Property transactions and technology
Property lawyers can be slow adopters of technology: exhibit A has for some time been the ADLS/REINZ agreement, which sees security or efficiency (or something) in settlement by fax machine, rather than by a nominated email address.
Crystal ball gazing about technology is difficult and dangerous. It is very easy to be wrong. Demand for computers, ipads, and gaming apps has often been very different from expectations. We don’t yet do property transactions by bitcoin, and for every technological advance, there seems to be an equal and opposite compliance regime that slows down technology.
It is however relatively easy to envisage a world of property transactions, driven by smart (self-executing) contracts. Within five years, why not:
- A digital portal system for land contracts, accessible by the lawyers for the vendor and purchaser.
- The vendor and purchaser’s lawyers enter contract terms, and lock them in digitally.
- Conditions are satisfied by a button click against the relevant condition. Correspondence about the contract only exists digitally.
- That portal uses the information entered to contact the relevant councils, auto-apportion rates and produce a settlement statement (without human involvement or human error).
- That portal presents a list of what must be provided on or before settlement (discharge of mortgage, pre-settlement disclosure statement, etc).
- Once provided and acknowledged, the system updates for this.
- The portal accepts purchase money in escrow from the purchaser, and automatically releases it to the bank and vendor contemporaneously with the register being updated (avoiding an exchange of undertakings).
- The portal could even auto-calculate (and in theory auto-deduct) penalty interest.
Such a system would not be difficult to create or use. There are of course many variables. A range of settlement day issues can arise (the stove isn’t working, the lawns haven’t been mowed, where is the bank money?, is X a fixture or a chattel?). There are therefore many steps at which some human intervention is needed. These cannot be avoided but can be a working part of any system. Issues like requisitions or claims for compensation – even essential terms, deemed or otherwise – can be part of a working system. Property transactions are never as easy as the public thinks, but the number of variables is controllable in most situations.
The Next Generation(s)
The next generation of the portal might link to Landonline (or its replacement) directly, auto-populating information from the contract portal into Landonline for signing and certification purposes. We might then move to wholly electronic Authority and Instruction forms, executed by clicking buttons on a screen rather than signing a piece of paper. It is difficult to see real estate agents (and some clients) wanting to dispense with formal ‘signing ceremonies’. However, as one RGL-equivalent overseas has put it, there is little conceptual difference between ordering sushi online and selling land online.
New Zealand sometimes has issues of technological scale, and few would want to invest in a system that might not see widespread use. That said, some lawyers were slow to adopt (or slow to want to adopt) edealing instead of paper transactions, electronic payments instead of bank cheques, same-day cleared payments, real-time payments. Some today are slow to want to drop fax machines from practice. Some will not want to drop their calculators for apportionments.
But they will be able to. In a world where it is easy to register a transfer online, it should also be easy to carry out a whole land sale online, and auto-executing settlements seems an obvious next step. Beyond that, records of title may one day be held and stored in a blockchain-type format, but what that means for the Torrens system remains to be explored. Baby steps may be the best place to start.
Last updated on the 10th May 2019