Internet Newsletter for Lawyers
September/October 2003, by Delia Venables

E-conveyancing: Promise and Reality
by Raymond Perry

According to the Land Registry, the aim of e-conveyancing is to "utilise advances in technology by creating a system that reduces the delay and anxiety which can be experienced in the house buying process". Certainly people seem to think that e-conveyancing will radically improve the conveyancing experience. An example of how pervasive this belief has become can be seen on the PSA Property Forum (www.psa.co.uk) website where the impending introduction of e-conveyancing is advanced in debate as a reason why another proposed reform, the Home Information Pack (HIP), should be abandoned.

"HIPs are totally unnecessary due to the advent of e-conveyancing and the National Land Information Service. E-conveyancing is being rapidly introduced and all communications and exchanges of documentation between practitioners, lenders, the Land Registry etc, will be undertaken electronically."

Is this widespread belief that the results of e-conveyancing will be wonderful actually correct? A sceptic might point out that the advantages of new technology are often exaggerated by technophiles. However non-experts are often reluctant to challenge technological boosterism for fear of appearing foolish and it difficult to avoid the conclusion that there has often been a lack of critical thinking about e-conveyancing.

The plan was to introduce a working e-conveyancing system based in England and Wales by 2006 although recently this has changed to "2006 to 2008". However the Government has a poor record when it comes to large-scale IT deployments. It should not be automatically assumed that the e-conveyancing project will be taken through to a successful conclusion on time or at all. Nevertheless the Land Registry can point to the successful introduction of forms of e-conveyancing in New Zealand and Ontario (albeit rather less complicated that is being envisaged here) as evidence that it should be possible to introduce a working form of e-conveyancing - even though the technological obstacles involved are formidable.

Unfortunately it is not possible at present to estimate with any accuracy what e-conveyancing will cost. The Land Registry is not able to give an estimate for the capital cost of developing the system. The costs to the users are also uncertain but the expense involved in supporting a very complex IT system which also requires banking-like levels of security is likely to be substantial. Whether here or abroad, e-conveyancing systems are expected to pay their own way. When the idea was first mooted, the suggestion was that e-conveyancing would be cheaper than the existing system. Such claims are now rarely heard and it seems unlikely that the new system will be cheaper for the ordinary consumer. Quite possibly it will be more expensive.

So what does e-conveyancing involve? There is no agreed definition but there are five elements suggested by the Land Registry which offer as good a framework as any. By examining each of these in turn we can see how likely e-conveyancing is to be successful.

Electronic conveyancing documents

This is the heart of e-conveyancing. Instead of the paper Transfers and Charges there will be documents that exist only in digital form. The reasoning behind this is important. For technophiles paper is seen as old-fashioned, inefficient and an impediment to the introduction of new technology. In fact this idea has been comprehensively discredited. The increased use of IT does not result in a corresponding decrease in the use of paper. Often, the reverse is true.

Even worse, as paper is not a significant cause of the problems involved in buying and selling houses, replacing paper documents with their digital equivalents is not a solution to those problems.

Digital documents also create new problems. The entire system is dependant on the core technology of digital signatures. Whilst they have many advantages, most notably that they cannot be forged, an absolute necessity for e-conveyancing, they also have a number of drawbacks. Hitherto they have been a commercial failure. Their complexity means that they are costly to use and for conveyancers there are problems of risk and liability allocation. In e-conveyancing, digital signature systems are used within the framework of contractual agreements between conveyancers and the land registration authority. The system relies on the security of the private key used to generate the signature. Thus the entire risk shifts to the user (conveyancer) who has to protect the private key. Critics of digital signature systems have long argued that in reality this is not practical unless enormous resources are devoted to security. Even worse, as digital signatures will only belong to conveyancers, homeowners will have to sign a paper authorisation allowing their conveyancer to sign on their behalf. This is what has happened in New Zealand and Ontario where e-conveyancing has already been introduced. There may perhaps be a way to avoid this by using stylus and special pads but this means even more expense and complexity.

Most conveyancing processes and communication between parties to be on-line

Almost all conveyancing searches can now be done over the Internet, even if in some cases the result still has to come back in paper form. It is here that most progress has been made towards e-conveyancing and where the benefits of IT are particularly strong. Computers are far better suited than humans to searching through databases and producing results. The digitisation of data by search providers whether local authorities, the Land Registry or other statutory bodies provides an obvious benefit to the conveyancer. In practice the three channel providers, Searchflow, (www.searchflow.co.uk), Transaction Online (www.transaction-online.co.uk) and TM NLIS (www.tmproperty.co.uk) offer well-designed and easy to use web interfaces with a simple pay as you use pricing structure. Conveyancers can also contract out the search process to one-stop specialist search agencies with an on-line presence such as OneSearch Direct (www.onesearchdirect.co.uk) or The Property Search Group (www.propertysearchgroup.co.uk). In short electronic searches are an undoubted success.

Simultaneous completion and registration, thus removing the "registration gap"

It has always been difficult to understand why the registration gap features quite so prominently as one of the benefits of e-conveyancing. For the individual homeowner, speeding up the post-completion registration process when most people only move house every few years is, in practical terms, irrelevant.

However e-conveyancing does remove the registration gap and allow real-time updating of the register without the need for manual re-keying of data. Indeed the New Zealand and Ontario examples suggest that this is the most obvious result of e-conveyancing. For the Land Registry this is a significant advantage. This serves as a reminder of the obvious, but often ignored, fact that the different bodies and individuals involved in the conveyancing system have different priorities.

Electronic Funds Transfer to co-ordinate payment of fees and balance transfers

There is no doubt that the present system is wasteful and inefficient. It also causes enormous stress at completion. To deploy an electronic settlement system that allowed, for example, all the payments in a chain to be made simultaneously would genuinely be an enormous benefit. However to introduce such a system from scratch is a substantial undertaking when the Government already has to deploy a full-scale electronic lodgment system based on digital signatures. The worry here must be that it is too ambitious but until the Land Registry publish the full report into system capability later this year it is at present impossible to comment further.

Increased availability and transparency of chain information

It is also proposed that there should be a graphical representation, the Chain Matrix, available via the Internet so that those involved in the chain can see what stage everyone else has reached. There are differing views about whether this is appropriate but on balance it would seem to be a useful idea and, more importantly, one that should be technologically straightforward. However there are some obvious limits to the benefits of this type of arrangement. It will be difficult, if not impossible, to convey the more complex reasons for delay, so although you may know that someone does not have a mortgage offer, you will not know why. Not everyone in a chain transaction necessarily wants to move ahead at full speed or even to be frank about their true situation. As Onora O'Neill argued in the 2002 Reith Lectures; "transparency may destroy secrecy, but there is little reason to think that it destroys... deception".

Conclusions

The existing conveyancing system in England and Wales is complicated and in a number of ways, unsatisfactory for the user. Can the introduction of new technology improve matters? The use of IT has already led to some improvements particularly in the area of searches. However the likely benefits in other areas are far less obvious and might easily be offset by new problems caused by the use of digital signature technology. In truth the problems of conveyancing cannot be solved by technical measures alone and to pretend otherwise is misleading. And we still don't know what it is going to cost.

Raymond Perry is a Partner at Davies and Partners, Gloucester and a writer on issues involving the law and IT. Email mail@raymondperry.co.uk. A collection of his papers and articles is available at www.raymondperry.co.uk.

Back to Contents.