E-asy as houses?

E-asy as houses?

The land registration act 2002 sets out a revolutionary system of e-conveyancing.

Yet some solicitors fear that such methods might be vulnerable to fraud, reports Michael Gerrard

Property solicitors are about to see great changes in their area of business, thanks to the passage in February of the Land Registration Act 2002.

Up until now its predecessor Act, dating from 1925, has held sway - largely based on the arcane practices and language of the original 1875 legislation.

Naturally enough, much has changed in the intervening 77 years and the present government, with its liking for all things 'joined up' and modern, has introduced legislation which will revolutionise property law.

The makeover has been a far-reaching one, encompassing such topics as a reduction in the length of time that a lease needs to run before it needs to be registered from 25 to seven years.

It also seeks to afford landlords greater protection against squatters.

But by far the most sweeping aspect of the Act is its provision for a complete overhaul of the land registration system, with an emphasis on the introduction of electronic conveyancing.

It is the culmination of work aimed at speeding up conveyancing, that also includes seller's packs (although the future of these remains in doubt) and the National Land Information Service (NLIS), which aims to provide searches electronically.

This will remove the onerous paper-based system of applying for searches.

The Land Registry has been going full steam ahead with its plans, recently receiving a 1.5 million grant from the Treasury's invest-to-save budget to design, build and pilot the proposed system of electronic conveyancing, and to develop a full business case for its implementation nationally (see [2002] Gazette, 28 March, 12).

A timescale of five to ten years is envisaged to get electronic conveyancing fully in place, and one major catch at present is that there is no agreed system to provide a secure way of conducting such e-transactions.

Lawyers working in the sector are expected to be asked for their views on the way ahead during a three-month consultation by the Lord Chancellor's Department scheduled next month.

At the core of any discussion will be the somewhat vexed question of electronic signatures - for save this factor the vast majority of parts required for an e-conveyancing system are already in place.

While all other documentation can be transferred via the Internet, any contract or transfer of land deed needs to be properly signed by the vendor or buyer.

Yet in the new e-world, most ordinary folk are unlikely to have a secure digital electronic signature of their own, at least for several years, thus the burden is likely to fall on their solicitor to sign electronically on their behalf.

This subject is likely to form a large part of the consultation paper - solicitors will need to be sufficiently satisfied that they have their client's irreversible authority before proceeding with a transaction.

Of course, no solicitor wants a client pulling out of a deal once he has put his signature to a contract.

Alan Riley, property law consultant with Manchester firm Halliwell Landau, says: 'Obviously we are looking for guidance from the Law Society on the quality of written authority required in order to sign for a client.'

Quite apart from fears of clients reneging on deals, many property solicitors have misgivings about whether digital electronic signatures are sufficiently secure from tampering.

Raymond Perry, a solicitor at Gloucester's Davies & Partners, a noted e-conveyancing sceptic, says: 'It is quite simple to sign a bit of paper.

You can make things more complex by introducing very complex IT systems.'

Mr Perry and many others fear such an electronic-based system could be open to abuses, notably fraud, especially if a hacker manages to get his hands on an encrypted electronic signature.

Ken Byass, a conveyancer and chairman of the Law Society's electronic law committee, reflects the fears of many that solicitors could be found liable if something goes amiss with their electronic signature.

He says: 'The risks of something going wrong are pretty remote; the people working on a model say that 99.9% of the time things should be safe.

But that margin of error still means something is going to happen.'

Naturally, the government is keen to ease such fears, stating that solicitors will be subject to the same liability as they are now over negligence or criminal behaviour.

Rejecting an attempt by shadow Attorney-General Bill Cash to introduce extra protection for solicitors against any claims arising from the fraudulent use of digital signatures, Lord Chancellor's Department minister Michael Wills told the House of Commons in February: 'I am happy to confirm that the principles that have guided the Land Registry in relation to the paper system will continue to operate in the new world of electronic conveyancing.

In particular, the Land Registry accepts that the burden lies with it to satisfy itself that there has been a bad case of fraud or negligence before seeking recourse against a conveyancer.'

Some solicitors - far from regarding electronic signatures with dread - welcome their arrival, especially as e-conveyancing will be optional, at least initially.

Neil Sagoo, a solicitor in City firm Norton Rose's property department, says: 'This could be viewed as a prime marketing opportunity.

We can tell clients that we have the capability to provide an electronic signature.'

He adds that it is probably easier to commit fraud with paper than by electronic means.

Of course, Norton Rose has great resources to call upon to introduce the necessary software and training to handle the transition to e-conveyancing, yet high-street operators will ignore the new methods at their peril.

The government has said that any electronic system would not involve great expense and is likely to be based on Internet systems that the majority of solicitors already possess.

On top of this, a further external challenge is likely to force the hand of any complacent high-street practitioner.

Alastair Rhodes, a partner at Hampshire firm White & Bowker, points to the plan passed recently by the Law Society's Council to allow in-house solicitors to offer their services directly to the public.

As an example, he says, Abbey National is just one of the large companies to have voiced an interest in retaining conveyancing work in-house.

Mr Rhodes says: 'If smaller firms don't embrace e-conveyancing, they could then find themselves taken over or by-passed if this change comes into effect.'

On the face of it, there appear to be more pluses than minuses in e-conveyancing, with NLIS the obvious example of a positive development.

Transparency could also prove to be a major improvement, with the Land Registry taking a leading role in ensuring that throughout a transaction all the parties will know exactly what is going on - through the introduction of a conveyancing chain system and a greater handle on the title-checking process, not least through NLIS.

The Land Registry will manage the property chain, using a computer matrix to keep parties up to date.

No longer will the chain be broken without all parties knowing what has caused it.

Similarly, Land Registry direction will mean that any problems over title and third party interests will be discovered earlier in the transaction process, unlike at present when hitches can come to light even at the post-completion stage.

Mr Riley is in no doubt that overall e-conveyancing is most definitely the way of the future.

He says: 'E-conveyancing is cheaper and more efficient than what goes on at present, where a lot of paper is shuffling around the place.'

There are bound to be teething problems, not least concerns over electronic signatures, but there seems little turning back now.

Michael Gerrard is a freelance journalist