Picture: ISTOCK
Picture: ISTOCK

Moves are under way to modernise South Africa's cumbersome and paper-driven property transaction process, in an attempt to eliminate fraud and ensure the immediate transfer of money to a seller when the buyer obtains ownership of a property at the Deeds Office.

Horror stories abound of consumers losing money due to conveyancing errors and conveyancers defrauding property buyers who have paid deposits.

South Africa has a sound property registration system, in that it provides certainty of ownership, but the process is outdated and complicated, says Renier Nel, the director of Nel Attorneys in Gauteng.

Willie Stoman, CEO of the new Property Payment Exchange of South Africa, says that last year R161-million worth of claims were lodged with the Attorneys Fidelity Fund due to mistakes or misconduct during the conveyancing process. Furthermore, electronic fraud is on the rise, and an increase in claims can be expected in the current year, he says.

Protecting all parties

Pexsa is a private industry initiative by LexisNexis that will pave the way for modernising payment transactions and transfers in the property sector.

The website platform is a tool that conveyancers use to verify and lock beneficiary account details and process payments through the banks, allowing multiple payment options when a property registers. It will protect all stakeholders in a property deal, including buyers, sellers, banks, estate agents and the conveyancers.

The envisaged second phase will result in immediate payment and settlement through the Reserve Bank.

"We can ensure an efficient, simultaneous, final and irrevocable transfer of ownership in exchange for payment in one click online, which is in the interests of the buyer, seller, agent, banks and conveyancers," Stoman says.

Potential for fraud

Currently the conveyancing process takes two to three months from the time you sign on the dotted line to purchase your home to when it is registered in your name at the Deeds Office. It is only then that conveyancers manually transfer the purchase proceeds to the seller from their trust account. This can take days, as it is at the discretion of the conveyancer when to transfer the proceeds of the sale to the seller.

As a practising conveyancer, Nel says it is commonplace to receive seemingly authentic e-mails or calls from sellers on the day a property registers into the buyer's name at the Deeds Office, saying that their bank details have changed.

This is a fraudulent attempt to divert funds intended for the property seller to somebody else.

Another vulnerable time in the process is when, as a buyer, you pay your deposit to the conveyancer for your property purchase.

Stoman says your money "essentially goes into a black hole", as there is hardly any transparency and no certainty as to the safety of your money.

You typically sign a power of attorney, which allows the conveyancer to invest your money on your behalf while the property transfer process is under way, and this is where fraud can take place. For instance, some unscrupulous attorneys use this money as bridging finance to clients.

The first phase of Pexsa has been introduced as a pilot programme among conveyancers and involves multiple levels of authentication; importantly, your bank account number is verified directly with your bank, Stoman says.

Buyers who use conveyancers that utilise Pexsa will be alerted when someone changes their account details during the conveyancing process, as account details can only be changed through a strict and controlled verification process.

Pexsa is working with the banks to ensure that buyers who use conveyancers on the Pexsa system will be notified the moment their money is transferred from one bank account to another and in this way can be alerted to any unauthorised tampering with their funds.

Rules and procedures

Stoman says the next step will be to establish a national working group under the guidance of the Reserve Bank and the Payment Association of South Africa, with all stakeholders collaborating on rules and procedures for wider implementation of the second phase of the system, which will allow immediate payment and settlement through the Reserve Bank the moment property registers in the Deeds Office.

Walter Volker, CEO of the Payments Association of South Africa, says the organisation fully supports what Pexsa is trying to achieve.

But, he adds, his association is not in a position to formally endorse this venture, as it is not a formal industry initiative but a private commercial one.

Stoman's vision is to see Pexsa serve as a regulatory clearing house for property transactions as in Australia, which recently introduced legislation to make the system compulsory.

Commenting on the first phase implementation of Pexsa, Nel says: "The main thing is you know you can't pay money to the wrong account and that the correct amount will be paid out."

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