Electronic Land Registration - 2: Options from a legal perspective

INTRODUCTION:
Having looked at the overview of the present paper based system and a discussion of the first two options for an electronic land registration process: 1. The Deeds Office assumes full responsibility for the legal validity of deeds, and 2. The Legal profession assumes full responsibility for the legal validity of deeds, the writer turns to the final three options: 3. The Deeds Office merely records and registers as the examination function is delegated to the private sector, 4. The status quo remains unaltered save for certain consequential adaptations necessitated by an electronic as opposed to a paper process and 5. The status quo remains unaltered in essence but with a number of cardinal adjustments to facilitate the process, alleviate the burden of the Deeds Office and render a better service to the public.

3. The Deeds Office merely records and registers as the examination function is delegated to the private sector
The Deeds Office outsources the examination function to the private sector. The Deeds Office as the representative of the State remains the authority to perform the registration function, to keep records and maintain registers. The private sector performs the examination function on behalf of the Deeds Office. This will ensure that examiners will have to be trained and employed by the private sector. They will continue to perform, as in the past, in addition to the examination function, the important judicial function, i.e. give rulings similar to the present Registrar's Circulars and Registrar's Conference Resolutions as well as ad hoc decisions in regard to problems of law and practice, as these manifest themselves country-wide on a daily basis.

The role of the conveyancers remains unaltered subject to the qualifications as set out in (4) below.

It is doubtful whether the inter-action between the public and private sector as we know it today can be improved upon if such inter action (with its system of checks and balances) is replaced by a system where the private sector interacts with itself, i.e. the conveyancers on the one hand and the examination entity on the other hand.

The question arises whether this option would serve any purpose. It is doubtful whether a shift of this nature would afford real benefits to either the public or the employees of the various Deeds Offices. The disruption that will be caused by such a move will probably not add value to the public or any of the role players in the property industry especially insofar as it relates to land registration. The conversion of a paper-based system to an electronic system should not result in changes that are unlikely to improve the status quo.

For the reasons given above under option (2), the State, through the Deeds Office, should retain the all-important function to ensure that the laws of the country, relating to land and land registration, are duly complied with. We strongly believe that it is in the public interest not to commercialise the judicial function of the Deeds Office.

4. The status quo remains unaltered save for certain consequential adaptations necessitated by an electronic as opposed to a paper process
It can be said of our land registration system where the obligations and duties of the various role-players are clearly defined, that it virtually guarantees security of title - to the extent that title insurance (the norm in the United States of America) is unknown in South Africa. There is also no need for the State to guarantee security of title as disputes between land owners based on boundary or ownership issues, are rare in those instances where registrations are effected in the conventional Deeds Registries.

Electronic registration must not detract from the status quo in this regard. It must streamline the system without compromising its integrity. To achieve this, it would be necessary for conveyancers to assume greater obligations and responsibilities when performing their legal-, management- and financial functions and duties.

The electronic registration environment will however require certain adaptations affecting both the Deeds Office and Conveyancers.

In regard to the Deeds Office, a computerised land registration system should provide for the examination of deeds by electronic means. This would relate to basic issues such as checking the names and identity numbers as well as the marital status of transferors against the existing records of the Deeds Office, e.g. the prior transfer or a title relating to another property or an ante-nuptial contract. This should also apply to the description of a property i.e. the lot or holding number as well as the portion and number of the farm. This would also relate to the extent of a lot or farm as well as the number of the holding title.

These facts can be effectively checked and verified without human intervention. It should be noted that the conveyancer's certificate is in any event supposed to cover the majority of these matters. The computer can assist greatly in verifying the correctness of the conveyancer's certificate. This will save a lot of time and effort on the part of the examiners whom at present check and collate these facts in any event against existing records.

Human intervention should be limited to matters of judicial or quasi-judicial nature such as the exercising of discretion in regard to the interpretation and/or application of legislation, the acceptability of notarial deeds purporting to create servitudes which can be registered whether personal or praedial and in the last analysis, whether any deed or document submitted for registration or execution, should be passed or rejected.

In regard to conveyancers, it would appear that conveyancers would have to assume additional responsibilities. The Deeds Office should no longer check and retain supporting documents such as powers of attorney to pass transfer or register bonds, transfer duty receipts, rates clearance certificates, consents to alienate, sub-divide and the like. These supporting documents will for the foreseeable future remain in paper format. This would certainly apply to the authority of a property owner to transfer or mortgage his or her property (the relevant power of attorney). Such an authority should in our view be given in writing to be used as best evidence for the resolution of disputes.

The conveyancer or statutory rights officer should be obliged to keep a proper protocol for these documents. Should the validity of a transaction be questioned or attacked, the parties to the dispute must be enabled to access the documents authorising the digital registration of the property transaction. In the public interest the conveyancing profession should assume this additional responsibility.

5. The status quo remains unaltered in essence but with a number of cardinal adjustments to facilitate the process, alleviate the burden of the Deeds Office and render a better service to the public
If the present system were converted to an electronic one, certain "paper requirements" would still hamper and even frustrate the entire initiative. We therefore recommend that the duty to check transfer duty receipts should not be imposed on the Registrars of Deeds. The duty imposed on Registrars of Deeds to check rates clearance certificates issued by local authorities should likewise be dispensed with.

These duties should become the responsibility of conveyancers and the legislation should be amended accordingly. In this regard it should be noted that the entire initiative to introduce electronic land registration could be severely hampered by the insistence that the Registrars still check transfer duty receipts and clearance certificates.

Experience has shown that inordinate delays are caused in property transfers by the requirement that transfer duty receipts and municipal clearance certificates have to be lodged. These documents are in any event not furnished electronically and it would be an untenable position to have both an electronic component as well as a paper component (i.e. the aforesaid receipts) in respect of every property transaction.

The obvious solution is to shift this burden to the conveyancers and accredited government officials.

The acceptance of these proposals will undoubtedly speed up the registration process without affecting the position of the conveyancers, the Receiver of Revenue or the various local authorities for the following reasons:

Conveyancers obtain transfer duty receipts and rates clearance certificates in any event.

The Receiver can easily check in respect of which transactions conveyancers omitted to pay transfer duty. The Deeds Office will have no difficulty in furnishing each Receiver from time to time with all the information regarding registrations in its area of jurisdiction for a specific period so as to enable the various receivers to collate (presumably electronically) this information against its records relating to the payment of transfer duty. It should therefore be a simple exercise to identify those transactions in respect of which conveyancers failed to pay duty.
Local Authorities should not be placed in a better position than Bodies Corporate in Sectional Title Schemes. Reluctance on the part of the Commissioner for Inland Revenue and especially the local authorities to co-operate in this regard, should not impede the implementation of electronic land registration.

THE RECOMMENDED LEGAL OPTION:
From a legal perspective we recommend that the responsibility for the legal validity of titles and deeds should be borne by both the private sector (the conveyancers) and the public sector (the Deeds Office examiners and accredited government officials).

The division of these responsibilities should follow the established common law and existing statutory provisions save to the extent that these will have to be adapted to fit into an electronic environment. This would inevitably lead to an increase in the responsibilities of conveyancers and the alleviation of the examination function of the Deeds Office examiners subject to the important proviso that such alleviation will relate to time-consuming and mechanical issues rather than matters of substance. The role and function of the Deeds Office as the ultimate watch-dog of our land registration system will not be diminished but the process should become less cumbersome and easier to manage.

The position of the Deeds Office
1. The introduction of electronic registration should enable the Deeds Office to dispense with the labour intensive and time-consuming checking and collating of matters such as identity numbers, the numbers of companies, trusts and close corporations, the names of persons whether natural or judicial as well as the numbers of erven, holdings and farms, the extent of these properties as well as their title numbers. These are all matters that can be attended to in a electronic environment without human intervention.

2. Authorising documents such as powers of attorney to give transfer or pass bonds and applications for the issue of certificates of registered or consolidated title, should no longer be lodged as these documents should be kept in safe custody in the Conveyancer's Protocol.. This practice has been followed in respect of Notarial Deeds in the current paper system for many decades. This principle also applies to powers of attorney relating to mortgage bonds submitted for registration in terms of the provisions of the Sectional Titles Act No 95/1986. Electronic registration will provide an ideal opportunity to extend this principle to all Deeds lodged for registration or execution thereby relieving the Deeds Office of the burden of having to examine these documents.
This principle could be further extended to other supporting documents such as transfer duty receipts and rates clearance certificates. These can likewise be kept in the Conveyancer's Protocol. Before this procedure could be implemented in respect of transfer duty receipts and rates clearance certificates, the co-operation of both the Commissioner for Inland Revenue and the various local authorities will have to be obtained. This will also necessitate the amendment of legislation governing the production of these documents. This is a long-term initiative which is not a pre-requisite for electronic registration and which should be pursued as a separate issue. It should nevertheless be emphasised that it will simplify matters for the Deeds Office if the checking of these documents by the Deeds Office, which has nothing to do with the integrity of our land registration system, could be dispensed with.

3. The updating of the records of the Deeds Office will occur instantaneously with the registration of each and every transaction. The present expensive procedure in terms whereof the information received by the Deeds Office in paper format, can only be converted into electronic format by data operators (leaving room for errors) after registration, would no longer apply. This will inevitably result in the records of the Deeds Office being more accurate and up to date as the present system does not necessarily reflect the actual position by reason of the time-lapse occasioned by the conversion of paper-based data into electronic format. data typists will be able to update the remainder of paper-based information, e.g. court orders, more expeditiously and would be free to perform other tasks and duties.

4. By reason of the aforegoing labour saving consequences that electronic registration should bring about, the Deeds Office should be able to handle and examine substantially larger volumes of deeds and documents lodged for registration and execution with its present staff complement.

5. Electronic registration may also enable the Deeds Office to create additional revenue streams such as -

a. establishing and maintaining security registers for commercial banks and other financial institutions;

b. establishing and maintaining comprehensive property and ownership registers for local authorities and services councils.

6. The need for the expedition and restoration of deeds will diminish and may even disappear. Although it is the prerogative of the Deeds Office to accede to or refuse requests for either the expedition or the restoration of deeds, much time and energy is expended in considering these requests. The system is often abused and does interfere with the normal workflow of a number of examiners. Conveyancers will undoubtedly welcome "the levelling of the playing fields" as many conveyancers feel that the system is being abused by some of their colleagues.

The position of the Conveyancer
The substantial common law and statutory responsibilities of the conveyancer will have to be extended in order to facilitate both the introduction and application of land registration in an electronic environment.

1. Authorising and other supporting documents should be kept in a conveyancer's protocol. We submit that it would be in the public interest that authorising or empowering documents such as applications and powers of attorney (in paper format and duly signed by the owner) should be kept in safe custody in a conveyancer's protocol. Such documents can be used as best evidence in the event of a possible dispute in conjunction with the records of the Deeds Office. Appropriate amendments to both the Deeds Registries Act, 1937 and the regulations framed thereunder, will have to be made in order to legislate for the establishment of a conveyancer's protocol and to determine the nature of the documents that should be filed in such a protocol.

2. Electronic registration would expedite registration as cumbersome procedures relating to the examination process will be simplified. The possibility of drawing a distinction between "normal" and "complicated" registrations should be considered. "Normal" transactions would relate to the sale and transfer of residential properties in established townships, financed with bank loans duly secured by covering mortgage bonds. For these matters a one-tier examination process may well suffice. This would account for the majority of transactions. "Complicated" transactions would relate to sub-divisions, consolidations, estate transfers (especially those in respect of which conditions capable of registration have been imposed in terms of the Will of the deceased) and servitudes, whether personal or praedial. These may even include forced sales involving Sheriffs in the case of execution sales and trustees or liquidators in the event of insolvency sales. In respect of these matters the two-tier examination system could be retained. We recommend that the labour implications of this possibility be researched in conjunction with the Deeds Office.

3. It is important to note that time will not only be saved because of the fact that the examination and registration period in the Deeds Office (presently 10,36 working days in Pretoria) could be substantially reduced (conceivably to two or three days). Electronic registration will also expedite the process that precedes lodgement in the Deeds Office. To give but one example: Dispensing with the paper process would result in the Deeds Office no longer requiring a client's copy of a title deed or bond(s) for lodgement. The laborious procedure in terms of whereof titles or bonds must first be obtained from sellers or mortgagees would automatically fall away. A substantial period of time will be saved in this manner.

CONCLUSION:
The integrity of the main role players in the conveyancing profession (namely the deeds office examiners and conveyancers in private practice), would therefore become of even greater importance than in the past as the checks and balances afforded by the paper system will not be as self-evident in an electronic environment. The above options are all subject to the very important proviso that the status quo relating to the qualification and training of both deeds office examiners and conveyancers in private practice will remain intact for time to come