Land Registry opens consultation on Digital Conveyancing
The Land Registry has proposed changes be made to the Land Registration Rules 2003, to pave the way for it to be able to offer its customers digital alternatives to paper conveyancing and registration in the future.
The Land Registry believes that the proposed changes are:
“...not a radical review of the Land Registration Rules 2003 as that would not be appropriate while the Law Commission is reviewing the Land Registration Act 2002 in the Law Commission’s Twelfth Programme of Work. The proposed rule amendments are the minimum ... needed pending the outcome of the Law Commission’s work, in order to pursue Land Registry’s Business Strategy.”
The changes would allow the conveyancing industry to undertake transactions entirely digitally using e-signatures for land transactions and land registration. They would be introduced as an alternative to paper, and at this stage there would be no obligation to use the digital services meaning that “lenders, conveyancers and borrowers can continue to use paper if they wish.”.
The Land Registration Act 2002 was designed to allow for the introduction of electronic conveyancing, and following the introduction of the Land Registration (Electronic Conveyancing) Rules 2008 a small number of electronic mortgages were created and registered during a 2009 Land Registry pilot scheme.
The Land Registry concluded that at the time of the pilot scheme:
“ the appetite for digital conveyancing documents was not strong and the banking crisis resulted in a period of consolidation for lenders, conveyancers and Land Registry. Further developments were put on hold.”
As the conveyancing market has now recovered somewhat, the Land Registry understands that Lenders and conveyancers are now keen to see improvements in the efficiency of conveyancing and registration services. As part of the proposed changes, Land Registry anticipates that the Land Registration (Electronic Conveyancing) Rules 2008 would be revoked, as they will no longer be necessary and will be replaced by a registrar’s notice setting out the conditions and limitations for using the new digital service.
The Land Registry believes that digital conveyancing and registration will be more secure that current paper transactions, and assist in the prevention of fraud. Parties will sign papers using digital signatures, having previously completed identity verification through the GOV.UK Verify system.
As the Land Registry is liable by statute to pay indemnity for losses resulting from mistakes in the register and their correction (even where these are caused by fraud) they anticipate that the new digital service will result in a reduction in the indemnity payments Land Registry makes for fraud, which in 2015/16 accounted for 73.9% of indemnity transactions totalling £5.9m (including costs).
Initially Land Registry wants to introduce electronic mortgages (“e-mortgages”) for use where there is no change of ownership of a property, so generally where the owner wants to take out a mortgage or re-mortgage their property - as the service can be introduced using the current Land Registration (Electronic Conveyancing) Rules 2008.
The Land Registry intends to introduce electronic transfers too, but does not currently have a timeframe in which to do so. They also state that "other dispositionary electronic documents such as leases might be introduced later if there is a user need.".
The Land Registry has outlined how it sees the e-mortgage system working:
- The Land Registry will provide the e-mortgage deed templates through its Business e-services
- The e-mortgages will be in a format already agreed with the lenders who wish to use them and will be given an ’MD’ reference just as paper mortgage deeds are
- The conveyancer will create the e-mortgage by accessing the Land Registry Service and completing the borrower's details and using the correct MD reference
- The conveyancer shall then give the borrowers the link they need to gain access to the e-mortgage deed and sign it electronically
- The entries will be added to the register once the mortgage is completed
The Land Registry intends to create API’s (Application Programming Interfaces) so that CMS’s (Case Management Systems) and other applications can be directly integrated with the new system, resulting in a more streamlined conveyancing process for all parties.