incomplete. If required verification of identity or Client Authorisation has not been completed, the practitioner may be unable to sign or lodge the electronic instruments and settlement may be delayed.
- A title or lodgment issue appears at the last minute. For example, a newly lodged caveat or other title activity may prevent or complicate the proposed dealing. Separate adjustment issues, such as changed council-rates figures, can also require the settlement statement to be corrected before settlement.
- The system has an outage. Rare, but it happens. PEXA publishes a system status page and your conveyancer will be tracking it.
If settlement cannot complete at the scheduled time, the workspace may be rescheduled later that day if the parties, lenders and systems become ready. Different consequences can apply if settlement still does not occur. Under the current standard LIV/REIV electronic-settlement condition, the next-business-day mechanism applies in circumstances arising after the workspace has locked; it is not a general grace period for a party that is not ready to settle. Default interest depends on the particular contract and whether a party is in default.
Why electronic settlement is now the default in Victoria
Victoria’s move to electronic lodgment was not simply a matter of practitioner preference. Under section 106A of the Transfer of Land Act 1958 (Vic), the Registrar of Titles determines which instruments must be lodged electronically by relevant subscribers, subject to applicable exceptions. PEXA is one Electronic Lodgment Network through which electronic conveyancing transactions can be completed.
Here is what changed.
| Element | Paper settlement | PEXA settlement |
|---|---|---|
| Where settlement happens | Physical settlement room | Online workspace |
| Funds | Bank cheques exchanged in person | Cleared electronically same day |
| Title transfer | Days to weeks for Land Registry processing | Instruments are lodged electronically after financial settlement; many standard transfers register very soon after lodgment, but registration timing can vary. |
| Late changes | Possible to wave through at the last minute | Required documents, signatures, funds and readiness checks must be complete before settlement can proceed. |
The trade-off is that electronic settlement is less forgiving of last-minute issues. Everything sits inside a system that will not proceed until each step is properly complete. That puts more weight on the conveyancing work that happens before settlement day, which is where the difference between a smooth settlement and a delayed one usually gets decided.
Conveyancing Today has been a PEXA member firm since before the 2019 mandate, and we run electronic settlements every week for buyers and sellers from Berwick through to Drouin.
One thing most buyers do not hear about until settlement week
PEXA Key is a free app for buyers and sellers. It provides a secure way to share and receive bank account details with a conveyancer or lawyer and includes settlement guidance, tracking information and checklists. Your conveyancer or lawyer can invite you to use it.
Settling in the Pakenham to Warragul corridor? We run electronic settlements every week for buyers and sellers from Berwick through to Drouin. Get in touch before you sign contracts so we can plan settlement day properly.
This article provides general information only and is not legal advice. For advice specific to your situation, consult a qualified conveyancer or solicitor.