By Michael Cross, Law Society Gazette
Digital optimists have welcomed a long overdue development that could make paperless conveyancing a reality after many false starts. But there are reasons to be sceptical.
The solicitor’s humble routine of witnessing signatures on TR1s and other Land Registry forms could be consigned to history – along with a modest but useful income stream – if the latest long-awaited step towards paperless conveyancing becomes reality. Land Registry has opened a consultation into amending its rules to allow deeds to be signed electronically rather than on paper.
For digital optimists, this is a long overdue step that should make e-conveyancing a reality after 15 years of false starts. Overall, the proposed changes ‘will allow the incremental introduction of secure electronic conveyancing and registration services’, the document states. ‘It will allow the flexibility and speed that is vital in the digital world.’
However the proposals will also face sceptical scrutiny about the potential for fraud – and the choice of technology for authenticating high-value transactions.
At the moment, with limited exceptions, a legal interest in land cannot be created or conveyed without a deed in writing and properly executed. The registry proposes to amend the Land Registry rules 2003 to allow it to accept documents signed electronically. The Law Society described the proposals as a ‘positive step’, noting it had backed the use of electronic signatures in a practice note last year. The Conveyancing Association, which represents larger conveyancing firms, also welcomed the move. Chairman Eddie Goldsmith said: ‘This will create new opportunities for innovation both in terms of efficiency and customer experience but also in terms of security.
‘Currently, while a home mover might start their move online, the conveyancing process – no matter how tech-savvy the conveyancer is – inevitably ends up with printed pieces of paper having to be signed and posted, causing delays and frustrations when documents go missing,’ he said.
However there are reservations about the choice of technology, the Gov.UK.Verify scheme. This is an online identity management scheme set up by the Cabinet Office to replace the last Labour government’s aborted national identity register.
Rather than maintaining a single database of identities, Gov.UK.Verify certifies independent ‘identity providers’ (there are currently seven, including Barclays, Experian and Royal Mail) who certify the identities of citizens who sign up to them by matching information stored on government databases and bank records. It then issues codes, for example by text message, that citizens can use along with passwords to certify that they are who they say they are when logging in to services such as ‘check your state pension’ online.
Under a digital government strategy published last week, Gov.UK.Verify is to become the default means of authenticating official transactions. The aim is to sign up 25 million users by 2020; at the moment only 1.1 million registrations (some of them duplicates) have been made.
According to the Land Registry consultation, Gov.UK.Verify will do away with the need to witness signatures ‘because the identity assurance takes place before the e-signature can be used’. Officials in the Government Digital Service, which is behind the scheme, claim that the electronic database checks are considerably more robust than those made by a solicitor thumbing through a paper passport.
Goldsmith agrees: ‘It is unrealistic to think that a witnessed document somehow has greater validity in this age, where fraudsters are taking advantage of every area, where trust was previously sufficient.’
To build confidence in the new system, Land Registry says electronic signatures will be piloted with mortgages and remortgages that do not involve changes in ownership.
However, despite the cautious approach, there are concerns about whether Gov.UK.Verify is robust enough to authenticate high-value transactions in a sector riddled with attempted fraud. To the embarrassment of the Cabinet Office, a major government user, HM Revenue & Customs, is pressing ahead with its own ‘identity solution’ – for business users, as Verify does not allow professionals to sign on behalf of clients.
Goldsmith says the Conveyancing Association would like to see digital signatures developed to include biometric data as well as credit referencing agency data to confirm the relationship between a person signing a document and the property. The association also wants Land Registry involved much earlier in the conveyancing process so that frauds can be exposed before money changes hands: ‘This way we will drive these hateful crimes out of the industry.’
Electronic conveyancing has been a long time coming. Land Registry and the Law Commission began working together on the necessary changes at the height of the 2000 dotcom boom. The result was the Land Registration Act 2002, which provided for the use of electronic documents.
At the time, the Law Commission said: ‘It is envisaged that, within a comparatively short time, [electronic conveyancing] will be the only method of conducting registered conveyancing. Investigation of title will be almost entirely online. [The technology] will also provide a means of managing a chain of transactions by monitoring them electronically. This will enable the cause of delays in any chain to be identified and remedial action encouraged. It is anticipated that far fewer chains will break in consequence and that transactions will be considerably expedited.’
An enthused Land Registry began developing its own end-to-end system, in 2008 piloting a system which allowed parties to view a ‘matrix’ of the stages reached by all participants in a property chain. However it halted the programme in 2011 amid soaring costs and limited interest.
Most recently the baton has been picked up by commercial suppliers, including the discontinued Law Society-backed Veyo product.
The latest initiative, the Free2Convey portal, was originally promoted by the Legal Software Suppliers Association. It was set up by an offshoot of one member firm, Osprey Legal Cloud, which has pledged to continue to offer it for free. It now has 423 firms registered as users, co-founder Matt Lancaster told the Gazette. Through a product called Docs4home it allows approved parties in each transaction to share documents securely and view the status of others in the chain.
Lancaster says that he is delighted with the Land Registry’s proposals: ‘Good for them!’, he said.
The race now is for a credible system to build critical mass. Caution is understandable, however, while the rules are still up in the air. The registry stresses that its current consultation is ‘not a radical review’ – for that it is awaiting a Law Commission review of the 2002 act, which is due next year. That is supposed to tackle the ‘rigidity of the current legislation’, which it says is hindering the development of e-conveyancing.
Whether the government has any appetite for taking up e-conveyancing in the run-up to the 2020 election remains to be seen.
This article was first published in the Law Gazette on 20 February 2017