A. Advise Quill what changes he needs to make to his business practices and when.
Property 1
Assessed Essay
EASTER 2002
A. Advise Quill what changes he needs to make to his business practices and when.
The Law of Property (Electronic Communications) Order 2001 incorporated into Section 8 of the Electronic Communications Act 2000, and enactment of the Land Registration Act 2002 will have a number of implications to Quill's business of creating hand written conveyances and selling individual house to Americans. Firstly, it will be voluntary for conveyancing to be carried out electronically which will make it simpler and more efficient. A new section 2A will be added to the Law of Property (Miscellaneous Provisions) Act 1989 to make contracts of sale available electronically, and a new section 144A in the Land Registration Act 1925 will provide a deed to be created electronically. Both electronically created contracts and deeds will take effect as a paper contract or deed.
In order for Quill to adapt to these changes, some formalities need to be understood. At present, all conveyances of land are required to be made in writing under a deed in section 52 of the Law of Property Act 1925, with the exceptions of assents, creation of short leases, and conveyances by operation of law. Under the draft Order for e-conveyancing, a deed can be created electronically via a secure Intranet. Quill will firstly be required to update his business by purchasing a computer in order to be able to carry out transactions in the future. If he has not done so already, Quill will have to be registered as a licensed conveyancer by application to the Council of Licensed Conveyancers1. For Quill to be able to access this "secure Intranet" he will require a "Network Access Agreement" by authorisation of the HM Land Registry2. However, in order to have the right to enter a network access agreement, Quill is expected to provide evidence of having "a proven record of competence conveyancing"3.
The first requirement underlined in the Land Registration Act 2002 is that the document, to take form electronically, "purports to effect a disposition". By a "disposition", we refer to either a disposition of a registered estate or charge, an interest that is subject to notice in the register, or a disposition that requires registration4. So before Quill is able to make dispositions of his properties electronically, the land involved must be registered, and if it is unregistered then this will trigger the requirement for compulsory registration5. With concern to the land being sold in "postage stamp sized lots", Quill may be subject to the souvenir land scheme whereby registration is now required despite the implication of Section 5(1) of the Land Registration (Souvenir Land) Rules 19726. Quill should enquire by letter to the Chief Land Registrar whether a declaration will need to be made. The District Land Registrar must be satisfied that the land has wholly or mainly been disposed of as souvenir plots in order to make a valid declaration. This declaration will be entered on the property register of the registered title. Under Section 4 of the Land Registration and Land Charges Act 1971 and the Land Registration (Souvenir Land) Rules 1972, Quill should register this land by a "Souvenir Land Declaration" to the District Land Registry7. The land itself must be registered before any declaration can be made. This would aid the application of electronic conveyancing and cause fewer problems for Quill and his American clients in the near future.
All other titles that Quill has been selling will also have to be registered.
Under the new section 144A of the Land Registration Act 1925, Quill can change his business by creating the deeds electronically using a Gothic font to upgrade his business of elegant hand-written titles. If the document in electronic form is to be authenticated by the licensed conveyancer rather than the individual (i.e. the buyer), he will need to "obtain written authority of his principal"8.
Quill will then be required to obtain an electronic signature from the Land Certification authority, which is otherwise known as a "private key" or PKI9. This private key will be issued to Quill once the authority is satisfied as to his identity10. He will need to inform his American buyers or mortgagees that this key can be decoded via a "Public key" which will be supplied by the authority. The document would therefore be valid providing it is in writing, and signed by each individual by use of electronic signature11. Once these requirements have been fulfilled, the electronic ...
This is a preview of the whole essay
Quill will then be required to obtain an electronic signature from the Land Certification authority, which is otherwise known as a "private key" or PKI9. This private key will be issued to Quill once the authority is satisfied as to his identity10. He will need to inform his American buyers or mortgagees that this key can be decoded via a "Public key" which will be supplied by the authority. The document would therefore be valid providing it is in writing, and signed by each individual by use of electronic signature11. Once these requirements have been fulfilled, the electronic document will be as effective as an equivalent paper document.
The new section 2A of the Law of Property (Miscellaneous Provisions) Act 1989 will change Quill's business of conveying his manor houses to aristocrats or any other disposition of an interest in land is to be made. Again, as with section 144A12, the land will need to be registered before any disposition of an interest can be made. If the land is unregistered, then compulsory registration will be triggered under section 123 of the Land Registration Act 1925. However, if the manor houses are incorporeal hereditaments as described under the Land Registration Rules 1925, compulsory registration under section 123 would not apply. In this situation, because the estates are being conveyed, there will be a break in the descendancy that will make it compulsory for first registration once the sale is completed.
With regard to his business of conveying tenanted houses to Americans, Quill would still require this land to be registered even if he grants a lease for more than just 3 years13. Quill can transfer these interests over land by e-contracting. It is quite surprising that Quill has not heard of the Land Registry because if his land was not register two months after it was conveyed to the Americans, the sale would be void and his clients would not have any title or interest over the property. By the process of e-conveyancing, because the sale and registration are almost simultaneous, Quill can ensure that a genuine transfer of property has been made.
For a contract to be valid electronically, there are four requirements14. Firstly, between Quill and the buyer (or his respective agent), an incorporation of all the agreed terms will need to be expressed in the document, as has been practiced under section 2(1) and (2) of the Law of Property (Miscellaneous Provisions) Act 1989. Secondly, the time and date of when the contract is to take effect must be implied within the document. Thirdly, Quill's clients will need to obtain an electronic signature to authenticate the document. Finally, this signature should be certified with the Certification Authority.
The implications of these two new sections created by the draft Order will in effect, force Quill to acquire competent computing skills in order to satisfy the new system of electronic conveyancing and add efficiency to his business.
As to when Quill should make these changes, it is advised that he acquires computer skills as soon as possible to prevent being undermined by larger firms of conveyancers who will have the upper hand with expensive advanced computer technology. The Land Registration Act 2002 was given the Royal Assent on 26 February 2002, however, it must be remembered that this will only render e-conveyancing methods as voluntary. It has been estimated that in 4-6 years time, e-conveyancing will become compulsory, but the date is yet to be confirmed.
B. In half a page or so write a research trail indicating how you have located the material needed to advise Quill.
By following this trail, I was able to access the World Wide World via a computer, using a modem, and acquire the necessary information to advise Quill on e-conveyancing:
(i) The first website I entered was www.lcd.gov.uk which is the site for the Lord Chancellor's Dept. By clicking on the link in blue text entitled "Consultation Papers", I was given more links of which I found under General Consultation Papers, the "Archived Consultation Papers and Responses". Here, I was able to download "Electronic Conveyancing - A draft order under section 8 of the Electronic Communications Act 2000" by clicking again, on the blue text.
(ii) The next site I entered was www.lawcom.gov.uk by typing in the web address in the Explorer bar. On this site, I clicked on the relevant link entitled "Property and Trust Law". On this web page, I was able to download the two reports on e-conveyancing; "Land Registration for the Twenty-First Century: A Consultative Document", and "Land Registration for the 21st Century - A Conveyancing Revolution" by clicking on the numbers in blue text adjacent to the titles.
(iii) I found the Land Registration Act by accessing the website www.hmso.gov.uk. I clicked on the link "Legislation", for "United Kingdom", finding "Acts of UK Parliament" under the Public Acts of "2002". This brought me to the list of Acts of which I found the Land Registration Act 2002.
(iv) The final web address I gained information from was www.tscheme.org. On the left-hand side of the web site, I clicked on the "library" link where I was given a number of downloadable "PDF" files. The files I downloaded were; "tScheme response to DTI consultation on E-signatures Directive", the "Electronic Communications Act (ECA 2000)", and "Directive 1999/93/EC (Electronic Signature)-PDF".
(v) I also obtained information regarding souvenir land by firstly looking in the law text book, "A New Land Law - Peter Sparkes" and then searching the Web using the search engine. By typing in "souvenir land" in the search field, I was given a list of links where I found www.landreg.gov.uk - the site for the HM Land Registry. Here I searched "souvenir land" again, in the box at the top right-hand corner, and was given a downloadable PDF file entitled, "pI018.pdf". This document was the Practice Leaflet 18 on Souvenir Land issued May 1999.
C. Assess whether the benefits of e-Conveyancing and e-contracting will in general outweigh the costs.
Already 94% of conveyancers have access to the internet with a computer in their workplace. This means that electronic conveyancing would benefit conveyancers if they already hold access to a computer and have computing skills. It is estimated that the e-conveyancing software required would cost approximately £200 per user and as such software would require updating after a period of five years, the cost per user of software would be £40 per annum15. If the system of e-signature is used for these documents, the cost would be £5 per transaction, compared to the current cost of £21. The savings would be on clerical labour, copying and preparing paper contracts, postage, and storage16. A small business who do not use IT may find that their competitive position will erode if larger firms of solicitors or conveyancing firms are more competent in using computers for e-conveyancing. The cost of having to update and train staff may prove more expensive for those in that position. For all those using the software, there may be large expenses in the case of system failures which is another factor that needs to be taken into account.
However, despite some savings to large firms, there are further costs that need to be weighed out.
Firstly, the cost of obtaining an electronic signature to begin with, may be costly. As criticised by the Law Society, if every signature was to be "certified", the cost of checking the authenticity of each licensed surveyor or solicitor's identity "would come at a cost which might well discourage those who would otherwise be keen to embark upon e-conveyancing"17. The signatures themselves may be less secure than perceived, as the Certification Authority are not held liable for third parties. When the Land Registry receives a disposition document (i.e. a deed), they have no means of verifying that the signatures on the document have been authorised by the real buyer and seller18. This can be considered a risk for fraudulent conveyances and as a result, some may be compelled to carry out the transactions themselves unless the Certification Authority and Land Registry work together to ensure all signatories are monitored with a high level of security.
An advantage of e-conveyancing would not only reduce the cost by having paperless transactions, but there are other benefits which simplify the process of conveyancing. Firstly, where a mortgage requires registration and to be carried out by a deed, e-conveyancing enables a mortgage to be executed by a licensed surveyor or solicitor with the mortgagee's express authority. There is no longer a need for the signing to be witnessed, or any delay on the "delivery" as the time and date are fixed into the document19. The terms of the mortgage can be agreed via the Intranet and the date and time fixed in the document in electronic form. The mortgage will then be signed by the solicitor, acting on behalf of the mortgagor, by use of his or her electronic signature. The mortgagee (i.e. the Bank) can then transmit this document directly to the HM Land Registry where it can be registered. The execution of the charge and registration will therefore take place simultaneously, closing the registration "gap" which can be dangerous as the seller would still remain the legal owner of the property until registration is complete. Thus if a person is not yet registered as a proprietor of a property, they cannot serve a notice on the register until registration occurs20. The only protection for the purchaser between the completion of transfer and registration is an official search with priority which would not even protect overriding interests whose rights are valid even though they are off the register21. E-conveyancing would close this gap, giving purchasers protection by serving notice of their interest on the register at the time of the transaction. This also applies in the case of e-contracting where automatic priority protection will be given to the purchaser on completion of the sale22.
Secondly, e-conveyancing will benefit the Land Registry office by obviating the need for costly storage facilities23 and reduce their workload by not having to duplicate the information contained in the transfer document thus reducing the risk of error24. However, despite this benefit, the fundamental existence of a Land Charges Certificate to prove identification of the registered proprietor of a property has diminished under the electronic system. Without the need of this Certificate, it can be argued that e-conveyancing is vulnerable to fraudulent transactions by falsely impersonation of someone with an interest over land that is not actually theirs25. This risk needs to be weighed against the financial benefits of e-conveyancing, as security of a purchaser/proprietor should be the main priority.
Thirdly, the sytem of e-conveyancing and e-contracting will fulfill the HMLR's objective to have all titles registered with the exception of titles that virtually never change hands (i.e. otherwise known as land "in demesne" - Crown land)26. Licensed surveyors and solicitors will therefore have access to a search all registered titles via the Intranet which will ensure accurate and efficient transactions are taken place with clients. However, as this "virtual database" is restricted to the "agents" of a disposition of land, individuals are unable to make these searches independently or carry out conveyancing themselves which may disbenefit them financially.
On a final point, it can be argued that e-conveyancing and e-contracting need not be weighed with the costs as it is a requirement by EC Directive to use electronic signatures to "strengthen confidence in, and general acceptance of, the new technologies"27. The European Parliament recommend in this Directive that electronic signatures be used in a wide range of new services "such as registration services, time-stamping services..."28. Although e-conveyancing does not adversely affect the authority of the register29, it does, however, have power to require simultaneous registration30. As a member state of the EU, we would be working in accordance with the principles of subsidiarity as set out under Article 5 of the Treaty, thus creating a harmonised legal framework for the provision of electronic signatures31.
Section 1(5) Law of Property (Miscellaneous Provisions) Act 1989
2 Paragraph 13.37 Land Registration for the 21st Century (2001) HC 114
3 Paragraph 13.40 Land Registration for the 21st Century (2001) HC 114
4 Section 91(2) Land Registration Act 2002
5 Section 123 Land Registration Act 1925; Section 91(2)(c) Land Registration Act 2002
6 General Information - Practice Leaflet 18-Souvenir Land May 1999
7 Practice Leaflet 18-Souvenir Land May 1999
8 Section 91(6) Land Registration Act 2002
9 Paragraph 26 Lord Chancellor's Consultation Paper on E-Conveyancing March 2001
0 Paragraph 28 LCCPE March 2001
1 Section 91 (4) LRA 2002
2 LRA 1925
3 Paragraph 7 LCCPE March 2001
4 Paragraphs 59-63 LCCPE March 2001
5 Appendix III, Paragraph 11, LCCPE March 2001
6 Appendix III, Paragraphs 9, 12 and 13, LCCPE March 2001
7 Paragraph 28, E-Conveyancing-Response of the Law Society
8 Paragraph 33, E-Conveyancing-Response of the Law Society
9 Paragraph 13.3, Land Registration for the 21st Century (2001) HC 114
20 Brown & Root Technology Ltd. v. Sun Alliance & London Assurance Co. Ltd [1997] 1 E.G.L.R. 39
21 Page 82 A New Land Law - Peter Sparkes
22 Paragraph 54, LCCPE March 2001
23 Paragraph 11.14, Land Registration for the 21st Century (1998) Cm 4027
24 Paragraph 11.7, Land Registration for the 21st Century (1998) Cm 4027
25 Paragraphs 21 and 22, Electronic Conveyancing-Response of the Law Society
26 LRB 2001
27 Section (2) Electronic Signature Directive 1999/93/EC, OJ L13 (2000) 12, doc 31999L0093
28 Section (9) Electronic Signature Directive 1999/93/EC, OJ L13 (2000) 12, doc 31999L0093
29 Paragraph 8 Lord Chancellor's Consultation Paper on E-Conveyancing March 2001
30 Section 93 LRA 2002
31 Section (28) Electronic Signature Directive 1999/93/EC, OJ L13 (2000) 12, doc 31999L0093
