In a world that is becoming increasingly digitalised, it is likely that within the next few years we will see huge technological shifts in the way conveyancing is conducted. This could mean the whole process of purchasing a home, including completion of all necessary documentation, moving online. But, what does this mean from a legal perspective, and how do conveyancers and lenders ensure that their documentation is legally compliant as it moves to an electronic form?
Electronic Mortgages and the use of electronic signatures
On 5 April 2018 the UK’s first electronic mortgage was signed and executed. This followed months of testing and was undertaken by Coventry Building Society (the UK’s second biggest building society) and Enact Conveyancing (the UK’s largest direct conveyancing firm). Rather than a full purchase and mortgage transaction, this test run involved the re-mortgage of a house in Rotherhithe, London.
Whilst there are no plans for electronic mortgages to become compulsory any time soon, this does provide a glimpse of how digitisation of the conveyancing process may look in the future.
One concern that the process of digitisation may present to conveyancers and lenders is whether and how they can be compliant with the legal requirements for execution. Transfers of land and charges must be made by deed – this means signing, witnessing and attesting. In fact, however, whilst many would believe that this process requires physical signing, it is already possible to execute deeds by electronic signature.
In order for an electronic signature to be valid under the Land Registration Act 2002, any electronic signatory must be stringently verified. In practice, this means being signed up to the Government’s ‘Verify’ service. This is the same service which allows people to now apply for driving licenses and passports online. An individual sets up an account with a government identity provider, and provides a series of personal information. Government approved companies (including major banks, the Post Office, etc) then verify this information (for example, against credit agencies or mobile phone providers) and confirm the identity of the individual.
The individual can then securely log in to the Verify system and produce a unique transaction code in order to electronically sign a document; much in the same way some online banking transactions are currently conducted. The Land Registry has now invited financial institutions to apply for digital mortgage deeds where remortgage is being offered. Guidance has also been released to Conveyancers, Lenders and Customers explaining how to sign an electronic mortgage deed.
Legislation is necessary to move forward
Although the Law Commission has recently confirmed its view that, for the most part, contacts and deeds can be validly executed with electronic signatures, the overwhelming view within the legal profession is that specific legislation should be enacted to clarify the legal position and to provide certainty in this increasingly vital area.
New legislation should pave the way for the market to move confidently towards full digitisation, which could have huge benefits for the conveyancing sector. In particular, it could allow future buyers a much simpler, quicker and more streamlined process for purchasing a property. There is also a feeling that millennial buyers would feel more in control of a digital process, much like they now do when finding their own insurance policies or creating their own package holidays online. Digitisation could also present benefits for practitioners as it would, in theory, remove or reduce the problem of incorrectly signed or attested deeds and documents. The need for a digitalised conveyancing process is recognised by the Land Registry, who have invested heavily in their Digital Street project.
There are, however, other concerns which would need to be overcome in order to move towards full digitalised conveyancing. For example, whilst it is convenient, the fact that the Verify system does not require any physical signature (just verification via login details) does mean that it is potentially vulnerable to, say, a partner or spouse being able to access the system. Therefore, as things stand, there is a risk that an individual could fraudulently apply for a mortgage in their partner’s name, without the partner having any knowledge of it. As a result, lenders will still heavily rely on conveyancing solicitors to carry out the ever important due diligence and ‘Know your Customer’ checks when acting in a mortgage transaction.
Detailed consideration of technological solutions (such as, potentially, the inclusion of biometric data in security checks or login processes) and enhancements to industry-wide security practices will be needed, with a view to minimising or safeguarding against risks of fraud, before full e-conveyancing can become a reality.