Fiona Larcombe and Stuart Dixon-Smith compare the UK’s proposed changes to the Land Registry with the models used in Australia and Canada
The government’s consultation Land Registry: new service delivery company closed on 20 March and a formal response is expected imminently. The stated focus of the consultation was to gauge opinion on the idea of separating the day-to-day delivery of land and property services from the regulatory aspects of land registration, by creating a separate service delivery company. Inevitably, this raised questions about what would happen if part of the land registration process was carried out by the private sector.
The Law Society of England and Wales and the City of London Law Society were among those publishing responses. They both made the point that the consultation document did not contain enough detail to establish the case for a service delivery company. Both also highlighted the importance of a reliable, independent and efficient land registration system to the smooth functioning of the property market. They warned that confidence in land registration could be undermined if large parts of the process were passed to the private sector without the right protections.
The risks identified fall into three broad categories:
? Governance: high profile failures by private companies carrying out government functions (think back to security arrangements for the London Olympics in 2012) have undermined public confidence in outsourcing. The Law Society stressed the need for a robust and effective system of governance to maintain the integrity of land registry data and confidence in it.
? Shift in priorities: a private operator is likely to look for cost savings and value-added services. There is a fear that cost savings might lead to an erosion of quality, through the loss of human expertise and a reduced appetite to accept risk. Value-added services might be given more priority than less profitable (but crucial) aspects of the land registration process.
? Confusion over roles: the model set out in the consultation gave examples of functions likely to be carried out by a service delivery company and a remodelled Office of the Chief Land Registrar but no comprehensive lists. The published responses expressed particular concern over where the Land Registry’s quasi-judicial functions would sit. A Land Registry decision – for example, whether or not to register a notice of chancel repair liability – can have a profound impact on land value, so this an issue of huge importance.
Reliance on land registry data is at the heart of the property market in England and Wales. Until the industry has more detail about how any “outsourcing” project will work, it is difficult to see it being received other than with caution.
View from Australia
At present, each state and territory in Australia has a land registry office owned and operated by the regional government, but Australia has travelled further towards privatising parts of the process than the UK. Recently, there was a proposal in New South Wales for the NSW Land Titles Office to grant a concession to the private sector to operate a large part of the land registry business, although the regulatory, title guarantee and quasi-judicial functions were to be retained by the government. Scoping that proposal involved a careful review of the Canadian model.
In Ontario, transactions are submitted for registration through a private sector company. That company has a concession to accept applications, manually check and recommend applications for registration, and then submit them to the land titles office as “ready for registration”. The Land Titles Office then registers them, generally with minimal further investigation. The New South Wales project has, in fact, been deferred for a few years, to allow a new national electronic conveyancing system to be fully implemented across Australia.
Are stakeholders right to be cautious?
The Canadian experience suggests that it is possible to introduce a privately operated lodgement system with little visible change to the operation of the registry system. It is difficult to see a situation where a privatisation would be done in a way that increased risk to any stakeholder. Pricing of services might become more closely aligned to stakeholder needs, with, for example, express services being made available for an increased fee. Where swift registration is critical to revenue generation for developers, a private operator might charge extra for accelerated processing and registration. Arguably, this might adversely affect registration times for non-urgent dealings.
Canada’s privatisation of the lodgement function shows that the world did not come to an end with private sector involvement. With hindsight, Canada may not have been ambitious enough in its privatisation and could have benefitted further by privatising far more of the process. It outsourced the implementation of an electronic register. This made it extremely difficult to run a competitive process for outsourcing the lodgement function. The operator that handled the conversion had a natural advantage over other potential bidders and was able to avoid a public tender process in obtaining the concession to handle this part of the land registry process.
Australia has tried to avoid this pitfall by ensuring its systems are modernised and working as efficiently as possible before taking the business to the market. Implementing a fully electronic conveyancing system in Australia is considered to be the final step in maximising the value of the land registry system. The UK has a long way to go before it reaches this point, so perhaps the next step for England and Wales should be to focus on modernising the land registry system, and moving towards the legal framework of a land titling system closer to Australia and Canada’s torrens title system.
What the UK can learn from Australia and Canada
? Land registration is big business and the income from running a land registry function commercially is significant.
? Run efficiently, with modern technology and the right regulatory regime, the cost of generating this revenue is quite modest.
? With the co-operation of the major banks, and a complementary regulatory regime, the entire conveyancing process, including completion and registration of documents, can be done electronically.
? Government does not need to own all the businesses that operate the income-producing part of the land registration process. They can, arguably, be privatised without risk to the integrity of the title system.
? These businesses are very attractive to infrastructure investors, who are prepared to pay well for the stable incomes they generate.
Stuart Dixon-Smith is a partner in the Sydney office and Fiona Larcombe is a solicitor in the London office of King & Wood Mallesons