From 1 October 2018, it will be mandatory in Victoria for transfer transactions to be effected via the PEXA platform.
PEXA has come under significant scrutiny in recent months as reports have emerged of settlement funds being fraudulently misappropriated.
To bring comfort to vendors of residential properties, PEXA has introduced a new PEXA Residential Seller Guarantee (PRSG) which allows vendors to make a claim against PEXA in the case of fraud. PEXA will pay the amount fraudulently misappropriated (including interest on that amount at the RBA cash rate) together with any costs incurred by the vendor due to it failing to settle its purchase of another residential property because of the fraud. The maximum liability of PEXA under the PRSG is $2 million in respect of any one settlement.
There are certain exclusions to the PRSG, which include:
- The property must be a residential property and the vendor must not be a ‘commercial vendor’ (defined as a vendor who is registered or required to be registered for GST who claims that the going concern applies or a vendor who is liable for GST on the sale);
- Settlement must be effected via PEXA on or after 29 June 2018;
- The PRSG does not apply in respect of funds to be paid to discharge the vendor’s mortgage, funds to be paid to the ATO (eg. GST, CGT) or payments on account of property outgoings;
- The PRSG does not apply if the property is sold under a power of sale; and
- The PRSG does not apply if the vendor’s settlement proceeds were to be paid to the vendor’s solicitors trust account or controlled money account.
There are also various procedural steps which must be satisfied in order for a vendor to invoke the PRSG including, without limitation, the financial information being entered correctly in the PEXA financial settlement schedule and a prescribed claim form being received by PEXA within 3 business days of settlement occurring.
If you require more information about the PRSG, please contact any member of the KKI Property team.