PEXA Residential Seller Guarantee

6. Circumstances which must exist for the PRSG to apply

A summary of the circumstances in which the PRSG applies is as follows:

• The seller provided the seller’s practitioner with payment instructions (ie. bank account details).
• The seller’s practitioner accurately entered those bank account details into the PEXA platform.
• After, a fraudster gained access to the PEXA platform and changed those bank account details.
• After, the practitioner approved the settlement (including the changed bank account details) by digitally signing the financial settlement schedule by applying their personal digital certificate and PIN.
• Upon settlement, the relevant funds were paid into the fraudster’s bank account, and not to the seller’s bank account.
• Within 3 business days of settlement (or such longer period as PEXA in its absolute discretion will allow), both the seller and the seller’s practitioner signed and lodged the PEXA claim form with PEXA.

If any of those circumstances do not exist, then the PRSG will not apply.

7. Timing of a payment by PEXA

If each of the above circumstances exists, PEXA agrees to make the payment under the PRSG within 10 business days of receipt of the claim form by PEXA.

8. What will PEXA pay

The maximum liability of PEXA under the PRSG is $2 million in respect of a single settlement.

Subject to that $2 million cap, PEXA will pay the following:

• The amount of the “vendor’s funds” paid to the fraudster’s bank account which have not been recovered, returned or frozen by the receiving bank at the time the payment is made by PEXA.
• Interest on that amount from the date of settlement until the date of payment by PEXA payable at the published RBA cash rate.
• Where the fraud has resulted in the seller failing to settle on a purchase of another residential property on the due date, rescission notice fees, reasonable accommodation expenses, penalty interest, reasonable legal costs and additional storage and removalist costs.

9. What if my loss is greater than the $2 million cap

If your loss is greater than $2 million, you should carefully consider whether to make a claim under the PRSG, or whether instead to take steps yourself to recover your loss by other means.

If you make a claim under the PRSG, PEXA will have certain rights.

In particular, PEXA will have the right (to the exclusion of you) to take action in your name to recover the loss and may compromise or settle any such action on such terms as PEXA sees fit.  Accordingly, unless PEXA agrees otherwise, you are not entitled to take action to recover the amount of your loss above $2 million.

Moreover, if PEXA recovers any amount after making a payment under the PRSG, PEXA is entitled to retain the amount so recovered up to the sum of:

• the amount paid by PEXA under the PEXA Residential Seller Guarantee;
• plus any interest recovered on that amount;
• plus an amount equal to any costs (including without limitation administrative, recovery agent, funding and legal costs) which PEXA has incurred in taking any recovery action,

before paying the excess (if any) to you.  This could mean that you recover less in aggregate than your total loss.

10. Exclusions from the PRSG

There are exclusions from the PRSG.

• The PRSG only applies to sellers. A claim cannot be made by, and a payment cannot be made to, the seller’s practitioner or a purchaser.
• The PRSG only applies in respect of the sale of residential property. It does not apply if the property is used primarily for the purposes of industry, commerce or primary production.
• The PRSG does not apply where the seller is a commercial vendor, such as a developer. The reason for this is that a commercial vendor will not be made homeless as a result of a fraud which the PRSG is intended to cover.  Also commercial vendors are carrying on a business and should be better able to protect themselves vis-à-vis their practitioner compared to a non-commercial seller.
• The PRSG does not apply where a mortgagee or other third party is exercising a power of sale (ie. ATO, confiscation orders, sheriff etc.). Again, a mortgagee or third party exercising a power of sale will not be made homeless as a result of a fraud which the PRSG is intended to cover. Payments in these cases will not generally be paid directly to the proprietor.
• The PRSG does not cover amounts in excess of the $2 million cap per settlement.
• The PRSG does not cover amounts to be paid to discharge a seller’s mortgage. This is because the bank account details for these funds are not communicated by the seller or entered by the seller’s practitioner (the bank will enter their own bank account details into the PEXA Platform).
• The PRSG does not apply where the payment was to have been made into the seller’s practitioner’s trust account or the payment relates to the practitioner’s legal/conveyancing fees and disbursements. Bank account details relating to the practitioner’s trust account and office account can be stored within the PEXA platform, meaning the practitioner does not need to enter those details for each transaction.
• The PRSG does not apply to misdirected payments that should have been made to certain third parties, include to the ATO in respect of GST or CGT, or payment relating to property outgoings like land tax, water authority fees, council rates, etc. Bank account details relating to payments to ATO for GST and CGT are stored in the PEXA platform and payments relating to property outgoings are required to be signed by both the buyer’s and seller’s practitioners.
• Most consequential loss cannot be recovered under the PRSG.
• The requirement that your bank account details are accurately entered into the PEXA platform means that the PRSG does not cover practitioner error in entering your bank account details.
• That requirement also means that the PRSG does not cover situations in which the seller’s instructions were intercepted, with the result that the practitioner entered the fraudster’s bank account details into the PEXA platform. Email is not necessarily a secure method of communciation, therefore practitioners should confirm all account details by some other means of communication.

11. PEXA’s rights if a claim is made

If you make a claim in respect of the PRSG, then PEXA will have certain rights. Those rights include the following:

• If any amount of the misdirected vendor’s funds are recovered after PEXA makes a payment under the PRSG, PEXA is entitled to keep those recovered funds up to the sum of:
  • the amount paid by PEXA under the PEXA Residential Seller Guarantee;
  • plus any interest recovered on that amount;
  • plus an amount equal to any costs (including without limitation administrative, recovery agent, funding and legal costs) which PEXA has incurred in taking any recovery action,

  before paying the excess (if any) to you. This is particularly relevant if your loss is greater than the $2 million cap.

• PEXA will be authorised to deal with your practitioner, the receiving bank and the investigating authorities on your behalf, including to provide any information to them.
• PEXA (and PEXA’s agents, such as an insurer) will also be authorised to make a claim against the seller’s practitioner for negligence, etc. if applicable on your behalf.
• If PEXA makes a payment under the PRSG, PEXA will be subrogated to your rights in respect of the fraud (including your right to recover the amount paid to the fraudster’s bank account).  Accordingly, PEXA may:
  • if it chooses, take steps to recover from any or all of the fraudster, your practitioner who approved the settlement of the transaction on your behalf, and any other person which PEXA believes to be liable or complicit in respect of the fraud;
  • take such recovery action, without your consent, using your name, and whether or not you have been, or has a right to be, fully compensated for any or all of the loss or damage by PEXA or anybody else; and
  • if it chooses, compromise or settle your claim on such terms as PEXA sees fit.

12. Residential Property

The PRSG only applies to the settlement of a sale of residential property. Residential property refers to property that is used or intended to be used for residential purposes but does not include property that is used primarily for the purposes of industry, commerce or primary production.