Electric dreams

Any non-lawyers will be amazed to think the topic of e-conveyancing can still be a heated topic of discussion in the smart-phone age. Developed for property sales and purchases in 1998, the concept is still far from complete with the Land Registry, the Law Society and the government still dedicating swathes of time trying to bring this idea closer to reality. It was initially supposed to be introduced with a big bang, but this optimistic plan was soon replaced by the idea of a 'seamless' series of 'tranches' being phased in.

The idea is to simplify and streamline the conveyancing process with transparency in chain transactions. The holy grail remains a comprehensive register that can reduce the need for additional enquiries and houses minimal defects in the applications and registration process. In the brave new world of e-conveyancing, there will be no registration gap as completion and registration will take place simultaneously. This will get rid of a majority of hurdles arising from late registration, fraud and bankruptcy of the seller being the substantial ones.

But how far have we actually come since section 92 of the Land Registry Act 2002 (LRA) first extolled the virtues of a digital communication network?

Snail's pace

Following parts 1 and 2 of the consultations on secondary legislation and a series of other consultations, e-discharges, e-lodgement and e-charges were introduced with their associated accessories.

First, electronic notification of discharges (END) was brought into effect and also the ability to access millions of registers and title plans held by the registry, electronically. It was also possible for conveyancers and other property professionals to obtain official copies of registers and title plans through Land Registry Direct (LRD) for a nominal fee.

Members of the public were able to view registers of any property in England and Wales for as little as £2 through land register online. END was only an indication of the discharge of charge and had to be followed up with a manual application form in either AP1 DS2 or DS2E. The charge entries were then cancelled manually by Land Registry staff.

Therefore, END was only an electronic substitute for the age-old Form 53 or the DS1. Electronic discharge (ED) has now replaced END with electronically removing the charge entry from the register as a machine to machine transmission. This requires no manual intervention. E-DS1 is an alternate service to EDs and can be used instead of ED.

A secure system of land registration was the foremost priority, and the network access agreement (NAA), introduced through schedule 5 of the LRA, was a step in this direction. Many network services are available for e-lodgement for practitioners who hold the agreement including e-charges for those who have signed up for the pilot.

Digital signatures have been successfully introduced for e-charges through section 91 of the Act, allowing professionals to use this e-signature for all their transactions as opposed to those doing DIY conveyancing and members of the public '“ who can use their signature only for a specific transaction. After a series of discussions on proper practices, it has been decided that decisions should be left to the practitioners and their clients who will sign the document in specific transactions.

The web-based chain matrix prototype pilot launched in 2007 for increased transparency in chain transactions has not met with much success so far and has been shelved for the present. However, the E-Homebuying Forum with the backing of the Land Registry has plans to revive it in integration with conveyancers' case management systems. It may be worth investing more in training to encourage practitioners to adopt the system in future.

There were plans to set in motion the electronic funds transfer (EFT) for financial transactions as part of the e-conveyancing system earlier in the schedule, but I assume this will happen sometime along with CM or perhaps even later in the process towards a complete e-conveyancing system.

Glimmers of hope

Of course, e-conveyancing has met with plenty of obstacles along the way. Indeed, original plans have been disrupted beyond recognition in some areas. But it has not been all failures and sob stories. LRD and land register online have facilitated practitioners and members of the public to perform many processes electronically and thus more quickly. One-stop applications lodged at the LR have proved a boon to the staff. Whereas, earlier, every stage in the registration process was dealt with by different people in different departments, computerisation enabled them to be completed by one individual on the day of receipt of the application, provided of course there were no requisitions.

Another example is the successful launch of a total discharge, transfer and charge (DTC) application '“ the essential elements that make up a residential conveyancing transaction.

The e-discharges system has been working well and the development of e-charges has been satisfactory, although it is currently limited in its applicability. Meanwhile, e-transfers have been consulted as part 3 of the secondary legislation on Land Registration (E-Conveyancing) Rules 2011 and will be piloted in 2011.

Most preliminary service applications such as searches and requests for official copy registers, title plans and documents are already being dealt with electronically. Almost all correspondence and requisitions issues are done via email '“ the days of using pens, paper and carbon papers are far behind us.

And finally, we now have the web portal, introduced this year to replace LRD. The business gateway is still in its infancy and when completed will enable conveyancers to launch applications directly from their case management systems.

Stresses and strains

There are many businesses that may be pleased that the system has taken so long to get off the ground. Section 93 of the 2003 Act stipulates that e-conveyancing should be mandatory by the time it is fully implemented. So firms that are struggling to join the electronic revolution will find it virtually impossible to exist once we finally do enter that stage. Associated systems and businesses will invariably be electronic and therefore it is essential to keep up with the times. However, the registry is yet to cross a number of difficult hurdles to reach a fully operational e-conveyancing system.

The Land Registry has become dependent on external commercial organisations to develop its CM and EFT systems. A number of them have expressed their willingness to take this forward with LR's support but to date something concrete is yet to take off. The two systems are the corner stones for the development of a totally functional e-conveyancing system. The timeframe for these are unknown.

Then there is the issue of e-signatures, which are adding to the woes of the conveyancers in times of a deep downward spiral in the property market. If they have agreed for their clients to sign the documents, they have to go through the time-consuming process of sending the sign on, a password and numerical grid separately in the post for obvious security reasons. It is difficult to conceive of a complete e-signature system given the impracticalities of dealing with members of the public who are the final recipients of this.

The ordinary citizen cannot be expected to understand the full implications of e-signatures and therefore will require a full length explanation over the telephone by the conveyancer before they e-sign the document. Language barriers can add to the problems.

If the market picks up, time will be a factor to make this effectively workable; practitioners may not be able to spare the time during busy periods.

A workable solution may be for practitioners to sign on their clients' behalf. However, there may be various other difficulties arising from this. They will need their clients' authorisation and may face increased risks and liabilities. There could be added difficulties with overreaching where there are co-owners and trustees under the Trustee Delegation Acts 1999 and 2000.

The system of e-signatures is complex and expensive to implement for smaller firms and sole practitioners who may not have the clientele to justify the investment. It has been developed to alleviate forging of signatures but is likely to bring with it many other risks associated with computers and e-services. These are challenges which the Land Registry and practitioners have to tackle together to reach an amicable way forward.

Heavy IT investment is part and parcel of the e-conveyancing revolution, meaning practitioners may not yet want to implement given the current ambiguous status of the programme.

The property boom of the early 1990s, followed by the global economic turmoil by late 2007, could be termed a kind of 'curse' for developing e-conveyancing. There was a steep decline in property transactions and the Land Registry found itself at a cross-roads considering the best possible alternatives to combat the situation. It relies solely on its fee income to sustain its business and not on taxpayers' money. Consequently, the Land Registry has responded to the dilemma by closing some of its offices, with the loss of 1,500 staff, but has not ventured so far into abandoning this exciting but challenging project.

The move to e-conveyancing has been expensive to develop in terms of time and resources and giving up at this stage would be a great loss which the Land Registry can ill-afford. Further, matters are at such a stage that it would also be impossible to revert back to the paper-based system. A half-baked system with paper as well as digital conveyancing may be a solution for the short term but unsustainable on a permanent basis. Whatever the long term has in store, it has certainly delayed the overall schedule of the programme and in turn is likely to cost more overall.

The road ahead

The hope that e-conveyancing could usher in an age of global conveyancing is still alive and well. There are tell-tale signs of this with the increased trends in outsourcing in the recent past. Even within the UK, Tesco law is fast creeping in enabling those without any legal background to do conveyancing. A fully fledged e-conveyancing system would hasten this phenomenon.

But a lot of work needs to be done before the full implications of e-conveyancing are understood. The anticipated chain matrix and EFT are not even in the pipeline and until they are fully implemented it is difficult to assess their usefulness and drawbacks. There are already lingering doubts of the effectiveness of a chain matrix where the causes of delays and chain breakages are not straightforward. There are reservations on its ability to quicken the conveyancing process.

There are no answers as to whether EFT would reduce or annihilate money laundering. Currently the various processes towards e-conveyancing are fragmented and would require technological integration with e-conveyancing to make them workable. The revolution was intended to solve security problems but the system could pose a threat from hackers and phishers. It may combat fraud and forgery but becomes an open forum for criminals to play around and obtain important personal details of clients.

Similarly, there are no solutions offered for the after effects of e-conveyancing in terms of job losses and redundancies '“ but this may be something that goes hand in hand with the process and alternatives have to be found for those affected by the change. Perhaps a future of 'remote working' could be on the cards, saving valuable resources through rent and utility costs.

There are success stories in other jurisdictions such as Canada and New Zealand and no doubt they too dealt with the painful transition from a paper-based system to a successfully established EC system. Maybe there are lessons to be learned from them.