New Zealand Law Society - Abolition of bank cheques – proposed new conveyancing guidelines

Abolition of bank cheques – proposed new conveyancing guidelines

This article is over 3 years old. More recent information on this subject may exist.

The New Zealand Law Society | Te Kāhui Ture o Aotearoa Property Law Section (PLS) and New Zealand Society of Conveyancers (NZSoC) are pleased to announce that our organisations have reached an agreement on the recommended best practice for settlement undertakings where a vendor client is represented by a conveyancing practitioner and a lawyer represents a purchaser.

Currently, the PLS Guidelines provide that these settlements should be carried out by way of “reverse undertaking”. Where an agreement around undertakings cannot be reached between the lawyer and conveyancer then a settlement in person (using a bank cheque) is available as a fall back. This is no longer a viable option because banks are in the process of phasing out cheques.

PLS and NZSoC have each written to the Ministry of Justice seeking an amendment to the Lawyers and Conveyancers Act to make conveyancers’ undertakings summarily enforceable in the High Court, in the same way as those of a lawyer. However, both organisations accept that a legislative amendment could be some way off and an interim arrangement is needed in the absence of bank cheques – one that protects clients, incoming and outgoing mortgagees, and the professional obligations of both lawyers and conveyancers.

We have also been exploring new ideas to enable remote settlements in the absence of a bank cheque fall back. After careful consideration, PLS and NZSoC have jointly formulated a new settlement process, whereby conveyancers acting for vendor clients will give their undertakings in the form of a deed. Section 18 of the Property Law Act allows for the court to enforce undertakings made in a deed. This signals a departure from the “reverse undertaking” recommended in the current PLS Guidelines.

Proposed amendments to the PLS Guidelines and a template deed of undertaking have been drafted and referred to the Law Society’s Board as part of an upcoming revision of the PLS Guidelines.  However, some lawyers and conveyancers might choose to use the draft template deed before the new PLS Guidelines are issued, particularly where their bank no longer issues bank cheques.

This proposal was developed in consultation with the ADLS Documents & Precedents ‘Agreement for Sale & Purchase of Real Estate’ Subcommittee (ADLS). Amendments are also being made to the Agreement for Sale and Purchase to recognise the profession of conveyancers.

During our discussions, we considered it would be helpful for both lawyers and conveyancers to be better educated on the professional indemnity requirements for both professions. Lawyers have recently had their minimum requirements increased to a minimum of $1.2M cover per practice, or $900,000 per partner, whichever is greater. Conveyancers currently all belong to a group scheme and have a minimum level of cover of $1M. Having been apprised of the level of lawyers’ cover, NZSoC has advised its intention to increase the group cover as their policy renews in September, so that it matches the cover expected of lawyers. The two organisations will keep an open dialogue on this issue in the future so professional indemnity obligations remain broadly aligned. 

We believe this new approach will help to facilitate smoother settlements between our two professions, while ensuring that necessary safeguards are in place for both lawyers’ and conveyancers’ clients, and their mortgagees. This is a positive step forward for lawyers and conveyancers and, most importantly, the clients we each represent.