Dematerialisation - friend or foe?

Denis Cameron looks at the Land Registration Act 2002 and moves to cut paper documents from conveyancing

Most conveyancing solicitors, particularly those who have been around a long time, love their deeds.

Thirty years ago, when registered conveyancing was not so widespread, solicitors used to have to pore over them going back at least 30 years to investigate the title properly.

The reduction in the investigation period to only 15 years came as a shock to the traditionalists when it was introduced in the 1970s.

A greater shock to those traditionalists was compulsory registration of title, which now covers the whole of England and Wales.

But somehow those old deeds have survived.

It is rare to find deeds consisting of merely the charge certificate or land certificate and a few searches.

This is hardly surprising.

The Land Register is not comprehensive.

However, what is more important is that no one is prepared to pay solicitors to check through the bundle of deeds, and sort the wheat from the chaff by removing from the bundle documents which have no legal significance.

If this were to happen it would be no exaggeration to say that the majority of documents could be disposed of.

Few would have any historical significance either.

Times are now rapidly changing in conveyancing and all solicitors, even the most traditionally minded, will have to change with them.

The Land Registration Act 2002 and the land registration rules will be introduced in October of this year.

There is no mention in the Act or the rules of new charge certificates being issued by the Land Registry.

The fact is that they will not be.

The details of the register will just be held electronically.

There will be no land certificates either.

All that the owner will receive from the Land Registry is a piece of paper giving brief details of ownership.

This document will have no legal significance; it is designed purely to give comfort to the owner until the public becomes more used to the concept of the electronic register.

The lenders appear to be happy that their charge certificates are to be held electronically.

Currently, they can access the Land Registry through Land Registry Direct, where they can have a look at their security whenever they want.

They will not need to have to go to the expense of storage of deeds for new matters, and of course over the years their stock of deeds will gradually diminish as will the cost.

The Land Registry will not require the old charge certificate to be returned when a registered property is sold; if it is returned it will only be shredded.

It is anticipated that by the end of this year all scanning of documents will have been completed and all registered titles will be held by the Land Registry electronically.

The vectorisation of the index map (this means converting all file plans to electronic form) is also expected to be completed in 12 months.

We are all now familiar with the electronic notification of discharge (ENDs) procedure.

This summer, the first pilots of electronic discharges (EDS) will start; EDS is the procedure whereby lenders will have direct access to the register to remove their charges electronically.

It is hoped that in 2004 the Land Registry will introduce e-lodgement pilots and electronic charges.

E-conveyancing pilots should be with the profession at the start of 2006.

All of these changes must leave practitioners in no doubt that what is called dematerialisation is with solicitors now and must be approached by the profession, not with resignation, but with enthusiasm.

A few years ago, dematerialisation troubled practitioners - and with some justification.

Several lenders had started to adopt a practice of only taking some deeds from solicitors.

In particular, they did not want those usually bulky pre-registration deeds.

They asked us only to send the charge certificate and one or two other documents that they considered they wanted.

This was unsatisfactory.

What was the solicitor do with the remaining documents? Just send them to the client in the knowledge that the chances of those documents ever marrying up again with those held by the lender were slim? Retain them, knowing that the client could still go to another solicitor elsewhere to sell without requiring them? Or simply bin them? For any conveyancing solicitor, knowing that the Land Register is not comprehensive, the third suggestion was never acceptable.

However, one or two lenders are now showing the profession the future well ahead of the changes that will start in October.

They are now saying 'we don't want any documents at all'.

Solicitors are invited to retain the deeds or send them to the clients.

So far as these lenders are concerned, this is 'total dematerialisation'.

There are risks in it for them - not having the original lease is an example.

They are aware of these risks but these lenders know that the benefits far outweigh them.

There is a huge money-saving for them even now in cutting down on storage.

In any event, it is the future - so why should they not take an early step into it?

The Law Society has received considerable correspondence from concerned practitioners worried about, or even objecting to, what lenders are doing.

One cannot disagree with the concerns that are being expressed about lenders only taking some documents, but there should be no objection to the lenders who are taking nothing at all or simply some copy documents.

This practice will spread in the coming months but will rapidly increase after October.

Total dematerialisation takes away from practitioners that worry about deeds being separated.

Solicitors can send them to their clients, with a note telling them to look after them.

Or, law firms can keep them.

If practitioners have all of the documents in their possession they may have more of a chance of the client returning on a subsequent sale.

The choice is for the solicitor.

Eventually, the Land Register will be more comprehensive.

Old covenants and other archaic matters may have to go.

In the future, there will be no need for any paper documents in the conveyancing process.

Denis Cameron is Law Society Council member for Central Lancashire and Northern Greater Manchester and chairman of the Society's conveyancing and land law committee