eDealing update

Bell Gully has been using Land Information New Zealand's (LINZ) Landonline online electronic system for registering land title documents since the beginning of 2007. Since that time, there have been a number of developments that have improved Landonline's functionality and increased the number of land title instruments that can be registered electronically using the system. LINZ introduces these developments as periodic "Releases" from time to time.

Overview of development of eDealing

The mandatory date by which all discharges of mortgage had to be completed electronically was 1 May 2007. Release 2.9 was introduced on 11 June 2007. However, most of the changes related to the appearance of the database rather than the functionality of Landonline.

From 1 August 2007, it has been compulsory for all standard transfers and mortgages (ie. no annexure schedules) to be completed electronically. Release 2.10, introduced on 8 October 2007, made more substantial changes to Landonline's capabilities, increasing the number of instruments capable of being registered electronically. This update also streamlined the sign & certify procedures, making the database more user-friendly.

Release 3.0 on 24 April 2008 has meant that all discharges of mortgage, transfers and mortgages are e-capable. Multiple transfers and mortgages are able to be completed within the same dealing. There is also greater flexibility, with conveyancers now able to use eDealing to complete more complex transfers and mortgages.

In addition, there is now the option to "Add Text" or "Add Image" to certain instruments. This means that additional clauses or conditions can be included as an annexure schedule to the instrument being registered. Where these functions are used, the dealing is not automatically registrable and requires LINZ staff to check the information before the eDealing transaction is registered. Therefore, the dealing is "lodged" immediately, but it may take up to 15 days for it to appear on the title.

With Release 3.1, LINZ aims for all land transactions to become e-capable, including variations of mortgages, caveats, changes of names and easements.

LINZ plans to make electronic lodgement compulsory for all instruments from 31 October 2008.

Commercial issues in relation to eDealing

As eDealing has become market practice, it is evident that the electronic environment, as with the paper environment, has some limitations. Outlined below are some commercial issues that we have identified.

Opening hours of the Land Register

The Land Transfer Regulations prescribe opening hours for the Land Register of 9am to 4pm. While it is possible to create, pre-validate, sign & certify and release instruments at any time, an eDealing cannot be submitted to alter the Register before 9am or after 4pm.

As such, if settlement is due to occur in the afternoon of any day, including funds being drawn down, it is important to remember that the eDealing (containing all instruments - for example, discharge of old mortgage, transfer and new mortgage) may not be able to be submitted until the following morning.

From our experience, the reason for the delay is that confirmation of receipt of funds may not be able to be provided by the borrower's solicitor until the following morning, or that the borrower's solicitor is awaiting confirmation of receipt of funds from the vendor's solicitor. This means that the vendor's solicitor and the borrower's solicitor will not release the instruments that they are responsible for until they have received adequate funds.

Furthermore, while the Register can be altered from 9am onwards, it can take several hours until all instruments have been released and the eDealing is submitted.

In order to protect our clients' interests during this period, our practice is to hold a guaranteed search of each certificate of title in addition to undertakings from all other parties involved in the eDealing. However, it is worth noting that, during this intervening period, it is possible for other instruments, such as caveats or mortgages, to be registered.

Lodged eDealings can be requisitioned

As outlined above, it is now possible to register instruments that contain additional text or images, such as annexure schedules. An instrument that contains additional information is considered to be "non-standard". The additional text/image can be included simply by typing text into the box provided or by attaching a document. As there is a greater possibility for human error with "non-standard" instruments, these must be checked by a LINZ officer to ensure that they comply with the provisions of the Land Transfer Act. As such, while a "standard instrument" is automatically registered, a "non-standard" instrument must be lodged, which can take up to 15 business days. If an eDealing contains a combination of standard and non-standard instruments, the whole dealing will be lodged for registration. During the 15 day period, the eDealing will appear as a "pending dealing" to those who search the title and any instruments registered will be added to the title behind the lodged dealing. As such, the lodgement process does not alter the priority of the eDealing, but it can take up to 15 days to receive confirmation that the titles have been updated.

If the LINZ officer determines that there is an error in a lodged instrument, they will "requisition" the eDealing to the submitting firm to correct the error. The requisitioning process does not prejudice the priority of the eDealing as a whole. However, if a dealing has a significant error or omission, then the eDealing can be rejected, which means it is not acceptable for registration. A rejected dealing will be given a new dealing number and will need to be amended and resubmitted. The priority of a rejected dealing will be lost.

A re-submission fee applies for rejected and requisitioned eDealings.

Enquiries and information

For more information on any of the cases, articles and features in Commercial Quarterly, please email Diane Graham or call her on 64 9 916 8849.