A consultation from the Land Registry proposes changes to the land registration legislation to allow the introduction of electronic signatures.
The Land Registry has announced a new consultation on changes to the Land Registration Rules 2003. These are the rules that, together with the Land Registration Act 2002, regulate the operation of the Land Registry and govern how the land register is maintained and changed.
The changes have been proposed in an effort to modernise the Land Registry's services and to progress its programme of digital transformation. The Land Registry states that the amendments will make it quicker and simpler for customers to deal with the Land Registry. This is certainly to be welcomed, so long as these aims can be achieved without risk to the security and integrity of the register.
Of most note is the Land Registry's proposal to allow for the introduction of fully digital conveyancing documents, with e-signatures to be used for land transactions.
The Land Registration Act 2002 already allows for the introduction of full-blown electronic conveyancing, under which completion of the transfer would automatically update the register. This proved too complex to implement, and so the emphasis is now switching to digital documents that are signed online. Under the general law, transfers and mortgages of land must be made by deed. Section 91 of the Land Registration Act 2002 allows for rules to be made so that electronic documents will be regarded as deeds. However, so far, specific rules have been made only in relation to electronic mortgages (and only a very small number of those have been created). The proposed amendments to the rules would provide that, in the future, any disposition that must be registered may be carried out using digital documents with electronic signatures.
The proposed changes in practice that are envisaged look to be incremental, starting with electronic mortgages for use where there is no change of ownership of a property. Once that is established, further developments are expected, including electronic mortgages for corporate borrowers and electronic transfers of property. Under the proposals, documents would be executed using secure encryption technology through the Land Registry's systems, either through its business gateway or, as the service develops, through its web portal. Links to the agreed form of document would be sent to the signatories to enable them to sign it electronically.
This would be a major change to land registration practice. However, this is not 'electronic conveyancing' as originally envisaged in the Land Registration Act 2002. Transactions that have been carried out with electronically signed documents will still need to be completed by registration by Land Registry staff.
It may be quicker and more convenient for the parties to sign documents electronically, reducing the need for documents to be entrusted to the post, but such a system would not reduce the delays that parties to a transaction currently encounter between the completion of a deal and the date of registration. This 'registration gap' is problematic, as we explained in our articles Mind the Gap and The Gap Widens. The buyer does not become the legal owner until registration is completed and the Land Registry's proposals do not attempt to change this rule.
Security of the registration system is clearly a key issue. The Land Registry is confident that the system of secure e-signatures and network access agreements will provide adequate security and allow users to rely on an electronic system, fully confident of its integrity. That remains to be seen and debated.
The consultation period started on 9 February 2017 and the closing date for responses is 5 April 2017. You can read the consultation here.