Article by Nikki Johnston

As a result of the advent of electronic conveyancing via platforms like PEXA, Conveyancers no longer must navigate the complications of cheque directions to an incoming mortgagee, time constraints, and the potential risk of spelling errors or incorrect amounts on the day of settlement. We are, however, facing a new issue; an increasing shortfall of funds on the morning of settlement.

During the approval process and the signing of the mortgage documents, most Finance Brokers and Bankers arrange for the incoming Mortgagee to provide the Conveyancer with full proceeds via PEXA. Once the client has signed a debit authority, the incoming Mortgagee can then debit the client’s nominated bank account for the balance required after the loan proceeds. Brokers will often refer to this as the ‘deposit’ amount when discussing with their clients.

In theory, this should be convenient for the conveyancer but, it limits us from knowing the exact funds that are available from the loan (total loan amount less bank and registration fees). Consequently, it is difficult to accurately calculate the precise balance owed by the client and subsequently move the necessary funds into the trust. We’re now seeing a high percentage of issues on the day of settlement because the client does not have sufficient funds in their shortfall account.

It’s difficult to identify the breakdown in communication between brokers, banks and clients regarding necessary amounts occur but to avoid the issue, clear instructions should be provided to the client. We recommend seeking instruction regarding:

• Which bank account has been listed as the nominated account
• A recommended amount for the shortfall account (including a suggested $1,000 buffer for contingencies)
• Confirmation that the funds are available in the nominated account at least 1 day prior to settlement.