Background

As firms become more familiar with e-dealing, many are asking what is the most efficient method of storing documentation that might be required for a Land Information New Zealand (LINZ) e-dealingcompliance review. LINZ has the statutory authority and obligation to conduct e-dealing Compliance Reviews under s164C(3) of the Land Transfer Act 1952.

The retention requirement is contained s164C(1) of the Land Transfer Act 1952. That links back to the regulation 14 of the Land Transfer Regulations 2002 which currently specifies 10 years from the date on which the instrument is lodged for registration.

Which documents?

The documents that LINZ requires as part of the Compliance Review link to each certification made for every instrument in the e-dealing. Common examples include:

• Authority & Instruction form (A & I) for transferee and transferor
• email or letter from the bank authorising a discharge (Certification is only made for the chargeholder for any discharge so no specific authority is required from the registered proprietor.)
• full letter of instruction from the mortgagee
• consent of caveator
• Power of Attorney and certificate of non-revocation if A & I signed by an attorney (Power of Attorney does not need to be lodged with LINZ)
• Maori Land Court confirmation.

What’s best?

Retention on client file

As e-dealing is mandatory for routine conveyancing most files will be impacted by the above document retention requirements.

The client file should remain complete and all original documentation should remain on that file (unless scanned as noted below). Some firms photocopy the compliance review information and hold that on a separate folder. That is, in my view, an unnecessary duplication of work that will have a significant impact on overall storage.

A Compliance Review request will generally comprise of e-dealings registered within the previous six months. Many firms will hold the files on site for that period, and the time taken to locate three files and copy the necessary information will be far less than routinely copying it for every client file. If the files are archived off site, it is only a matter of retrieving three files.

A further suggestion is to retain the relevant compliance review information inside the front cover of the client file in the pocket or on separate clip. This practice has a dual benefit as it will help the Conveyancing Professional to ensure that all documentation necessary for each certification are held at the time of signing.

The other advantage is if the client uplifts the file it is easy to take the bundle of Compliance Review documentation from the front of the file without the need to trawl through the entire file.

Scanned and held electronically

There are a number of larger firms that scan the entire client file at the time of closing. The files are then either destroyed or separately archived. (Consideration should be given to the firm’s obligation to provide any original documentation to the client if requested. This may be something to consider addressing in the initial retainer letter.)

The other issue about destruction of the paper file is the requirement of some mortgagees that the original A & I will be held and provided to the mortgagee if requested. There are at least two options to deal with this:

The requirements for retention of the client file electronically are covered comprehensively in an article by Andrew Beck on the NZLS website at http://www.lawyers.org.nz/PDFs/glines-ret-rcrds.

The key requirement is around security of the information, the ability to retrieve it, and appropriate stable storage and back-up depending upon the system used.

Any Compliance Review will always identify the e-dealing number and the client reference if one was entered in the original dealing. The suggestion for electronic indexing (or any other method of storage) for ease of retrieval is:

1. Client name
2. Client file matter number
3. e-dealing number

LINZ has confirmed that the supporting documentation for the Compliance Review may be provided electronically. Therefore, if you are holding everything electronically, simply attach it to the email response. There is no need to print and post.

Separate folder

There are still a number of firms that copy the compliance review documentation and hold that on a separate folder.

There are several problems with this. The most common is that only the A & I is held on that file and they still need to revert to the original file for the letter of instruction from the bank or discharge authority.

The true cost in time and resource is significant, for example:

1. Staff time in copying and filing
2. Copy costs
3. Additional storage costs

Accordingly, I suggest that the firms that currently adopt this approach reassess.

Storage in deeds is also reasonably common. That again is less favourable for the same reasons as holding on a separate file.

What about routine file cull?

There are various retention timeframes that impact on a conveyancing file. They include:

The commonly held belief is that client files must be retained for 7 years. Interestingly, that seems to be nothing more than tradition with no link to legislation, professional rule or guideline. There is actually nothing to require holding anything other than trust account-related transactions and evidence in support of those together, with compliance review documentation. Before anything from the file is destroyed, it should be offered to the client as they are the client’s documents.

Obviously, the practical consideration of having the file to defend any subsequent dispute or proceeding in relation to the file is an important reason to hold for a reasonable period.

Summary

There is no right or wrong way to hold the information. It all comes down to how efficient it is for your firm considering, size and cost of storage, ability and ease of access, retrieval and staff time in facilitating the method adopted.

Duncan Terris
NZLS e-dealing Consultant
The Property Lawyer
Volume 9, Issue 2, July 2008