The age of e-conveyancing?
The development of electronic registration of title and the prospects for the age of electronic conveyancing
The rate of change on the Scottish conveyancing scene is fast accelerating. It could even be said that conveyancing is undergoing a revolution. Since the advent of the Scottish Parliament, much of the change has been due to legislative reform relative to feudal abolition, title conditions, leasehold casualties, mortgage rights, and so on. Within the next year or two, the Scottish Law Commission intends to turn its attention to further reforms, with the Law of the Tenement and the Land Registration (Scotland) Act 1979 being prominent on the list for consideration. It is clear, however, that another factor which is increasing the rate of change is the pervasive influence of electronic commerce or e-commerce as it is widely known.
E-commerce is not tomorrow’s phenomenon. Its global value is estimated at $34 billion and predicted to rise to around $3.2 trillion by next year.
Scottish Executive Ministers are convinced that digital technologies and electronic commerce are of vital importance to Scotland’s future prosperity and well-being. Ministers agree that action is needed by Scottish businesses, including firms of solicitors, to ensure that they are well prepared to survive and prosper. Digital technologies are already improving their competitiveness and creating opportunities to sell Scottish goods and services across the world. The Executive is committed to e-commerce and Scottish Enterprise and Highlands and Islands Enterprise have translated this commitment into strategies to encourage our businesses to increase their usage of these technologies.
Electronic registration is a key element in the national drive towards e-commerce. Scottish Executive Ministers anticipate that it will quickly convince the house-buying or selling public of the benefits to be gained from engaging solicitors who use digital technology. They also predict that it will create future demand for the full range of house-buying transactions to be handled electronically, so that weeks of waiting for paperwork to be completed can be cut out. It is likely therefore to prove to be an important staging post on the way to comprehensive e-conveyancing. Those firms which do not make the transition to such new ways of working risk losing out to more nimble competitors.
In line with Government policy on e-commerce, and the Digital Scotland initiative, the Registers of Scotland Executive Agency (RoS) has been developing its registration and information systems in order to provide greater electronic access for the public. Access to the information held on the Registers under the Keeper’s control is already partially available electronically through the medium of Registers Direct. Over the next few months the information held on both the Sasine Register and the Land Register, as well as on a number of smaller registers, will be available electronically. On the registration side, RoS is considering ways in which technology can open up choices for the public in the way they transact with the Keeper.
At the forefront of this considerative process lies the initiative that is currently known by the acronym ARTL, which stands for Automated Registration of Title to Land.
Automated registration internationally
Scotland is not alone in developing the concept of automated registration. Many jurisdictions across the world are currently developing something similar. Indeed, some provinces of Canada, such as Ontario, already have automated registration systems successfully up and running. Similar developments are occurring in Australia and New Zealand. While European land registration and cadastral authorities may lag a little further behind, the idea of automated registration is already established in several of the member states of the European Union.
ARTL in Scotland
What is envisaged varies enormously from jurisdiction to jurisdiction. In England and Wales the emphasis is on the idea of a complete system of electronic conveyancing, in which solicitors will conduct all conveyancing (and interact with HM Land Registry) electronically. Other jurisdictions are simply looking at electronic lodgement. In Scotland, the system of ARTL as presently being developed entails the paper-free registration of dealings with whole of interests that are already registered in the Land Register. At this early stage in its evolution, ARTL will not impact upon first registrations or transfers of part. Nor will it affect the Sasine Register.
ARTL envisages that no paper deeds or documents will accompany the application for registration of a dealing with whole. Instead of application forms, supported by deeds and documents, the concept of ARTL is that authorised persons - solicitors, in the main - will carry out registration electronically by responding to a set of prepared questions on screen.
Payments of stamp duty and registration fees would also be rendered electronically. There will be minimal administrative intervention by RoS, as the Keeper’s staff will no longer process these applications manually. Rather they will rely upon certification of certain statements by the authorised conveyancer, subject to security routines and rules that will be built into the software to eliminate common errors.
In essence, the submitting solicitor will, via Internet access, input the details necessary for effecting a change to the Land Register. However, it will only be possible to change the B (proprietorship) and C (charges) sections of the title sheet and, before any such changes are confirmed and the title sheet updated, the Keeper will conduct a back-end system check and a search of the Register of Inhibitions and Adjudications. The Keeper’s indemnity will still apply to automated transactions.
Development of the ARTL pilot
Two years ago, RoS developed a limited proof of concept model in concert with Messrs Thorntons, Solicitors, Dundee, and demonstrated it at the 50th Anniversary Conference of the Law Society of Scotland. The interest and enthusiasm generated by the demonstration led to the establishment of an ARTL Steering Group chaired by me as Deputy Keeper of the Registers, with representation from the Justice Department of the Scottish Executive and the Law Society of Scotland. Although the idea came from RoS the drive to make ARTL a reality is thus a collaborative effort involving RoS and the Law Society with input from the Scottish Executive, the Inland Revenue and other government bodies. The Law Society, for its part, is wholly behind ARTL, as will be seen from the view expressed by Michael Samuel at the end of this article. Indeed it is likely that ARTL could be with us as a fully functioning system by 2003 or 2004.
A pilot to test and further develop the ARTL system was launched in January of this year. Under the pilot, solicitors will continue to submit an application for registration to the Keeper in paper form but at the same time they will carry out an equivalent registration via ARTL. In other words there will be “parallel registrations” with the two being checked against each other to test for consistency. The only registration which is legally effective is, of course, the paper-based registration using the statutory application form, and the electronic registration is merely an experimental replication of the paper-based registration. The pilot system has proved successful so far both in terms of actual functionality and positive feedback from those parties using it. At the time of writing, nine parallel registrations have been conducted by solicitors participating in the pilot. None of these parallel registrations has manifested any discrepancies, which bodes well for the future development of ARTL, but RoS will continue to monitor the results closely.
The pilot is a very simple system to use. In practice, it is no more complicated than completing the current application form. The user-friendliness of the system has attracted favourable comment by pilot users and RoS will strive to ensure that this is not lost as and when the pilot matures into something more significant.
Currently 41 solicitor firms and a number of lending institutions are taking part in the pilot. The ARTL Steering Group is keen to involve more firms, hopefully upwards of 100 in total, in order to generate a sufficient number of parallel registrations to test the system fully. Any readers who are keen to get involved should get in touch with one of the ARTL development team members whose names are given towards the end of this article. In terms of technology, all that is required to take part in the pilot is a PC with Internet access. No additional software or hardware is required. RoS will provide full training in the use of the ARTL system, free of charge.
Once the system becomes a reality, input from the agents acting for both the buyers and sellers, or for the borrowers and the creditor, will be necessary before registration can be effected. At this stage, pilot users need not even submit parallel registrations to experiment with the pilot, though it is hoped that they will do so. To familiarise themselves with the pilot system, they can simply ‘play’ with dummy titles which RoS has loaded into the system. On request, members of RoS’s ARTL development team will happily adopt the role of the buyer or seller’s agent if the other party to a given transaction is not one of those firms participating in the pilot.
It is anticipated that the pilot will last some 12 to 18 months. During that time, the categories of dealings that can be processed under ARTL will be expanded from the current, straightforward sale/purchase transaction involving individuals to more technically, if not legally, complex cases involving (for example) company transactions and power of sale transactions. In addition, the system will be progressively improved in response to the feedback we get from users.
Beyond the pilot: the growth of ARTL
Development and testing of the system are only part of the story. Legislative change will also be required to facilitate the introduction of ARTL. Preliminary discussions between RoS and the Scottish Law Commission in this respect have already taken place. Because it is only the registration process that is changing, it is hoped that legislative change can be kept to a minimum. Paper deeds and documents will still be used: it is simply that under ARTL they will not have to be submitted for registration. Rather, it is the information contained in the deeds and documents that will form the basis of what solicitors input into the eventual ARTL system. Consequently the reform that is necessary will be on a much smaller scale than what may be required in England and Wales, for example, where interested parties are contemplating legislation for the introduction of electronic conveyancing over and above the simple act of automated registration.
Security is another issue high on the ARTL agenda. The ARTL Steering Group is conscious that both the Keeper and external users must have absolute confidence in the security of the system. The Government itself is currently addressing the issue of Internet security and is considering the establishment of a secure ‘portal’ where parties transacting with public bodies can be approved and certificated. It is likely that ARTL will make use of some such facility. On a more basic level, only accredited users will be permitted to use a direct registration facility. Even under the pilot system, an audit trail is already in place which enables the ARTL development team to track, monitor and re-create every step in a digital transaction.
ARTL will bring about considerable benefits for solicitors. It will provide a one-stop shop. There will be no need for the solicitor to first contact the Inland Revenue Stamp Office prior to submitting an application for registration. Instead ROS will act as a collection agent for the Inland Revenue. Discussions are also ongoing with Companies House with a view to enabling, via ARTL, the automatic transmission of limited company standard security details to the Register of Charges. Consequently, the registration process will be cheaper for the solicitor as printing, postal and certain other administrative costs will be eliminated. The solicitor will have direct control over the registration process; any bureaucratic involvement will be at a minimum. Registration will be much quicker: ARTL can complete registration of a dealing with whole on the day a property changes hands. At present, there is often a delay of a few days or more while documents are transmitted to the Inland Revenue for stamping and/or to the Keeper. During this short period, there is always the potential for a deed adverse to the interest of the purchaser to be registered. ARTL will make it possible to eliminate this risk, or at least reduce it considerably. Those firms who participate in direct registration will therefore be able to offer a quicker service with greater certainty for the public through registration being effected immediately. For the Keeper, automation will mean that he can provide a service that enables the business of conveyancing to function more effectively and smoothly.
ARTL will also provide users with choice. Registration can be either on-line or by the traditional paper method. At some point in the future the cost savings to the Keeper should be passed on to the consumer by way of reduced registration fees. Taking a longer-term perspective, it is likely that electronic registration will drive forward the automation of the whole conveyancing process, leading to lower charges for the house buyer and mortgage borrower.
The first solicitor to complete a parallel registration under the ARTL pilot was John Leyden of Messrs Morton Fraser. John has been an enthusiastic supporter of ARTL. I was particularly encouraged by John’s positive comments in a recent interview, when he was asked what the main benefits of ARTL were. John replied: “First of all, solicitors will be able to create virtual offices - with staff working from home during hours which suit them. There will also be numerous savings to be made in terms of time, postage, paperwork and therefore costs. Because the system is so easy to use, there should be a dramatic reduction in errors in applications. Clients will benefit by knowing that their registration will be done immediately – not after 14-30 days as is the case with the existing system. And finally lenders will welcome ARTL with open arms as they will be able to make dramatic savings as they will no longer store title deeds.”
John Leyden’s comment on the attitude of mortgage lenders may prove to be particularly prophetic. The ARTL development team has only just begun to discuss ARTL with lenders, but some lenders are already very keen on what is known as ‘dematerialisation’ - the disappearance of paper deeds and Land Certificates.
I think there can be no doubt that ARTL will be part of the future of conveyancing in Scotland. Technology is driving change in all spheres of economic activity and conveyancing cannot remain immune from this. Indeed the need to drive down costs and further improve an already highly professional product is essential if solicitors are to continue to participate in the increasingly competitive conveyancing market.
The ARTL development team in RoS, ably assisted by RoS’s Marketing and Business Development staff, has been remarkably successful in signing up conveyancing solicitors as users of the pilot. Sustaining the interest of pilot users, and keeping in touch with them, is another important activity on which the team is now embarked. RoS needs many more parallel registrations to test the strengths and weaknesses of the pilot system. On RoS’s side, I do not intend to allow the initial successes to lead to complacency and bland acceptance of the feasibility of ARTL. There will certainly be weaknesses inherent in the concept and in the system, and only with the active participation of numbers of solicitors will these weaknesses be detected and eliminated.
For all these reasons, I invite readers to become involved with ARTL now. I realise that some conveyancing solicitors may be disinclined to get involved, because of pressure of work and perhaps because of the perception that, under the pilot, the solicitor is asked to prepare two parallel applications - one on paper, the other on screen. It is true that the pilot does mean some duplication of effort for the busy solicitor. There is therefore no financial incentive to participate in the ARTL pilot. But let me point out that the duplication of effort, in the short term, is relatively insignificant when compared to the longer-term benefits that I have outlined above. Pilot users will have a real opportunity to influence the growth of ARTL, in collaboration with RoS. Electronic registration is a logical consequence of e-commerce, and full-blown electronic conveyancing may not be far behind it.
Surely it is better for conveyancing solicitors to seize the initiative now, while ARTL is still in its infancy, to shape and fashion its development, rather than to learn to live with a system devised by others. So I urge solicitors to take up this offer to participate in the ARTL pilot without delay, by contacting development team members Andy Martin (firstname.lastname@example.org; tel: 0131 479 3619), Kevin Ramsay (email@example.com; tel: 0131 200 3935) or Melissa Murfin (firstname.lastname@example.org, tel: 0131 479 3649). The team has a direct dial local rate telephone number, 0845 60 70 167.
For those pilot users who have signed up but not yet submitted their first parallel registrations, please give it a try - it won’t hurt, but it will help!
I am happy to take views from solicitors on the concept of ARTL, the development of the model, the legislative changes that may be required, or even the eventual emergence of e-conveyancing. I can be contacted at the usual address, but in the spirit of e-commerce I also welcome e-mail messages addressed to email@example.com.
The Society’s Conveyancing Committee is supportive of the drive towards Automated Registration of Title and sees this as the next step in conveyancing practice. The drive towards automation is progressing fast and the Committee has noted with interest that in England and Wales the Government has issued a consultation paper on ‘Electronic Conveyancing’, looking at the legal framework for the creation and transfer of interests in land in England and Wales by electronic document, this following the passing of the Electronic Communications Act 2000.
The Conveyancing Committee encourages solicitors’ firms to join and use the ARTL pilot to ensure that the profession has some meaningful input into the system created by our Land Register in Scotland, not only so that solicitors can be at the forefront of these developments which are so surely going to affect them but also so that, on a practical level, the system is as effective and easy to use as possible.
Austin Lafferty’s firm Lafferty Law - in Glasgow City Centre and East Kilbride - about a quarter of whose fee income is from conveyancing, mainly domestic, admits to being a fan of the Registers of Scotland and has confidence in them to deliver ARTL.
“I think there has now been enough time and experience of e-based systems and work for the RoS actually to appreciate the needs of the practitioner, and of all the Government agencies I deal with, including Scottish Legal Aid Board, courts, executive departments, the Register staff are the easiest to deal with and get problems resolved.”
He’s uncertain if conveyancers as a group are ready to embrace a system of electronic conveyancing.
“It is true that conveyancers are variable in their response to technology and particularly online communication. I have found very few that use e-mail in anything but a desultory fashion. The quickest way to prepare a disposition is to draft it in Word (yourself – not by the needless and costly double-effort of you dictating and a girl typing), e-mail it by attachment to your oppo, he/she downloads and revises it onscreen, and mails it back to you or by agreement prints it off for execution. No paper, no post, no envelope, no time wasted. But there are still too many old Spanish customs that we can’t seem to shift quickly enough. I think the same is true in most other areas of practice.”
Does he have any concerns that the advent of technology will see fees fall through the floor? “As someone who has watched fees crash in real terms over the last 20 years, I don’t think that the public is now uncomfortable with the general range of conveyancing fees. The growth of consumerism has not just been about cost, it has also been about value, service, and informed choice – thus if you make sure they know that the bill includes unavoidable outlays – mostly to the Government one way or another – and that your own fee is a fraction of the glorified shop window that is the estate agent’s account, and that you have some actual brainwork to apply to the job, I think we are about as low as we need to go. Over the same 20 years, I have changed my conveyancing practice and changed again, so that for a fee reducing in real terms, I am still able to make a profit. And this is mainly down to hooking into the technological advances that have emerged. All my conveyancing work is done on computer, though still backed up by paper files. I use Word, Outlook, Compuserve, the Coal Authority online service, and we are getting into the Axiom Oxygen data and case management system, and am joining up to the Registers Online and SPH OneSearch. All this speeds up the process and reduces cost for me.”
Morton Fraser’s John Leyden suggests we could soon witness the virtual office, with practitioners working from home. Does he share that vision?
“Some will and some won’t, and some, I guess like me, will pick the bits they like. Lawyers are notoriously independent, and personal styles and practices are difficult to wrench away from solicitors who have found trustworthy ways of doing things. And the fear of error or professional negligence claims make most of us reluctant to try something new without good reason. I favour a mixed economy technologically, and I would be wary of putting all my eggs in one mainframe. One example – it is quicker to complete a form 2 by handwriting in ink on a standard printed form than to complete a RoS e-form on screen and print it. I like the screen version so I do it that way, but there are so many fiddly checkboxes that it can feel like doing needlework instead of registration.”
On balance, he’s keen to encourage the advance of the electronic age of conveyancing.
“We need to progress with online registration and to get as close as we reasonably can to an electronically based system of property conveyancing. I like computers, but I am not a religious maniac about them. A mixed economy can be a good thing, whereas slavish devotion to a set procedure is not what the law is about, nor adequate to meet the needs of a changing market place and the utterly uncountable range of problems thrown up by all the clients.
“E-practice has saved me time and money, and will progressively do so. But no computer program can help me to do the problem-solving, multiple plate-spinning, and feverish water-baling that is private client conveyancing. If the loan cheque (more likely electronically transferred funds) is not there, then Mr Gates cannot get my clients their keys. If the central heating in the new house is wonky, then I would doubt that e-mailing the client a list of plumbers is what is needed. Often it is the brain and the voice, a backbone and a will to win that are the tools needed.
“E-procedures speed things up, and that has two effects. One is that the expectation of the clients, other solicitors/agents/lenders is for high speed in turnaround of work and from field to plate, or viewing to key receipt. This puts pressure on you as a practitioner to be alert and work fast, which always has the risk of error increased. But the other is that profitability is made greater and quicker. My late father’s day, when a late start and a long lunch were a right and not a luxury are long gone. Such things are now simply a fantasy for most of us.”
David Adie of Glasgow firm Adie Hunter opts for “cautious acceptance” and welcome for the ARTL initiative.
With a large proportion of their two partner firm’s income deriving from domestic and commercial conveyancing, he suggests that while their technology is kept up to date they aren’t yet at the forefront of buying new equipment in anticipation of conveyancing’s electronic age.
Like Ivor Klayman he has concerns about the Registers of Scotland’s ability to deliver. “I have no great faith in the Keeper. Too often in the last two or three years what the Keeper has been providing isn’t accurate and reliable. They used to be infallible. I am concerned that there is a hidden agenda in reducing the costs for the Registers while the solicitor is left with more work.
“Online registration will arrive in the not too distant future but people must have confidence in the system for it to work and for people to use it.”
Pressures of work have prevented participation in the pilot scheme so far but Adie believes that from the client’s perspective electronic conveyancing is neither here nor there. Clients will still expect to speak with and liaise with the solicitor and the main advantage of ARTL might be to allow the solicitor to be less consumed with paper work and able to give the client added value in terms of face-to-face contact.
He disagrees with John Leyden’s vision of conveyancers working form home in a virtual office. “I can’t see that taking off. Clients will still expect to come to a functioning office. There are certain tasks we can do from home but you still need people in the office to bring the whole thing together.”
He envisages a system of paperless conveyancing which may see Scottish solicitors become more like a French notary. “With access restricted to search facilities, the solicitor will come more to the forefront of the transaction”.
Some have expressed fears that, taken to its logical conclusion, the OFT report could pave the way for banks and building societies to offer the complete home buying service. Adie doesn’t perceive that as a threat.
“Banks would contract out such services. Most conveyancers will tell you that one of the most protracted parts of any transaction is getting the loan papers from lending institutions. How would they cope with anything beyond that? Banks simply aren’t responsive enough to clients needs to be a threat, nor would there be much profit in it for them.”