New NSW government inquiry into competition in eConveyancing

A new inquiry into competition in eConveyancing is being undertaken by the New South Wales government.

Members of the Legislative Council backed MP Taylor Martin call to set up a Select Committee to examine reforms in the sector.

It means there is now a Federal and a State-based investigation currently underway into the $300 million market.

Independent MP Taylor Martin asked for the committee to examine what he called “the development of a monopoly” by incumbent eConveyancing platform PEXA.

“What we have seen over the past two years is the development of a monopoly, instead of the competitive market we hoped for, and a government not responding fast enough to the problems being faced,” he told the council.

“Addressing the problem is of paramount importance.

“The benefits of competition in this market have been reported on and examined ad nauseam.

“In the simplest of terms, it means that home buyers and sellers will save money when they transact on property.

“The average buyer could save on legal fees at a time in their life when every single dollar counts.

“Across the board, the savings are in the millions. It is clear that, despite the Parliament’s legislative intention to introduce competition in the market, that has not been achieved.

“Going back to the basics, the PEXA monopoly effectively has about 100 per cent of the eConveyancing market.

“This is the market that Australians use to buy and sell property every single day.

“It continues to enjoy this privileged position with little attempt to bring competition to the market.

“Despite its claim that it is pro‑competition, we have seen PEXA write legal letters to banks which resulted in the banks withdrawing from participating in discussions with new competitors.

“New South Wales must contend with this private monopoly that has full visibility over data and a profit margin of more than 80 per cent, which is just about unheard of.

“There is also great risk in relying on a single provider.

“It is shocking to see that PEXA has experienced dozens of outages on its network, including one on 16 May which impacted an estimated 400 homebuyers across the country.”

Martin was highly critical of the Australian Registrars’ National Electronic Conveyancing Council (ARNECC), saying it was undertaking more reviews with “no clear deadline”.

There are specific enforcement powers to compel PEXA and Sympli to participate in the program, with $10 million fines and the power to place a pricing freeze on fees.

“That remains unused and PEXA has been allowed to increase its fees each and every year with no competition in sight, further slugging the consumer,” he said.

Referring to the fact that a Senate inquiry is currently underway, he argued that a State-based inquiry needed to take place because of the different powers the authorities have at their disposal.

The Hon. John Graham said the government was “not necessarily persuaded that yet another inquiry into eConveyancing reform is necessary, given the amount of work that has been done in this area” and that it would overlap the current Federal inquiry.

But he said: “The New South Wales Government supports competition and interoperability between electronic lodgement network operators.

“I can inform the House that the New South Wales Registrar General has issued a direction to both PEXA and Sympli to cooperate with the review using the enforcement powers legislated by this Parliament.

“If PEXA or Sympli do not participate in the review, the Registrar General may take further regulatory steps.

“Both reviews will inform the next steps for the reform, which is why the New South Wales Government believes that any inquiry should take place after they conclude.

“We also believe that such an inquiry is likely to replicate what has occurred before.

“States lack regulatory powers to resolve the concerns of banks about this reform. Banks have indicated that the current scope is not sufficient and does not capture bespoke financial settlement functions that they have developed with PEXA.

“The banking sector claims that, without this functionality, up to 20 per cent of settlements may fail in interoperable transactions.

“Registrars may not be the appropriate authorities to oversee the bank or electronic lodgement network operator arrangements

The Hon. Mark Banasiak – speaking on behalf of theShooters, Fishers and Farmers Party – also supported the establishment of a select committee into this matter adding that it was “important for families looking to move house and settle on new homes”.

Opposition Whip the Hon. Chris Rath said: “Competition almost always leads to better outcomes and more responsive companies to the needs of consumers and lower prices.

“It is almost always a good thing and there will be no difference in the eConveyancing space

“It is … a good idea that the inquiry looks at why the roll out has been so slow and the problems that have existed.

“I have also read about the issues caused by some of the recent PEXA outages.

“It is already stressful enough when buying a home, particularly your first home, and you are dealing with banks and lawyers.

“You do not need PEXA to be down as well.”

Liberal Member Aileen MacDonald said: “It matters because property transactions are among the biggest financial decisions people make, whether they are buying a family home or securing land for small business.

“They deserve a competitive, reliable and transparent system.

“Outages and inflated fees can cause serious stress and financial loss. As we have heard, settlements collapsing or being delayed can be devastating.

“As the current dominance of one electronic lodgement network is stifling innovation and choice, it is time to test whether true market competition exists or if the system is simply being gamed to protect a monopoly.

“For those of us representing regional New South Wales, where property access and affordability are key to growth, this reform is vital.

“Delays and high costs hit regional conveyancers and buyers harder. They often have fewer options to turn to. This enquiry will bring essential transparency.”

Labor’s Cameron Murphy

Legislative Council member The Hon. Cameron Murphysaid: “For most people a property purchase is the single biggest investment they will make in their lifetime.

“It is so important to get it right. I am also concerned that some of the difficulties may be inherent problems of having a monopoly that is just moving to protect itself.

“It is an unacceptable burden on people when we have a housing crisis, where people are stretched to the limit in New South Wales to afford to buy a house in the first place, and where every dollar counts.

“It is important to look at whether there is unreasonable overcharging, sort out the issues of interoperability and make sure that there is adequate competition.”

PEXA said it would fully cooperate with the Committee.

“As with current and previous inquiries, we will continue to outline the many benefits PEXA’s world first eConveyancing platform has delivered to the property transaction process,” a spokesperson said.

However, we agree with Minister Graham that any parliamentary inquiry should wait until after the current reviews of the interoperability program, and that this Committee is likely to replicate the work of multiple previous inquiries into e-conveyancing.

PEXA notes that it is also likely to overlap with the existing Federal parliamentary inquiry into competition in e-conveyancing, to which PEXA has already provided detailed submissions.”

Note: The Australian Conveyancer is powered by triSearch but maintains editorial independence. triSearch is owned by ATI Global, which also has shares in Sympli.