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The Electronic Communications Act 2000 and the Land Registration Act 2002 (LRA), have removed, or created the power to remove, legal obstacles to e-conveyancing.
The LRA, the most comprehensive overhaul of registered land law since 1925, provides the legal framework necessary for electronic conveyancing of registered land; it will increase the importance of the register, eventually making it all embracing so that it is not necessary to raise supplementary enquiries and searches; it introduces a new regime for acquiring title to registered land by adverse possession; it overhauls the law relating to overriding interests and the protection of third party rights and introduces a new system for the independent adjudication of disputes.
Part 8 of the Act relates specifically to electronic conveyancing and provides for the use of electronic documents, electronic signatures and execution by agents (i.e. conveyancers who will have to execute electronic documents on behalf of their clients because, notwithstanding the wishes and hopes of the government, it is unlikely that their clients will have their own electronic signatures, in the early days of e-conveyancing at least).
The Act goes on to provide for a secure confidential intranet, with regulated access, over which e-conveyancing will be conducted. Access to this intranet and therefore, it is presumed ultimately, to registered land conveyancing, will be via a network access agreement overseen by the Land Registry with an independent adjudicator to whom there is a right of appeal.
There is also provision for 'chain management' and an on line matrix whereby authorised participants can monitor the progress of each transaction in the chain, the duty to provide information to the chain matrix overriding the duty of client confidentiality.
The explanatory notes to the Bill stated that the 'chain manager' would not have any direct coercive powers but would have the means of identifying which links in the chain were causing delays and who would then be able to encourage the delaying party or parties to proceed with due despatch. An echo of the Woolf reforms to the litigation system where the Courts were granted a more proactive role in managing the progress of cases.
In their current consultation document, the Land Registry have constructed a model to show how the system might work; it has emphasised that the model is designed to stimulate thought, discussion and comment, rather than being a representation of the final article. At the launch of the consultation process Lord Irvine said that its purpose was: "…to ensure that …[the] electronic conveyancing system, meets the needs of its users."
Two questions posed at the launch should warn us against complacency. Firstly, commenting on the suggestion that the "…citizen would not have direct access to the chain matrix" , the Sunday Telegraph correspondent implied that it was common knowledge that some solicitors caused delays in the process and that access to the matrix would allow the citizen to, effectively, check the veracity of what their solicitor was telling them.
Secondly, in response to a question from the Nationwide Building Society, the Land Registry commented that it was neutral upon the point but certainly had not ruled out the possibility of activating the ACP scheme. Michael Wills, then minister for the Lord Chancellor's department, added that you have to recognise that: "…when you introduce a revolution there will inevitably be changes. Government is always concerned with what will benefit the home owner…"
The problem for conveyancing solicitors may be that the government's views on what will benefit the home owner will not necessarily co-incide with our own.
The six main requirements of the system are that it must be paperless, there must be no registration gap (i.e. there should be simultaneous completion and registration), it must allow for chain transparency, there will be a permanent connection between practitioners and the Land Registry, it must be secure and fraud-resistant and it must cater for simultaneous money transfers.
The most contentious issues are the need for a secure, reliable and instant money transfer system (both CHAPS and CREST are in discussion with the task force at the moment); the use of digital signatures, the potential for fraud and the possible liability of solicitors as agents of their clients; the chain matrix, specifically the information to be provided and the question of who will be entitled to access the matrix and the question of reliability and the importance of adequate back-up in case of system failure.
Copies of the consultation document should have been sent to firms and it can also be accessed and responded to electronically at the Land Registry's dedicated website at
http://www.e-conveyancing.gov.uk.
The consultation period ends on 30 August 2002 and the results are expected to be published in early 2003. It is intended to run a full system pilot in 2005 with a rather optimistic target for full system roll-out by 2006.
Many of the key players in the market place now use Web based technology to deliver their services and to provide information. It is possible to obtain quotations for and effect title indemnity cover via the Web; estate agents advertise properties and have links to conveyancers on their Web sites; some web based agencies deal only with technology enabled solicitors and there are a number of, usually, agent led Web sites where clients and other parties to a transaction can monitor progress.
Deeds and redemption figures can be ordered from some lenders' Web sites and some issue mortgage offers and instructions in electronic format; web based lenders will only accept on-line applications; and some lenders insist that lawyers undertaking bulk work report to them using specified technology or allow them access to the lawyer's own systems so that progress can be monitored.
Lawyers too are now using technologies such as e-mail to communicate with clients, their opposite numbers and the other participants in the transaction. In commercial property transactions, a number of 'deal rooms', secure areas accessible via the Web, have begun to be used to actually transact deals.
The digitisation of the Register of titles is almost complete. The scanning of the approximately 10 million documents referred to in the register is under way and is due to complete by September 2004.
Most of the major lenders now use the Electronic Notification of Discharge (ENDs) scheme to notify the discharge of mortgages to the Land Registry. Currently just a secure email system, Nationwide and Abbey National are piloting an enhancement whereby the message sent by the lender automatically discharges the registered charge without the intervention of the registry staff.
Dematerialisation (the abandonment of paper charge certificates) triggered by the Bradford & Bingley depository fire in 1999 when 400,000 charge certificates were destroyed, is understandably popular with the lenders (the Nationwide recently said that it had saved £10 million by not having to construct a third deeds storage facility).
Practitioners can now use Land Registry Direct, a secure, dial up, network using Internet technology, not only to view titles and plans and order searches etc. on-line but also to lodge non dispositionary applications.
The National Land Information Service (NLIS) is a Government sponsored initiative to provide improved access to land and property information.
The system allows users to connect with the suppliers of that information via the internet and uses e-commerce technology to provide a simple and rapid way to request, receive and pay for 'conveyancing searches' There are currently over 600 potential data providers linked in one way or another via NLIS.
The initial services of the NLIS have been targeted at the professional conveyancing community with the focus being on a nationally integrated land and property search facility in support of the conveyancing process.
There is already evidence of a massive improvement in the turn-around time for local authority searches where the Local Authority has achieved full automation of its records, with Northampton Borough Council returning the result of a search, something which has traditionally taken weeks rather than days, in under 15 minutes.
Whilst this in itself will not guarantee a quicker conveyancing service, it will allow solicitors to identify and therefore deal with, potential problems much earlier in the transaction and 'add value' to the service that they supply to their clients. NLIS in undoubtedly a key step on the government's committed path to e-conveyancing.
To achieve the full benefit from the system the data provider, e.g. the local authority must itself have put in place the necessary systems.
As at March 2002 only 10% of local authorities in England and Wales had achieved the goal of full automation, with 15% achieving the intermediate stage of putting in place electronic communication systems whilst still processing the search manually in the traditional way. All the local authorities are required to have reached this goal by 2005.
The provision of NLIS is a PPI project with the main infrastructure (the NLIS Hub) being provided by one company with user access thereto via one of three 'licensed channels' each provided by companies in competition with one another.
Those promoting the service suggest, and it is already becoming apparent to those practitioners using NLIS, that the savings in internal administrative time (e.g. the filling of forms, provision and marking of plans, checking the jurisdiction and fees of authorities, requisitioning of cheques etc.) justify use of the system. I have yet to find a user who feels that they have made a mistake in adopting the system, even where the local authorities that they habitually use have made no progress to full automation.
Each of the channel providers is fighting hard to gain a critical mass of users and it is currently a 'buyers market'.
The need for confidence in the security and reliability of the system is recognised by NLIS. The company chosen to provide and run the Hub, Macdonald Dettwiler, has experience of providing systems for such security conscious bodies as NASA, the Canadian Radar System and the Land Registry of British Columbia.
The NLIS Hub is based in Essex in a specialist support environment with specialised high reliability power supplies and communications links, sophisticated electronic and physical security and off site back-ups and archiving. The Hub is mirrored on sites in Leicester and in Vancouver. Peter Sizer, the NLIS Central Government Co-ordinator, an ex Treasury Auditor and so used to security issues, described the Hub environment as "…like Fort Knox". The experience of seeing the London Stock Exchange grind to a halt for three days whilst NLIS was in its planning stage caused those responsible for NLIS to ensure that, in addition to the measures described above, a manual back up system was also available.
Over 370 local authorities have already received an NLIS search request, with more than a third receiving payment by BACS. HM Land Registry, the Coal Authority are and, from 1 July 2002, the Water Authorities will be electronically connected. NLIS reports that traffic in Con 29 searches and to HM land Registry is growing at the rate of 30% month on month.
NLIS is seen as the foundation stone to the government's commitment to electronic conveyancing. It is also expected to play a major part in the compilation of electronic Seller's Packs if they are re-introduced as Lord Falconer has suggested will be the case.
E-conveyancing seems certain to happen. There will come a time when solicitors who do not have the technology will not be able to undertake residential property work. Two things will happen:
1. The 'shape' of the transaction will change. The due diligence work carried out prior to exchange will be undertaken more rapidly and efficiently (unfortunately, despite the government working party's optimism, this does not mean that transactions will happen more quickly because we still have the problem of chains, matrix or no matrix) and the work involved post exchange, and certainly post completion, will reduce dramatically.
2. Some firms will use this as an opportunity to attempt to recover the initiative and position themselves as the controller of the whole process.
Conveyancers can now put themselves back at the centre of the transaction; they can give and receive information to and from both clients and other parties involved in the transaction to help provide a speedy and efficient service. Incidentally, the only technology needed to use NLIS, other than standard office equipment, is a fast link to the internet, either by ISDN or ADSL.
Finally and importantly, an attempt by a firm to revise its processes and adopt technology need not mean that client service will suffer. Some firms have taken the decision that they no longer need to see their clients and report to them in writing, whereas others see the client interview as a core part of their service, but will still use the technology to enhance the way in which they provide the services, adoption of technology does not have to mean the abandonment of the core principles and values of the firm.
Provided practitioners remain clear about the way in which their services are to be delivered they will control the use of the technology, rather than the technology dictating the way in which they and their firm conducts their business.
Alastair Rhodes is a partner in Hampshire law firm White & Bowker, a 16 partner firm with offices in Winchester and Southampton. Coming from a property background he also specialises in technology law. He has set up and leads his firm's lender conveyancing team making extensive use of technology and also lectures on using IT in law firms and e-conveyancing. Email Alastair.Rhodes@wandb.co.uk.
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