E-conveyancing: A huge step in the electronic direction

In September last year I advocated the speedy introduction of e-conveyancing to accelerate transactions in land and improve the liquidity of the property market. It was therefore very pleasing to see that the most compelling proposal from the recent Land Registry consultation to amend the Land Registration Rules 2003 was a bold attempt to bring property transactions into the digital age. The Land Registry consultation has now closed and its report is to be published on 28 June.

Without doubt the proposals must be welcomed. As I noted in my previous article, when it comes to dealings in property there is often a stark contrast for clients between the timeframes for a property transaction and experiences they may have in other aspects of their lives, where money, shares, or commodities can be transferred in an instant. This lack of liquidity can drive down prices and the investment appeal of property assets. It is, of course, also a source of frustration to people buying and selling their homes.

In addition to tackling these issues faced by clients, one would also hope that a move to e-conveyancing could provide tremendous benefits to law firms. A move away from cumbersome paper-based transactions should improve efficiency in property departments and could increase profit margins in a price-conscious and highly competitive market.

For those readers not abreast of the proposals, they certainly amount to the wholesale changes which Julian Sampson advocated in his Solicitors Journal article in 2011. As Sampson put it, we needed to stop ‘tinkering at the edges’ of conveyancing and the proposals certainly do appear to fully embrace e-conveyancing.

Crucially, the Land Registry seeks to address the fundamental issue that under section 52 of the Law of Property Act 1925 a legal interest in land cannot be conveyed or created without a deed. The bold proposal is to allow electronic documents with electronic signatures to be regarded as deeds. Not only will this permit the creation and conveyance of legal interests electronically but it will also allow for their registration at the Land Registry.

A recent article by Monidipa Fouzder heralded the first exchange of contracts signed by way of electronic signature. This relates the completion of contractual documents which would have been signed under hand and therefore when the transaction completes (if it has not already) the parties will have to take the retrograde step and utilise a hard copy transfer executed and witnessed with a wet ink signature. Until we embrace e-conveyancing there is, of course, no other way of doing it. Fouzder’s article does, however, speculate that one day electronically executed documents could replace deeds – a prospect envisaged by the Land Registry proposals.

When you consider electronically executed ‘deeds’ you may be concerned with the potential for identity theft or forgery to increase. The Land Registry seeks to assuage these fears and address this issue head on. The proposals suggest use of the government’s Verify system to identify the parties to the transaction in advance of the execution of documentation. Using such a system would remove the need for there to be witnesses to the execution of deeds; as many have pointed out, such witnessing is a somewhat flawed procedure in any event given the clear capability for forgery. In comparison the Verify system is said to be highly secure with a high degree of identity assurance.

It is suggested that liability in respect of e-signatures will primarily fall on the Land Registry, although the scope of such liability remains unclear from the proposals.

The proposals therefore do seem to be a hugely positive step and would facilitate a more ‘accessible and dynamic property market which is fit for Britain’s post-Brexit future’, as I called for in my 2016 article. My concerns would, however, lie in the speed of the introduction of the service. It is proposed that once again a system is first introduced in relation to mortgages – initially, in fact, for mortgages where there is no change in property ownership. Such a system was already piloted back in 2009 and the proposals are to use the signing and security system already established in 2009.

In its proposals the Land Registry talks only of introducing electronic transfers ‘in due course’ and electronic leases ‘if there is user need’. I would argue that it is only when the transfer of land and creation of leasehold interests are also within the ambit of e-conveyancing that the full benefits of the digital revolution will be felt by both clients and the legal profession.

We will await the post-consultation report in June with interest.

Mark Johnson is a lecturer at the University of Law, Manchester

@UniversityofLaw