A new formula for determining which of two innocent parties of a land fraud should keep the property in question is among proposals for reform of the legal framework governing land registration in England and Wales to be published today. 

The Law Commission's consultation opens within a week of the government publishing proposals to sell Land Registry to the private sector, a move that would require primary legislation.

However the commission states that the privatisation plan 'is not a matter that falls within our project'. Instead, the 500-page document involves a wide-ranging review of the Land Registration Act 2002, including manorial rights and chancel liability, overreaching and the protection of beneficial interests and registration of local land charges. 

A 'pervasive issue' is how the registration system responds to fraud, for example where an innocent purchaser buys from someone who fraudulently claims to be the owner, thus displacing the legitimate owner from the register. The consultation proposes a provision formula 'to clarify and simplify' how the innocent victims should be compensated and which innocent party should end up with the property. 

The paper also examines whether more can be done to prevent fraud, including how the land registration system could include more effective identity checks.

The commission notes that the 2002 act 'provided for an ambitious electronic conveyancing model which has not yet been achieved'. It is seeking views on provisional proposals that will facilitate a more flexible approach to the development of electronic conveyancing.

Professor Nick Hopkins, law commissioner for property, family and trust law, said: 'The landscape within which land registration operates has changed considerably since the 2002 act came into force. Our review provides an opportunity for landowners, conveyancers, lenders and all those with an interest in the property market to tell us how the act has been working in practice.

'It allows us to consider where we can bring greater certainty and security and what can be done to reinforce the role of the land register as a guarantee of title.'

The consultation is open until 30 June.