The Australian Banking Association is calling for endorsement of an ‘infrastructure model’ and price regulation in e-conveyancing, effectively endorsing a monopoly for PEXA.
The Senate Economics References Committee is conducting an inquiry into ‘Micro-competition opportunities in the Australian economy in relation to e-conveyancing’ which amounts to a probe of PEXA’s long-running efforts to thwart the rollout of interoperability between ‘Electronic Lodgement Network Operators’ or ELNOs.
Since its establishment in 2020, with support from state governments and banks, PEXA has created what PEXA’s submission repeatedly references as a ‘world leading’ platform.
PEXA has also done its best, subtly or not, to crowd out competition.
“Caution should be exercised in applying to eConveyancing regulatory regimes designed for other industries such as utilities or telecommunications” PEXA warns.
“Extensive regulation is appropriate for large physical networks with no competition (such as electricity distribution and transmission infrastructure) or where competition is only viable with interoperability (such as telecommunications). However, the regulatory oversight for these industries is proportionate to their scale.
“The total addressable market of eConveyancing is less than one hundredth the size of the electricity and telecommunications markets.
“The complex regulatory regimes designed for electricity and telecommunications industries might well cost more than the total revenues of the eConveyancing industry.”
Total ELNO revenues in Australia in 2023-24 (primarily earnt by PEXA, with the remainder received by ASX/ATI Group’s Sympli) were $292 million, the PEXA submission shows.
eConveyancing is regulated under a cooperative legislative scheme between all States and Territories.
As the result of a COAG initiative, all States and Territories agreed to the Electronic Conveyancing National Law Agreement in 2011, which aimed to set up consistent business practices and regulation for eConveyancing across jurisdictions.
The Agreement also set up an industry regulator, composed of the Registrar General of the Land Registry in each jurisdiction, the Australian Registrars’ National Electronic Conveyancing Council (ARNECC).
Pursuant to this Agreement, the NSW Electronic Conveyancing (Adoption of National Law) Act 2012 provided the text of the Electronic Conveyancing National Law.
Legislation in all States and Territories adopted this National Law, which authorised the electronic signature and lodgement of documents for property transactions, the approval of Electronic Lodgment Networks, and the determination of rules to govern the industry.
Under the National Law, ARNECC has devised Model Participation Rules and Model Operating Requirements (MOR), for subscribers (conveyancers, banks, etc.) and ELNOs respectively, that manage testing, change management, and set standards, eligibility criteria and requirements for system capability, security, risk, monitoring and reporting.
The MOR set operating transparency and accountability requirements for ELNOs such as PEXA.
“In about September 2024, ARNECC commissioned Synergies Consulting to conduct a review of the Separation requirements which has not yet publicly reported” PEXA said.
“Poor regulation of eConveyancing could actually lead to increased total consumer costs” the argue.
‘Because ELNO revenues are only a fraction of total conveyancing costs, complexities introduced by requiring PEXA’s platform to be interoperable will likely reduce total productivity across the wider property transaction industry.
“To contextualise eConveyancing fees in the broader property exchange industry, consider the costs for an individual buyer and seller. The median Australian property price is around $985,900 with an average transaction cost of $81,500.
“PEXA’s electronic lodgement and settlement fee is around 0.3% of these transaction costs.”
The direct cost to a buyer and seller for completing a property transaction on PEXA’s network is $137.40. The fee has been price regulated since PEXA’s inception and has only ever increased by CPI.
The price differential between PEXA and the only other operating ELNO, ASX/ATI
Group’s Sympli, for a property transfer is about $10.
“Because the eConveyancing fee is so small, reductions in eConveyancing costs cannot be material to overall transaction costs” PEXA concludes.