The Government is proposing a privatisation of the Land Registry. Currently, both the Land Register and the Land Charges Register are Crown property. Several private equity firms have expressed interest in purchasing the Land Registry, including Advent International who are reportedly planning a £1 billion takeover.
In 2014, ministers previously considered handing over the running of the Land Registry to a private company in the form of a ‘GovCo’. However, these proposals were scrapped following widespread opposition. The Law Society contested the 2014 proposals on the grounds that privatisation would undermine the integrity of the Register, complicate the process through increased layers of operation and lead to higher costs.
The present Land Registry consultation on privatisation is on-going and closes on 26 May. There are currently two potential models and under both models, the Registers themselves will remain the Crown’s property and the data within them will continue to be protected by both Crown copyright and database right as material created by a public body. This may be an attempt to address the concerns expressed in 2014 that privatisation would undermine the integrity of the Register.
The two models of privatisation under consideration are:
- Privatisation with a contract between the Government and a private operator; and
- Privatisation with independent economic regulation.
Model 1: Privatisation with a contract between the Government and a private operator
The Department for Business, Innovation and Skills currently favours this model, whereby the Register would remain the property of the Crown but its core functions would be transferred to a ‘Newco’, which would be sold at auction. Investors would then buy shares in Newco and the Government could either retain some level of ownership in Newco or pass this on to the workforce.
The Consultation anticipates that the majority, if not all, of the economic benefit and risks of ownership associated with privatisation will be transferred to the private sector. The scope and standards of service that Newco would deliver would be governed by the service contract, which would also set out mechanisms for addressing underperformance. The Consultation considers that the contract could be drafted so as to provide greater certainty for investors and stability for customers and to ensure that the right protections are put in place to address the concerns associated with privatisation. However, apart from naming several existing protections which are to be retained, it does not discuss this further.
For this model to succeed, Government would need to retain the ability to manage and actively supervise the contract. To ensure this, there would need to be individuals within Government with the appropriate expertise and understanding of land registration who would have responsibility for the on-going relationship with Newco. The Government does not anticipate this being too costly but this may depend on the effectiveness of Newco at performing and managing its functions.
The Consultation expects that this model would be deliverable in 2017. This is the Government’s preferred option.
Model 2: Privatisation with independent economic regulation
Under this option, either a new independent economic regulator would be established or additional regulatory powers would be vested in an existing regulator to regulate Newco and review their actions. This would involve a licence being granted to Newco for the provision of land registration services on the Government’s behalf and the regulator would also set the prices and standards for Newco in accordance with its statutory duties.
Upon the sale of Newco, the Government would be paid a receipt for its shares. Central Government would not have an on-going role in the business or in setting standards, as these would be performed by the regulator. This model has been used in the UK’s water, energy and transport sectors. The Consultation believes it works better where the demand for service is predictable and the main requirement is for on-going investment, so it is not as well suited to the Land Registry where demand for services is variable due to being closely linked with the housing economy. For these reasons, and because the regulatory model is likely to be more costly, the Consultation considers that it would be better to regulate Newco through a contract with the Government.
If either model is implemented effectively, the proposed changes could improve the efficiency and effectiveness of the Register. Land registration is frequently subject to long delays and can be a source of frustration to conveyancers due to what can seem to be excessive bureaucracy. In the short-term there are unlikely to be tangible benefits to efficiency as it will take time to fully implement the proposals and, ultimately, there is no way of knowing whether privatisation will improve the effectiveness of the Register in the long-term. At present, the details of how Newco will improve the efficiency of land registration do not appear to have been adequately considered.
The Government’s rationale for privatisation is to create a recipe for Government to use elsewhere; however, by selling the Registry for short-term capital gain the Government could potentially exacerbate the Registry’s existing problems.
There is also a risk that the independence, impartiality and confidentiality of the Register will be compromised. Whilst the data will remain the property of the Crown, by outsourcing the functions of the Land Registry to a private company, there is an inherent risk that the impartiality and confidentiality of the Register will be affected.
We as a firm are wary of the proposed privatisation, primarily because of the importance of ensuring that the confidentiality and impartiality of the register are not compromised in any way. Privatisation would only benefit conveyancers and land owners if it was to rectify the Registry’s existing problems but the proposals do not appear to adequately address these. Hopefully more detail will be forthcoming and the views of users of the Land Registry will be taken fully in to account before any decision is made as the Government will need to consider such issues in detail prior to selling the Registry if it is to ensure a smooth transition into the private sector and if the privatisation of the Registry is to be of any real benefit to conveyancers, or their clients.