The Land Registry’s proposals for electronic signatures explained.
The Land Registry is proposing important changes to the Land Registration Rules 2003. The key proposal is to introduce electronic signatures for documents dealing with registered land.
Last year the Law Commission issued a consultation on possible reforms to parts of the Land Registration Act 2002 (“the LRA”) (EG, 15 April 2016, p105), but these will take several years to implement. The Land Registry believes that changes are required sooner to enable it to deliver products and services that meets its customers’ changing needs.
Land transactions
The key proposal is to allow electronic signatures to be used in land transactions. At present, the Land Registry accepts only hard copy documents executed in manuscript (so called “wet ink”). Although the Law Society and the City of London Law Society have issued joint guidance that deeds and documents can already be executed electronically, the Land Registry (along with many lawyers) takes a more cautious view.
Under the proposals, documents would be executed using secure encryption technology through the Land Registry’s systems. Links to the agreed form of online document would be sent to the parties to enable them to sign it electronically. Under the general law, real property can be dealt with only by a formal deed, but a document signed electronically will be treated as a deed for this purpose.
The Land Registry needs to ensure that there is a high degree of identity assurance so that opportunities for fraud are kept to a minimum. The proposal is that identity assurance will be provided by the government’s Verify system, which is already used by a number of government departments. HM Revenue & Customs, for example, uses the system to validate the identity of taxpayers making online returns. Under Verify, a person registers with one of seven commercial verification authorities and provides information proving who they are, such as details of their passport, bank account and driving licence. To use an online service, the verification authority then provides the user with a one-time authentication code by e-mail or text message, which is used to obtain entry to the relevant website.
Whether this form of identity verification is robust enough for land registration purposes remains to be seen. The Law Society has expressed some reservations about the Verify system, and it is not alone. It is possible to register multiple identities (taking advantage of the different verification authorities) and theoretically it is possible to forge a property owner’s identify. In addition, the system will not provide any safeguard that the signatory really is the person who is the registered proprietor – merely that it is someone with the same name (a John Smith rather than the John Smith who owns the property). This is a missed opportunity.
Another concern is that currently the Verify service is only available to individuals. This means that a separate system would be required for the execution of documents by companies, LLPs and indeed any legal person that is not an individual.
Electronic signatures would be introduced gradually and would not be mandatory at the start. The proposal is that the Land Registry will begin with mortgages signed electronically by borrowers where there is no change in ownership. In due course, the Land Registry would introduce electronic signing of transfers and leases.
Attractive as this may sound, this is not “electronic conveyancing” as originally envisaged in the LRA. Transactions that are carried out with electronically signed documents will still need to be completed for registration by Land Registry staff. However, it may be quicker and more convenient for the parties to sign documents electronically, removing the need for documents to be entrusted to the post.
Other proposed changes
There are other changes proposed in the consultation. Some are practical, such as allowing online users to view parts of a registered title and, importantly, historic versions of a registered title. Other proposals reflect changes in practice as the Land Registry now works from scanned images of documents and does not retain any paper versions. The humble fax machine will disappear as a means of service of notices and objections.
Of greater impact will be the proposed removal of the outline application procedure under which a short (three-day) priority period is provided to register notices and make other applications that cannot be protected by a priority search. In future such applications would need to be made online, providing immediate priority.
Another proposal is that the Land Registry wants to reduce the times and locations where members of the public can make personal applications, concentrating on digital services instead. Given the reduced number of Land Registry offices across England and Wales and the disproportionate costs of dealing with personal applications, this is probably inevitable.
Baby steps
The recent government white paper Fixing our broken housing market, indicated that the Land Registry was committed to becoming the world’s leading land registry for speed, simplicity and an open approach to data. Implementing the proposals in the consultation would be a small step in that process. However, this is not full-blown electronic conveyancing, and nothing in the consultation will address the most serious problem that landowners and their lawyers currently face: that it can take several months for complex commercial transactions to be registered. Hiring more staff would be a more helpful solution to that problem.
Michael Callaghan and Peter Williams are both professional support lawyers in the real estate group at Shoosmiths LLP
The Land Registry consultation can be viewed at: www.gov.uk/government/consultations/proposals-to-amend-the-land-registration-rules-2003
Responses have to be made by 5 April 2017
