4.2 England and Wales
In a very wide project which is being led and financed through the Land Registry, changes are being implemented but a number of hitches have also being encountered.
4.2.1 Key Drivers and Scope of the Solution
Lack of transparency, unpredictability of payments, time taken to transfer property and poor conveyancing practices are the reasons behind implementing e-conveyancing in England and Wales. The overall strategy in making conveyancing easier for everyone is to progressively introduce new electronic transactions over the next few years such as electronic sale and purchase of property, EFT transactions between parties, e-registration functions involving the Land Registry and the addition of value added services, the development of which could be led by the private sector.
On the legislative front, the Land Registration Act ("LRA") 2002 which came into force in 2003 addresses registration issues as well as some substantive changes to land law. Part 8 of the LRA sets out the framework by which e-conveyancing will operate. Aspects here include formalities, date and time stamps, e-signatures, electronic settlement schemes, data communication and electronic storage requirements. The Electronic Communications Act 2000, deals with some of the more technological issues such as Internet Service Provider liability, the licensing and control of trusted third parties for the issuing of public and private keys for encrypting data, and data protection issues.
An important aspect of the English system is the Chain Matrix, a dedicated web site which tracks the progress of a chain of residential property transactions, starting with the issue of contracts through to exchange and completion. The system should enable users to log on and see exactly where they are in the chain, and if there are any problems. Fixing a date for everyone to move will also be easier, as Chain Matrix includes a completion calendar, for agreeing on what is convenient with all the parties in the chain. It was originally developed by the Land Registry as the centrepiece of a project to computerise, control and co-ordinate the key stages of the conveyancing process, thereby reducing the number of transactions that fail because of breaks in chains as a result of unresolved registration issues at closing date. However, after a £4.6 million pilot in 2007 the Land Registry shelved work on the system and in February announced its readiness to support businesses developing their own services. – see Law Society to help develop conveyancing websites
Because of the shelving, the Homebuying Forum was established, according to their mission statement Home Buying Forum Mission Statement by:
"industry leaders who are frustrated with lack of progress in improving the home buying and selling process over the last ten years. We have the technology, the commercial nous and the political will to make the process better for buyers and sellers. However, the initiatives introduced by government – for example HIPs and the Chain Matrix - have not fully delivered on this potential.
The Forum believes that this lack of progress is caused by insufficient commercial input in the creation and structure of these initiatives.
As a result, the Forum is working in collaboration with Government and industry groups to encourage the development of commercially viable initiatives that deliver "Faster Certainty" to homebuyers and sellers."
One aspect of the attempt to speed up the conveyancing process has been the introduction of the compulsory Home Information Packs (HIPs). HIPs consist of a set of documents that provide the buyer with key information about the property and must be provided by the seller or the seller's agent – see What are Home Information Packs What are Home Information Packs and a Sample Home Information Pack
In March the third consultation document – Secondary Legislation Part 3 on the rules necessary to support electronic transfers (e-transfers) and electronic charges (e-charges) complete with e-signatures as a part of the e-conveyancing transaction was released by the Land Registry for comment (Secondary Legislation Parts 1 and 2 were published in 2007). Subject to the outcome of the proposals, it is anticipated that the new rules will come into force during 2011. It is also proposed that the electronic transfer system will have an interface with practitioners' case management systems.
An explanation of how e-transfers and e-charges will operate
What follows is a summary highlighting aspects of the expected solution as contained in the consultation document – pages 11 et seq.
The conveyancers for each party agree offline amongst themselves who will create the e-transfer and declare who they are acting on behalf of i.e. for the transferor or the transferee. Land Registry will allow the same firm to act for the transferors and the transferees.
- The creation of an e-transfer automatically creates what is termed as a “bundle”. A bundle cannot exist without an e-transfer. It will contain the documents relevant to the e-transfer registration application, and will have a unique reference number, which will be in addition to the unique document reference assigned to each document.
- From the relevant screen on the “Network Services” part of the Land Registry website the conveyancer will opt to create an e-transfer. He will enter the title number for the e-transfer, which will be applied to all e-documents made under this application, and will be subject to validation. This is consistent with Land Registry’s other e-document services. The system will display a screen containing the title number, property description and tenure. Property description and estate (freehold/leasehold) will be automatically populated from the title number. This will be the first opportunity for a conveyancer to save the e-transfer. On saving the e-transfer, a bundle is created.
- The conveyancer will enter the first transferor’s forename and surname. Although it is possible to take the relevant information from the register, Land Registry’s system will not auto-populate the transferors’ names. There are several reasons for not auto-populating the transferors’ names, including fraud and the need for the conveyancer to obtain and check up-to-date official copies.
- Following on, the first transferor’s forename and surname will be displayed as entered. The user will have the option to add additional transferors, up to a maximum of four, and edit and remove any names.
- When all names have been entered, the names will be subject to validation against the register. Mismatches between the register and the entered transferors’ names will be flagged to the conveyancer, and the conveyancer will be able to edit the name there and then. Alternatively, they will be able to account for the discrepancy at this stage if they wish. In any case, the conveyancer will be able to continue even if validation fails.
- After this, each transferee’s names and address(es) can be entered. On the first transferee’s address screen, their address will have been auto-populated by the system with the address of the property being transferred. The conveyancer will however be able to amend this information if this is not the correct address for service.
- The conveyancer can then add additional transferees together with their addresses, up to a maximum of four, and remove any names and addresses. Where a previous address has been entered it will be made available as an option to avoid the need for re-keying.
- An ‘other party’ function enables a conveyancer to indicate who will be acting on behalf of the other party. This can be another firm, or another conveyancer from the same firm. We envisage that the sharing of access to the e-transfer can happen at any time after the initial save of the e-transfer but must be completed before the e-transfer is approved. There will be a search facility to allow the conveyancer to select the appropriate firm acting for the other party. The conveyancer will then enter the monetary consideration (in sterling). Entering the consideration will begin the auto-population of the e-AP1. The conveyancer will select the type of title guarantee.
- Where the estate is leasehold the conveyancer will be able to select an appropriate limitation of the implied covenants relating to the repairing covenants in the lease if required and an appropriate entry will be made in the register.
- If there is more than one transferee, the conveyancer acting on their behalf will be given the option referring to the trust thereby created by selecting from a number of options.
- The conveyancer will be able to select personal covenants, if there are any, from various options - indemnity only covenants or observe, perform and indemnify covenants, or to indicate that there are no additional provisions. A small selection of commonly used clauses will be displayed to the conveyancer who will be able to choose the covenant with the appropriate wording, which will automatically create the matching register entry.
- Once all the information has been captured an e-transfer summary is created. This summary details the status of the e-transfer, as a created and saved document and details the individual panels of the e-transfer. The conveyancer can choose to view the entire e-transfer form as a Portable Document File (PDF), and subject to access, can view the specific panels of the e-transfer.
- It is at this stage that the conveyancer can select to view the e-transfer bundle by reference number or by a further search criteria. All e-transfer bundles available to a firm will be listed within the e-transfer bundle summary.
- The conveyancer may open documents contained within the bundle which is associated with the e-transfer application. He will also be able to remove documents from within the bundle, provided they have not been made effective. He will also be able to add new documents to the bundle.
- Both conveyancers will be able to edit the draft e-transfer. They will be able to select which specific panel of the e-transfer is to be edited. Only one conveyancer can select to edit a specific e-transfer at any given time as the specific e-transfer will be locked while one user edits.
- When the edit has been successfully saved, Land Registry portal will alert all conveyancers involved in this transaction. It will then be available for viewing and further edit. It will be possible to edit an e-transfer on multiple occasions.
- Following on from this the conveyancers may approve the e-transfer. The approval process will be a two-tier process, where both the transferor’s conveyancer and the transferee’s conveyancer will individually signal their approval of the e-transfer. Land Registry requires the e-transfer to be approved so that the e-transfer is in a stable state, ready for signatories to be identified and signatures to be applied. Approval will be signalled by pressing a screen button.
- E-signatories can be identified at any stage after the basic creation of an e-transfer. However, e-signatory nominations must be made before the final party indicates that the e-transfer is ready for e-signing.
- For both transferor and the transferee it will be possible for the citizen themselves to sign or delegate signing to their conveyancer, or another conveyancer within the same firm in case of an absence from work. Some practitioners are concerned about signing on behalf of clients. However, other practitioners have indicated that they feel that conveyancers signing on behalf of their clients would be their preferred option. Where a conveyancer intends to act as a signatory, there will also be the option to name a deputy for the reasons stated above.
- For the transferee only, there will be the option to declare that they will not be e-signing. The ‘not signing’ option will only appear when the conveyancer acting for the transferee accesses the system, and in situations where there is no obligation on the transferee to sign. This is only likely when the transfer contains no covenants on the part of the transferee. It has recently been agreed that if an e-transfer contains an indemnity covenant the system should require a transferee to sign.
- Where a citizen is to sign the document, a citizen account will need to be created. This already happens with the present e-charge service. The conveyancer will supply contact details for the citizen, and Land Registry will issue an e-signature authentication grid card to the citizen. The citizen would also be issued with security credentials to gain access to their e-signature account, where they would be prompted to accept the signature NAA before viewing and signing the transfer (and charge if appropriate).
- The citizen would view the e-document to be signed as a PDF before using the authentication grid card to apply their e-signature. Once the signature has been applied to an e-document, there can be no further edit to the e-document without invalidating the e-document e-signature. Where the e-signature has been invalidated, it will be the responsibility of the conveyancer to arrange for their clients to reapply their e-signature as appropriate.
- It is likely that a warning message would be displayed to a user if they try to edit the e-transfer after e-signing had commenced. Land Registry is considering allowing the system to remove an e-signature from an e-transfer to allow an amendment to be made to an e-transfer later on in the process, after both sides had already indicated that the e-transfer was ready for signing. The grid card issued to the citizen could be used on multiple occasions by the citizen up until the specific e-transfer is made effective.
- As explained earlier, the ability to sign will not be limited to the citizen alone. It will also be possible for a conveyancer to sign on behalf of his client(s) and to nominate a deputy.
I have only illustrated how a single transaction is handled, however, most applications also involve a mortgage. From the e-transfer bundle summary, it will be possible to add a limited number of new e-documents to the e-transfer bundle. The conveyancer would select the appropriate e-document from the drop down menu and select “add”. In the usual scenario the conveyancer would select a e-charge. The conveyancer would be prompted to enter an E-MD reference, which is an approved reference generating a template of an e-charge that has been agreed with a specific lender, and would generate the correct register entries for the e-charge.
Access to the e-documents within the e-transfer bundle will be restricted by the system. For example, it will not be possible for the transferor’s conveyancer to have sight of, or be aware of the existence of the transferee’s e-charge within the e-transfer bundle.
When the e-transfer has been created, saved, shared and edited where appropriate, approved, and fully signed, and if appropriate, an e-charge has been added to the e-transfer bundle, completion can take place. It is anticipated that the transferors’ conveyancer can then take the action of selecting to make the e-transfer effective, once they have received the purchase monies. There will also be a completion protocol to confirm the steps to be taken by conveyancers at the completion stage.
Land Registry has been in discussion with the Law Society to ensure that a Code for Completion suitable for electronic transfers will be in place. They expect that making the transfer effective will be a single act on the part of the transferor’s conveyancer, and the transferee’s conveyancer will not be required to take any action. When the transferors’ conveyancer indicates that the e-transfer can be made effective, Land Registry will attach the date and time it received the notification to the e-transfer. The system will verify the authenticity of signatures and will apply the registrar’s signature.
The transferee’s conveyancer will have two options for making an associated e-charge effective. They can choose for an attached e-charge to be automatically made effective at the same time as the associated transfer, or they will be able to elect in advance to detach the e-charge from the e-transfer to make the charge effective at a later time. In that case the transferee’s conveyancer will notify Land Registry when to make the e-charge effective.
Once an e-transfer and/or an e-charge has been made effective it cannot be deleted and once the e-transfer has been made effective, Land Registry will notify both parties. The transferee’s conveyancer can make an application for registration to Land Registry, provided the e-AP1 information has been satisfactorily captured. The creation of the e-AP1 can be started at any stage of the e-transfer process.
The conveyancer will select create e-AP1, and the e-AP1 will collect appropriate information not otherwise available in e-documents within the e-transfer bundle. It is likely that much of the additional application information will be captured automatically by Land Registry portal.
Although work is still being done on proposals for the full e-AP1 process for an e-transfer
bundle, questions will be asked to collect the following information:
- the value of the transaction
- the value of the charge
- the fees that are payable
- the details of the applicant
- whether any third party needs to be notified on completion of registration at Land Registry.
The value of the transaction will be auto-populated when the consideration is entered in the e-transfer creation process, and the fees payable field will be calculated and auto-populated from the value of the transaction.
The conveyancer will supply details of the reference number of an official search protecting the e-transfer or e-charge within the e-transfer bundle, and the transferee’s conveyancer will be able to prescribe the order in which entries should be added to the register.
The proposed SDLT solution for the e-transfer requires that the conveyancer is already a registered user of HMRC’s online service. The conveyancer will have already prepared and submitted their SDLT1 return using the online service, and will receive back the submission receipt as proof of submission, before application for registration of the e-transfer can be made to Land Registry. The applicant will attach an electronic copy of the HMRC submission receipt to the application. It is important to note, however, that the existing Land Registry rejection policy will remain in force
4.2.2 Lessons and implications drawn by the Report at page 94
Establishing a strong leading group helps drive the project
The development of the England and Wales solution is benefiting from the presence of a strong leading group that has ownership of the project and more importantly, is well resourced. Initially, the approach was far more fragmented and as a result the project failed to gather momentum. Following the decision to have a more integrated approach, the project gained credibility among stakeholders and has recovered any lost impetus.
Stakeholder buy-in is critical
Stakeholder buy-in is critical and the Land Registry has actively worked with all the relevant stakeholders to develop the solution and is ensuring that there is ongoing communication between the e-Conveyancing task force and the various stakeholder groups. The development of the solution is being conducted with the strong citizen focus with the consumer being at the heart of the new solution.
Process redesign should be conducted at an early stage
The Land Registry now acknowledges that it would have been better to redesign the business processes prior to initiating the development of the solution. The thinking originally being that stakeholders would be less resistant to adopting the new system, if the switchover was relatively seamless. It now finds itself in a situation of conducting process redesign after the formulation of the solution and it is of the opinion that this is less effective.
Conducting pilot projects builds stakeholder confidence and buy-in
Central to gaining stakeholder support and buy-in has been the decision to conduct piloting and proof of concept demonstrations in 2004. Extended testing and piloting phases with a prototype pilot in 2006 and a “chain matrix” pilot in 2007 were conducted to ensure complete functionality and credibility of the system.
4.2.3 Other points
The apparent failure of the Chain Matrix and the initial antipathy towards the Home Information Packs shows that despite even the most assiduous campaigns to get stakeholder buy-in such schemes can still fail. In this case it was the private citizen who was not convinced of the value of the chain matrix. See Chain Matrix Failure