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You are here: BAILII >> Databases >> The Law Commission >> Land Registration For The Twenty-First Century: A Conveyancing Revolution (Report) [2001] EWLC 271(13) (9 July 2001)
URL: http://www.bailii.org/ew/other/EWLC/2001/271(13).html
Cite as: [2001] EWLC 271(13)
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PART XIII
CONVEYANCING 2:
ELECTRONIC CONVEYANCING
INTRODUCTION
(1) the formal requirements for electronic dispositions;
(2) the provisions governing the land registry network; and
(3) the power to require both the use of electronic conveyancing and that electronic dispositions be simultaneously registered.
13.2 It will be recalled from Part II[1] that the main features of the proposed system of electronic conveyancing are as follows-
(1) the system will be operated through a secure electronic communications network;
(2) HM Land Registry will authorise access to that electronic communications network by contract with the users, such as solicitors and licensed conveyancers;
(3) that electronic communications network will be employed to conduct all the stages of a transaction in electronic form;
(4) the electronic communications network may be used to manage chain transactions, at least in relation to residential properties;
(5) the process of registering dispositions will be conducted by persons authorised by the terms of their access to the electronic communications network, and it will take place at the same moment as the disposition;
(6) there will be power to make electronic conveyancing compulsory; and
(7) there will be provision to enable persons who wish to undertake their own conveyancing to take advantage of electronic conveyancing.
13.3 The issue of electronic conveyancing was one of the main issues addressed in the Consultative Document.[2] Nearly 80 per cent of those who responded to the issue were in favour of the principle of electronic conveyancing. There was, however, a widely expressed view that there should be full public consultation over the details of electronic conveyancing and that interested parties should work with HM Land Registry in developing electronic conveyancing. We agree with that view. Indeed, we consider that it would be impossible to establish an effective system of electronic conveyancing without such consultation and the advantage of informed expert comment that it would bring, particularly from those who will have to operate the system. An inter-governmental working party was set up in 2000 to ensure co-ordination within government and this has met a number of times. In preparing the first stage of the introduction of electronic conveyancing by an order under the Electronic Communications Act 2000, which is explained below,[3] the Lord Chancellor's Department set up a steering group to advise it, consisting of representatives from the bodies most likely to be affected. Furthermore, both HM Land Registry and the Law Commission have engaged in extensive informal consultation since the publication of the Consultative Document in 1998, particularly with conveyancing practitioners. The outcome is a legislative framework that differs in a number of respects from that which was visualised in the Consultative Document.
13.4 We now examine in detail the provisions of the Bill on electronic conveyancing.
FORMAL REQUIREMENTS FOR ELECTRONIC DISPOSITIONS
Introduction
13.5 In the Consultative Document, we explained that, because any system of electronic conveyancing would necessarily be paperless, something would have to be done in relation to the existing formal requirements that apply to most dispositions of land and to contracts for the sale or other disposition of land.[4] Those provisions can be summarised as follows-
(1) It is normally necessary to use signed writing to create or dispose of any interest in land, whether legal or equitable.[5]
(2) Most conveyances of a legal estate in land have to be made not only in writing but also by deed.[6] There are some exceptions to this,[7] such as assents by personal representatives, where the conveyance of a legal estate can be made instead by signed writing.[8]
(3) Most contracts for the sale or other disposition of land can only be made by signed writing and must meet certain other conditions.[9]
13.6 Our provisional view in the Consultative Document was that there should be a power in the Bill to disapply or modify these provisions, and that this power should be exercisable by statutory instrument.[10] Subsequent events have led to the adoption of a somewhat different solution to this problem. The existence of these formal provisions is the immediate impediment to the introduction of any form of electronic conveyancing. If this impediment were removed, it would be possible to take the first steps towards the introduction of electronic conveyancing even in advance of the enactment of the present Bill. There are reasons why this should happen. HM Land Registry is keen to begin the introduction of some aspects of electronic conveyancing as soon as possible. These include-(1) the creation of registered charges; and (2) the making of applications for entries on the register, such as cautions, notices and restrictions; in electronic form. The Electronic Communications Act 2000 has provided a means of achieving this.[11]
THE DRAFT LAW OF PROPERTY (ELECTRONIC COMMUNICATIONS) ORDER
13.7 Part II of the Electronic Communications Act 2000 contains provisions to facilitate the use of electronic communications and electronic data storage. So far as relevant, section 8 of the Act gives the appropriate Minister[12] power to modify by order made by statutory instrument the provisions of any enactment in such manner as he may think fit for the purpose of authorising or facilitating the use of electronic communications or electronic storage (instead of other forms of communication or storage).[13] Two of the purposes for which such an order may be made are where legislative provisions-
(1) require or permit something to be done or evidenced in writing using a document, notice or instrument;[14] and
(2) require or authorise something to be signed or sealed by a person, delivered as a deed or witnessed.[15]
13.8 It should be noted that the powers under this Act permit the modification of "any enactment".[16] There is no power to amend any formal requirements that exist at common law. [17]
2000.[18] This draft Order and the accompanying consultation paper were prepared in conjunction with HM Land Registry and the Law Commission. The draft Law of Property (Electronic Communications) Order 2001 contains three main provisions.
(1) First, it inserts a new section 144A into the Land Registration Act 1925.[19] This prescribes the formalities required for dispositions in electronic form of-
(a) registered land; and(b) unregistered land that trigger compulsory first registration.
(2) Secondly, it confers additional rule-making powers in the Land Registration Act 1925 in relation to-
(a) various applications to the registrar in electronic form; and(b) the storage of documents in electronic form.[20]
(3) Thirdly, it inserts a new section 2A into the Law of Property (Miscellaneous Provisions) Act 1989.[21] This lays down the formalities required to make a contract for the sale of an interest in land in electronic form. The new section will apply whether the title to the land is registered or unregistered.
13.10 The present Bill will repeal the Land Registration Act 1925.[22] It necessarily contains provisions that replicate the effect of the first two elements of the draft Law of Property (Electronic Communications) Order 2001.[23] In fact, the provisions of the Bill go further than does the Order. There are two significant limits on what can be done by an order under section 8 of the Electronic Communications Act 2000. First, as we have mentioned above,[24] there is no power to amend any formal requirements at common law, but only those that are statutory. Secondly, by section 8(6)(a) of the Electronic Communications Act 2000, it is not possible to require that electronic communications or storage should be used. As we explain below, the Bill departs from both of these principles.[25]
THE PROVISIONS OF THE BILL
Introduction
13.11 Clause 91 of the Bill derives from the proposed section 144A of the Land Registration Act 1925 that is to be inserted by the draft Law of Property (Electronic Communications) Order. It enables certain dispositions to be effected electronically when they would otherwise have to be made in writing or by deed. It provides that, by meeting the requirements specified in the section, the parties to an electronic document are taken to have complied with the requirements for a written document or a deed. In some cases this will be for the purposes of any enactment[26] and in other cases for the purposes of the common law as well.[27] It should be noted that Clause 91 lays down a uniform requirement for making any electronic document, whether that document does the work of a deed or of signed writing. This is a striking development, though it is one that had been anticipated by the Law Commission in 1998.[28]
The applicability of Clause 91
13.12 For Clause 91 of the Bill to apply, the following requirements must be met.
(1) First, there must be a document made in electronic form that purports to effect a disposition.[29]
(2) Secondly, that disposition must be -
(a) of a registered estate or charge;[30](b) of an interest which is the subject of a notice in the register, such as an equitable charge or an option;[31] or(c) one which triggers the requirement of compulsory registration under Clause 4 of the Bill.[32]
(3) Thirdly, the disposition must be of a kind for which the Lord Chancellor has prescribed a form of electronic disposition.[33] It is intended that, in due course, a form will be prescribed for all dispositions that could be made in electronic form under the section. These forms are likely to be similar to those that have been successfully employed in paper form since 1997 in relation to applications for registration.[34]
(4) Fourthly, a document in electronic form must satisfy the four conditions that are laid down in Clause 91(3). These are explained below.
The four conditions
13.13 First, the document must make provision for the time and date when it takes effect.[35] At present, it is the usual practice for conveyancing documents to be signed and otherwise executed by the parties to them, but not dated. The instrument takes effect at the time when the conveyancers are ready for it to do so and it is dated shortly in advance. Where the document is a deed, this will be signified when it is delivered. The concept of delivery will not apply to documents in electronic form. An electronic document will not in fact be a deed, but is merely to be regarded as one for the purposes of any enactment.[36] It follows, therefore, that the concept of delivery is inapplicable. Clearly there has to be another means of fixing the operative moment of a document in electronic form. The requirement that an electronic document must make provision for the time and date when it takes effect achieves that. It will also enable the continuation of the present practice of completing when all parties are ready to do so. The time and date are likely to be inserted shortly before the document is to take effect.
13.14 Secondly, the document must have the electronic signature of each person by whom it purports to be authenticated.[37] An electronic signature is not a "signature" in the ordinarily accepted sense. It is a means by which an electronic document can be authenticated as that of the party making it.[38] There are several ways in which this can be done.[39] One method that is employed commercially is "public" or "dual" "key cryptography".[40] In the barest outline, the way in which this might work in electronic conveyancing is as follows. One party to a disposition, typically a seller or mortgagor of registered land, will send to the other party, the buyer or mortgagee (and HM Land Registry), some text which the sender will have encrypted using a "private key".[41] The recipient will be able to decode the text by means of a "public key", which will normally be obtained from the certification authority. That authority will have supplied the sender with his or her private key and the public key will only decipher the encoded text if it was indeed encoded by that private key. The recipient can tell whether there has been any interference with the message by, say, a hacker. It should be noted that although dual key cryptography is a common form of electronic signature, there will be no restriction on the types of electronic signature that will be permitted, provided that they meet the necessary security requirements. It is important that the legislation is flexible enough to allow for further developments.
13.15 Normally it will only be the disponor[42] whose electronic signature will be required. However, Clause 91(3)(b) specifies that the electronic signature is needed "of each person by whom it purports to be authenticated". This is because a disponee may sometimes need to be a party to the document. In particular, where there is a disposition of registered land and the disponees are to be joint proprietors, both the disponor and the disponees[43] should execute the transfer or application.[44] This is because the transfer form sets out the trusts upon which the land is to be held and, in this way, there will always be written evidence of the trust to satisfy the requirements of section 53(1)(b) of the Law of Property Act 1925. That provides that "a declaration of trust respecting any land or any interest therein must be manifested and proved by some writing signed by some person who is able to declare such trust…".[45]
13.16 Thirdly, each electronic signature must be certified.[46] Certification is the mechanism by which an electronic signature is authenticated. By way of example,[47] in relation to dual key cryptography, the "private key", mentioned above,[48] can be linked to a particular individual who signs a document electronically.[49] A private key will be issued to an individual by a certifying authority, which will have satisfied itself as to his or her identity, and will take appropriate steps to ensure that it is not employed by anyone else. The private key will commonly be incorporated in a smart card issued to the individual, which will also contain an electronic certificate from the certifying authority. The certificate will, therefore be sent electronically by the person signing the electronic document together with the document that he has just signed.
13.17 Fourthly, there must be compliance with such other conditions as may be prescribed by rules.[50] The purpose of this fourth requirement is to provide some flexibility in relation to the creation of dispositions in electronic form. It is possible that, with experience of electronic documents, it may be thought advisable to add further requirements, having regard (in particular) to the need for the security of transactions. For example, there are various levels of assurance that can be achieved in relation to the security of electronic signatures, and it might be appropriate to require compliance with a specified standard.
Deemed execution
13.18 Clause 91 depends for its operation on subsection (4). An electronic document that meets the requirements that have been explained in paragraphs 13.12-13.17, above, is to be regarded as a document which is (a) in writing and (b) is signed by each individual, and sealed by each corporation,[51] whose electronic signature it has. In other words, the Bill does not disapply the relevant formal provisions,[52] but instead deems compliance with them if the requirements for an electronic document laid down in Clause 91 are met. This provision goes further than its equivalent in the draft Law of Property (Electronic Communications) Order.[53] It not only deems the document to comply with any statutory requirements of formality,[54] but also with those that apply at common law. This is important in the context of those corporations that have no statutory powers of execution.[55] At common law, any instrument that effects a disposition of property by a corporation must be executed under that corporation's seal.[56]
Deeds
Execution by agents
13.20 It will be possible for an agent to sign a document in electronic form on behalf of his or her principal. This may be of some importance. It is likely that, at least in the initial stages of electronic conveyancing, solicitors, licensed conveyancers and other authorised practitioners will sign electronic documents on behalf of their clients.[57] Although at common law an agent cannot execute a deed unless he or she is authorised to do so by a deed,[58] this rule will be inapplicable to execution of an electronic document that takes effect as a deed. This is because the document is not in fact a deed, but is only to be "regarded as a deed for the purposes of any enactment".[59]
13.21 Clause 91(6) contains a further deeming provision, which relates to agents. It provides that where an electronic disposition to which the Clause applies is authenticated by an individual as agent, it is to be regarded for the purposes of any enactment as authenticated by him or her under the written authority of his or her principal. By statute, some dispositions can only be made by an agent on behalf of his or her principal if he or she is authorised to do so in writing.[60] The result of Clause 91(6) is that where an agent makes an electronic disposition, it will not be possible to raise any question as to whether the agent did in fact have written authority to make it.
Notice of assignments
13.22 It is envisaged under the Bill, that-
(1) it will become possible to assign electronically certain legal and equitable interests in registered land that are not registered estates or charges, but are merely protected by the entry of a notice; and
(2) that assignment will not take effect unless there is a change in the terms of the notice.[61]
13.23 This is something of a novelty. At present only the transfer of registered estates and charges is effected by registration. However, as we explain below, under the Bill there will be power to require that an assignment of an interest protected by a notice[62] is made in electronic form and registered simultaneously with the assignment.[63] In relation to any such interest that is a debt or legal chose in action -such as the benefit of an option or other estate contract -it is necessary to give "express notice in writing" of the assignment to the debtor or other contracting party.[64] Clause 91(7) provides that if notice of an assignment made by means of a document to which the Clause applies is given in electronic form in accordance with rules, it is to be regarded for the purposes of any enactment as given in writing.
Execution by corporations
Execution by corporations which are companies for the purposes of the Companies Act 1985
(1) corporations that are companies for the purposes of the Companies Act 1985;[65]
(2) unregistered companies for the purposes of the Companies Act 1985;[66] and
(3) foreign companies for the purposes of the Foreign Companies (Execution of Documents) Regulations 1994.[67]
There are two relevant provisions of the Companies Act 1985 as to execution, namely section 36A(2) and (4).
13.26 Section 36A(2) provides that "a document is executed by a company by the affixing of its common seal". We can see no reason why a company itself should not have an electronic signature and this is recognised in Clause 91(4)(b).[68] It would no doubt be the case that that signature could only be incorporated into or otherwise logically associated with an electronic document[69] at the direction of one or more authorised officers of the company. However, were that done, a document would then take effect as if it had been sealed by the company.[70]
13.27 A company does not, however, have to have a common seal.[71] Where it does not, it must execute instruments in some other way. It may appoint an agent to act on its behalf, whether under a power of attorney[72] or otherwise. Alternatively, section 36A(4) of the Companies Act 1985 provides that "a document signed by a director and the secretary of a company, or by two directors of a company, and expressed (in whatever form) to be executed by the company has the same effect as if it were executed under the common seal of the company". Where a document is in electronic form and is signed electronically by the relevant company officers, section 36A(4) will apply.[73]
13.28 Where an electronic document has apparently been executed in accordance with section 36A(4) of the Companies Act 1985, section 36A(6) of the Companies Act 1985 may be relevant. Section 36A(6) provides that "in favour of a purchaser[74] a document shall be deemed to have been duly executed by a company if it purports to be signed by a director and the secretary of the company, or by two directors of the company…".[75] Although the provisions of Part III of the Companies Act 1985 provide a significant measure of protection for those dealing with a company in respect of acts which it lacked the capacity to do under its constitution,[76] that protection is not complete. It does not apply in relation to-
(1) the unauthorised acts of individual directors;
(2) the acts of directors acting otherwise than as a board of directors;[77] or
(3) the acts of persons who have ceased to be office-holders but whose resignation had not yet been filed with the Register of Companies.[78]
13.29 However, the presumption of due execution under section 36A(6) will apply in such cases to protect a purchaser because it applies to a document that purports to be signed by the relevant officers of the company. Clause 91(9) makes it clear that section 36A(6) applies to a document that has been signed electronically. It provides that, if section 36A(4) of the Companies Act 1985[79] applies to a document because of Clause 91(4), section 36A(6) shall have effect in relation to the document with the substitution of "authenticated" for "signed".[80] This reflects the requirement contained in Clause 91(3)(b) that an electronic document must have the electronic signature of each person by whom it purports to be authenticated.[81]
Execution by other corporations
13.30 There are many significant categories of corporation[82] that cannot avail themselves of the provisions of the Companies Act 1985 that relate to the execution of documents. Some such corporations have express statutory powers that are similar to those found in the Companies Act 1985 in that they make provision for the signature of an instrument by specified persons.[83] Other corporations have no statutory powers of execution and in relation to these the common law rules apply. At common law, any instrument that effects a disposition of property by a corporation must be executed under that corporation's seal. However, as we have explained, under the Bill, all corporations can sign an electronic document,[84] and in this respect the Bill goes further than the draft Law of Property (Electronic Communications) Order.[85] In any event, any corporation could appoint an agent to execute an electronic document on its behalf, whether under a power of attorney or otherwise.
Rights of a purchaser as to execution
13.31 Under section 75(1) of the Law of Property Act 1925,[86] a purchaser is "entitled to have, at his own cost, the execution of the conveyance [to him] attested by some person appointed by him, who may, if he thinks fit, be his solicitor". Attestation is not appropriate to forms of electronic disposition and the right to such attestation (which we suspect is little used in practice) is therefore abrogated for such dispositions by Clause 91(8).
Supplementary rule-making powers
13.32 We have explained elsewhere the provisions of the Bill that govern applications for registration.[87] It is unnecessary to have specific rule-making powers in relation to applications for registration in electronic form, because the general rule-making power in relation to applications is wide enough to authorise the making of such rules. However, there are certain matters for which specific rulemaking powers are required, and the Bill provides for the making of rules about-
(1) the communication of documents in electronic form to the registrar; and
(2) the electronic storage of documents communicated to the registrar in electronic form.[88]
13.33 Rules made under the latter power are likely to include not only the manner in which such electronic documents are stored but, in relation to certain entries, such as estate contracts, the length of time that the document is kept.[89]
PROVISIONS GOVERNING THE LAND REGISTRY NETWORK
Introduction
13.34 In Part II of this Report, we have given an account of how it is visualised that electronic conveyancing is likely to operate,[90] and a brief summary of its main aspects is given above at paragraph 13.2. The second element of the Bill is intended to provide for that operation. It concerns the provision of an electronic communications network and the rules that govern its use. These provisions are of the greatest practical importance because they provide the necessary framework for the development and operation of electronic conveyancing. Under the Bill,[91] the registrar is given power either himself to provide an electronic communications network or to arrange for its provision.[92] This network, which is called in the Bill "a land registry network", is to be used for such purposes as the registrar thinks fit "relating to registration or the carrying on of transactions which-
(1) involve registration, and
(2) are capable of being effected electronically".[93]
13.35 Those purposes will, therefore, include-
(1) the provision of information to the registrar or to any party to a transaction or proposed transaction that will involve-
(a) some disposition of registered land or of an interest in registered land; or(b) a disposition of unregistered land that will trigger compulsory first registration;
(2) the preparation of conveyancing documents in electronic form in relation to (1)(a) or (b) above; and
(3) the registration of any disposition.
The Bill makes detailed provision in relation to this land registry network.[94]
Access to the network Network access agreements
13.36 In Part II, we explained that the introduction of electronic conveyancing would bring about a fundamental change in the way in which registered conveyancing is conducted. Instead of the registrar registering dispositions on application, solicitors and licensed conveyancers will register dispositions at the same time as they are made.[95] This is the only practicable way in which one of the main goals of the Bill can be achieved, namely, that dispositions and their registration should take place simultaneously.[96] The Bill therefore creates the necessary framework for this to happen. At the core of that framework is the mechanism that will give access to the land registry network.
13.37 A person who is not a member of HM Land Registry will only have access to a land registry network if he or she is authorised by means of an agreement with the registrar.[97] A "network access agreement"[98] of this kind will necessarily be a contract and enforceable as such.[99] This agreement may authorise access for any one or more of the following purposes-
(a) the communication, posting or retrieval of information;
(b) the making of electronic dispositions and applications which will result in changes to the register of title[100] or to the cautions register;[101]
(c) the issue of official search certificates;[102]
(d) the issue of official copies; [103] or
(e) such other conveyancing purposes as the registrar thinks fit.[104] There are three significant points about this provision.
THE LEVEL OF ACCESS WILL BE VARIABLE
AUTHORITY MAY BE GIVEN TO PERFORM REGISTRAR'S FUNCTIONS
13.39 Secondly, there is a rule-making power by which network access agreements may confer authority to carry out functions of the registrar.[105] Plainly, the functions listed above in paragraph 13.37, (b)-(d), and no doubt at least some of those that may be specified in (e), will be functions of the registrar. A solicitor or licensed conveyancer who is appropriately authorised will, within the limits of that authority, be able to carry out functions that are conferred by the Bill on the registrar. Obviously the principal function that is essential to the operation of electronic conveyancing is that such solicitor or licensed conveyancer should be able to register dispositions and make other entries on the register.[106] However, the powers need to go beyond that and include, for example, the ability to remove spent entries on the register, as where, on the completion of a disposition, a registered charge is redeemed. It is also necessary that authorised solicitors and licensed conveyancers should have power to carry out the various ancillary matters that will or may arise in the course of a conveyancing transaction, such as the issue of official search certificates or official copies.
CRITERIA FOR ENTRY INTO A NETWORK ACCESS AGREEMENT
13.40 Thirdly, the registrar must, on application, enter into a network access agreement with an applicant if it appears to him that he or she meets such criteria as rules may provide.[107] In other words, if the pre-conditions are met, the applicant has a right to enter into a network access agreement. Before the Lord Chancellor can make any such rules, he must consult such persons as he considers appropriate.[108] Given the great importance of these rules, he is likely to consult very widely, not only with the professions but also with other interested bodies. The rules must be fair and reasonable to those who wish to conduct conveyancing, while at the same time providing proper safeguards for the integrity of the register. In making such rules, the Lord Chancellor is to have particular regard to the need to secure certain objectives, namely-
(1) the confidentiality of private information kept on the network;
(2) competence in relation to the use of the network (in particular for the making of changes); and
(3) the adequate insurance of potential liabilities in connection with the use of the network.[109]
These are important provisions, and the thinking behind them requires explanation. It should be noted that the competence envisaged in (2) applies not just to the likely ability of the person entering into the agreement to be able to operate a system of electronic conveyancing. It also applies much more importantly to that person's competence as a conveyancer. He or she must have a proven record of competent conveyancing.
13.41 First, registered dispositions are guaranteed by virtue of the provisions of the Bill on indemnity.[110] If mistakes are made, the registrar must pay indemnity in respect of any loss suffered in consequence. Although solicitors and licensed conveyancers will perform many of the registrar's functions, his liability for mistakes remains, and it is essential, therefore, that he is able to ensure the integrity of the register.
13.42 Secondly, it is an explicit aim of the Bill to improve the quality of conveyancing services available to the public and to maintain that higher quality. This is because the standard of a significant proportion of conveyancing work nowadays is regrettably poor.[111] This has been a matter of concern for some considerable time both to the Registry and to the many solicitors and licensed conveyancers whose work is exemplary.[112] Furthermore, Mr Andrew Edwards CB, in the course of his recent Quinquennial Review of HM Land Registry, has also specifically raised it.
13.44 As a result of these concerns, it is essential that those who are authorised to undertake electronic conveyancing should meet specific criteria to protect the integrity of the register. In the end, it will be the users of the register who will have to pay for the cost of indemnity claims. Every effort must therefore be made to keep such claims down to no more than present levels.[113] The specific criteria must be such as not to discriminate in any way against either small or large firms. The most important factor must, however, be a proven record of conveyancing competence.[114] Indeed fairness demands that this should be so. Precisely how that will be judged has not yet been settled and must be a matter for discussions with the professions and interested bodies.[115] It should be noted that the criteria are, in any event, likely to differ according to the level of access that the applicant seeks under the network access agreement.[116]
13.46 Even when a person has entered into a network access agreement, he or she will be required to continue to meet its terms. As we explain below, a failure to do so may result in the termination of the network access agreement.[117] As a means of assisting those who have entered into such agreements to continue to meet the requirements, the Bill empowers the registrar to provide education and training in relation to the use of a land registry network.[118] It is likely that-(1) on-line training and education programmes will be provided by the registrar; and (2) participation in such programmes will be a condition of a network access contract.[119]
Terms of access
13.47 Under the Bill, the terms on which access to a land registry network is authorised will, as a general principle, be such as the registrar thinks fit, and may, in particular, include charges for access.[120] That principle is, however, qualified in a number of ways.
THE PURPOSES FOR WHICH THE POWER TO AUTHORISE MAY BE USED
To require transactions to be conducted electronically
13.49 The terms may require that the person authorised should have to use the network to carry on such transactions as may be specified that involve registration and are capable of being effected electronically.[121] It would not, therefore, be open to the person authorised to conduct such transactions in paper form. In this way, the registrar can ensure that those who use the network must carry out all (or all specified) registrable transactions electronically. This is part of the Bill's strategy of ensuring a speedy transition from a paper-based system of conveyancing to an electronic one. Although there is a power under the Bill to require that dispositions be made in electronic form,[122] this power is unlikely to be exercised until electronic conveyancing has become the norm.[123]
To regulate ancillary purposes
13.50 The terms on which the registrar may grant access to a land registry network may include such other purpose relating to the carrying on of qualifying transactions as rules may provide.[124] This power might be used for a variety of purposes, such as to require the person authorised to issue official search certificates or official copies when requested.[125]
To enable transactions to be monitored
13.51 The terms may be used to enable network transactions to be monitored.[126] We explain the monitoring of network transactions below. [127]
THE OBLIGATION TO COMPLY WITH NETWORK TRANSACTION RULES
13.52 Where a network access agreement grants a person access to the network to carry on transactions that involve registration and are capable of being effected electronically, it will be a condition of that agreement, that he or she will comply with any network transaction rules that are for the time being in force.[128] The network transaction rules will be of the greatest practical importance, as they will be the rules which specify how electronic conveyancing is to be conducted. The power conferred on the Lord Chancellor[129] is to make provision by such rules "about how to go about network transactions".[130] These rules may, in particular, make provision about dealings with the Land Registry, including provision about the procedure to be followed, and the supply of information.[131] The rules are likely to require an authorised solicitor or licensed conveyancer to provide specified information about any dealing and, in particular, information about overriding interests.[132] This is a significant requirement. It will for example provide a means of enforcing the obligation on persons applying for registration to disclose overriding interests affecting the estate to which the application relates.[133] This has been explained in Part VIII of this Report.[134] The rules are likely to require the disclosure of other information that a registered proprietor might not wish to have disclosed, such as the fact that a right to determine a registered estate in land has become exercisable.[135]
13.53 Another important function which these rules will almost certainly perform is to require that the making of a disposition or the entering into a contract and its registration shall occur simultaneously. As we have mentioned[136] and will explain more fully below,[137] this is probably the single most important technical principle in the Bill. Although there will be a power to make this principle compulsory,[138] it can at least be introduced without the exercise of that power by means of the network transaction rules.
THE POWER TO REGULATE TERMS OF ACCESS BY RULES
13.54 The terms on which access to a land registry network is authorised may be regulated by rules.[139] It is likely that rules will specify terms that should be included in any network access agreement. These terms will almost certainly vary according to the level of access that any such agreement gives.[140]
Termination of access
13.55 The Bill makes provision for the termination of network access agreements. The right to terminate is exercisable by giving notice of the termination of the agreement to the other party to it. However, the circumstances in which the parties are permitted to terminate the agreement are not the same. A person who is granted access may terminate the agreement at any time.[141] By contrast, the registrar's powers of termination are more limited and will be defined in rules. The Bill confers a power for rules to make provision about the termination of a network access agreement, and in particular-
(1) the grounds of termination;
(2) the procedure to be followed in relation to termination; and
(3) the suspension of termination pending appeal.[142]
In particular, rules may make provision that authorises the registrar to terminate a network access agreement if the party granted access-
(a) fails to comply with the terms of the agreement;[143]
(b) ceases to be a person with whom the registrar would be required to enter into a network access agreement conferring the authority which the agreement confers;[144] or
(c) does not meet such conditions as rules may provide.[145]
13.56 It should be stressed that the termination of a network access agreement is likely to be a remedy of absolute last resort. Because the agreement will normally be a contract, the registrar will have contractual remedies against a party to such an agreement that will stop short of termination.[146]
Appeals
13.57 There will, inevitably, be disputes as to whether the registrar has acted properly in either rejecting an application to enter into a network access agreement or in terminating such an agreement. For any practitioner involved, the refusal of an application for a network access agreement or the termination of an existing access agreement is likely to be a very serious matter that may cause the loss of his or her livelihood.[147] The Bill therefore confers a right of appeal to the Adjudicator.[148] This has two significant advantages over the alternative of leaving the aggrieved person to seek judicial review. First, it will be both quicker and substantially cheaper. Secondly, it will not be confined to a review of the registrar's decision. The Adjudicator will be able to reconsider the matter himself and substitute his own decision for that of the registrar's. He may then give such directions as he considers appropriate to give effect to his determination.[149] There will be a further right of appeal from the Adjudicator's decision to the High Court, but as this is a second appeal, only on a point of law. [150]
Overriding nature of network access obligations
(1) she might have to register an overriding interest affecting the property that her client is purchasing which he would prefer to keep off the title; or
(2) where the transaction is part of a chain, she might have to disclose information about it that her client regards as confidential.[151]
13.59 Where such conflicting obligations do arise, the Bill provides that the obligation under the network access agreement prevails and discharges the other obligation to the extent that the two conflict.[152] Such a provision appears to us to be necessary to ensure that the aims of the Bill can be properly implemented.
Presumption of authority
13.60 As we have indicated, it is likely that, at least in the early days of electronic conveyancing, solicitors and licensed conveyancers may wish to sign documents in electronic form on behalf of their clients.[153] There are, however, a number of problems that arise in this context because of certain limitations on an agent's implied authority to conclude transactions. In particular, a solicitor (and therefore, presumably, a licensed conveyancer) has no implied authority to sign a contract for the sale or purchase of an interest in land on behalf of his or her client.[154] He or she can only conclude such a contract if he or she has actual authority. We anticipate that it would in practice be very unusual for a solicitor, licensed conveyancer or authorised practitioner to conclude a contract in electronic form without such authority. However, because of the absence of any implied authority, a solicitor, licensed conveyancer or authorised practitioner acting for one party to a conveyancing transaction would be entitled to see the written authority from the other party to his or her solicitor or licensed conveyancer and vice versa. It rather defeats the point of electronic conveyancing if such paper-based written authorities have to be exchanged before contracts can be concluded electronically.
13.61 The Bill therefore makes provision to meet the point.[155] It applies where a person who is authorised under a network access agreement to use the network to make either a disposition or contract, purports to do so as agent. In favour of any other party, that person will be deemed to be acting with the authority of his or her principal if the document which purports to effect the disposition or to be a contract-
(1) purports to be authenticated by him or her as agent; and
(2) contains a statement to the effect that he or she is acting under the authority of his or her principal.
13.62 It is intended that, under the network transaction rules,[156] there will be a standard form of authority which a practitioner will be required to use to obtain his or her client's authority where he or she is to execute an electronic instrument as agent for that client.[157]
Managing network transactions
13.63 It is intended that the registrar (or such person as he may delegate) shall have power to monitor certain types of transaction in order to facilitate them. In particular, we have explained in Part II of this Report, it is anticipated that chains of sales, at least of residential properties, are likely to be managed in order to expedite them and reduce the risk of any break in them.[158] This is an intrusive power and should only be employed sparingly in those situations where the benefits that it offers outweigh the drawbacks.[159] It is, however, a very important power and one that has the potential to eliminate much of the stress and uncertainty that presently arises in chain transactions. The Bill therefore makes provision to enable network transactions to be managed.
13.64 First, as we have mentioned, the terms of a network access agreement may require the person granted such access to provide monitoring information.[160] In relation to a transaction that was part of a chain, this would probably require the solicitor or licensed conveyancer who had been granted access to provide the registrar[161] with information such as the following as soon as it became available-
(1) that his or her client was proposing to enter into a transaction that appeared to be part of a chain;[162] and
(2) that he or she had performed a specified conveyancing step, such as having completed local searches or that his or her client had received a mortgage offer.
13.65 Secondly, the registrar, or the person to whom he has delegated his "chain management" functions,[163] may use monitoring information[164] for the purpose of managing network transactions.[165] In particular, he may disclose such information to persons authorised to use the network, and may authorise further disclosure, if he considers it necessary or desirable to do so.[166] Typically, this will mean that the registrar (or his delegate as "chain manager") can disclose to other parties in the chain the state of progress of the other transactions in the chain. Although the "chain manager" will not have any direct coercive powers (indeed it is not easy to see what effective powers there could be), he will be able to identify the link in the chain that is causing the delay. He will then be able to encourage that party to proceed with due despatch.
Rules Introduction
Why a rules-based approach is necessary
13.67 As a general principle, the Bill follows the model of the Land Registration Act 1925, in that the primary legislation is intended to contain the governing principles, leaving the technical details for rules.[167] The move from a paper-based system of conveyancing to one that is completely dematerialised will inevitably take some years. It is likely to be introduced in stages, starting with the simplest matters and gradually progressing to the most complex transactions.[168] The electronic and paper-based systems will necessarily co-exist during that transitional period.
13.68 At this stage, the precise form that electronic conveyancing will take has not yet been settled, though HM Land Registry intends to demonstrate a proposed model in the autumn. In any event, it is certain that electronic conveyancing will evolve and change, just as has been the case in relation to paper-based conveyancing.[169] It is therefore necessary to have a framework that is flexible enough to allow for this development. The Bill seeks to do that by providing a structure within which electronic conveyancing can operate, leaving the exact manner of its operation to be laid down from time to time in rules.
Safeguards
13.70 As we explain in Part XVII, most of the powers to make rules under the Bill are powers to make "land registration rules". These will be made according to long- established procedures that were created under the 1925 Act.[170] However, subject to certain exceptions, for network transaction rules,[171] the rules applicable to electronic conveyancing are not land registration rules[172] and are deliberately subject to a higher level of scrutiny. First, before the Lord Chancellor can make any relevant rules,[173] he must consult such persons as he considers appropriate.[174] Secondly, whereas land registration rules merely have to be laid before Parliament,[175] the rules under discussion here are subject to annulment in pursuance of a resolution of either House of Parliament.[176]
13.71 It should be added that, although network transaction rules will be land registration rules and not therefore subject to any formal requirement of prior public consultation, it is inconceivable that any such rules would be introduced without such consultation, at least until electronic conveyancing is firmly established.[177]
Do-it-yourself conveyancing
13.72 Although the number of persons who conduct their own registered conveyancing is very small -it is understood to be less than 1 per cent of transactions -it is plainly important that they should still be able to do so, even when all registered conveyancing has become paperless. We mentioned the issue of "do-it-yourself conveyancers" in the Consultative Document. Our provisional view was that such persons would have to lodge the relevant documents with a district land registry, which would, as now, register the transaction.[178] This approach would deny do-it-yourself conveyancers the opportunity to take advantage of electronic conveyancing. It could also have deleterious effects if, say, such a person was involved in a chain of other transactions. We have therefore reconsidered the matter and the Bill adopts a different approach.
13.73 Once there is a land registry network, the registrar is to be under a duty to provide such assistance as he thinks appropriate for the purpose of enabling persons engaged in qualifying transactions[179] who wish to do their own conveyancing by means of the land registry network.[180] The duty does not, however, extend to the provision of legal advice.[181] It is envisaged that the way in which this will operate is that a person who is undertaking his or her own conveyancing, will be able to go to a district land registry for this service. The registrar will carry out the necessary transactions in electronic form on his or her instructions. Obviously that person will be required to pay an appropriate fee for the service that will reflect the costs involved to the Registry.
THE POWER TO MAKE ELECTRONIC CONVEYANCING COMPULSORY AND TO REQUIRE THAT ELECTRONIC DISPOSITIONS SHOULD BE SIMULTANEOUSLY REGISTERED
The objective of the power
13.74 We have briefly explained in Part II of this Report why the Bill contains and needs to contain a power by which, in due course, the use of electronic conveyancing could be made compulsory.[182] In particular, we explained that it might be necessary to require at least some transactions to be effected electronically because otherwise the benefits of electronic conveyancing could be lost. We also explained that the power of compulsion was linked to the single most important technical aim of the Bill.[183] That is to bring about the situation in which many transactions involving registered land will have no effect unless registered. Much of the thinking underlying this Bill rests on that principle. However, it can only happen if the making of the transaction and its registration are simultaneous and that in turn is possible only if both can be effected electronically.
(1) the transaction shall only take effect if it is electronically communicated to the registrar; and
(2) the relevant registration requirements are met.[184]
13.77 The absence of any period of time between the transaction and its registration eliminates any risk of the creation of third party interests in the interim. It also means that there is no risk that the transferor may destroy the interest after its transfer but before its registration, as where X Plc assigns its lease to Y Ltd and X Plc surrenders the lease to its landlord after assigning it but before the assignment is registered.[185]
13.78 At present the priority of an interest in registered land, other than a registrable disposition that has been registered, depends upon the date of its creation, not the date on which it is entered on the register.[186] That will remain so under the Bill.[187] However, the exercise of the power under Clause 93 will mean that a transaction and its registration must coincide. In this way, the register will become conclusive as to the priority of many interests in registered land, because the date of registration and the date of disposition or contract will be one and the same.
13.79 Quite apart from the reasons already given why electronic conveyancing might be made compulsory in relation to at least some transactions,[188] there is, therefore, also an important legal goal to be achieved by doing so. It is to make an inextricable link as a matter of law between the making of a transaction and its registration. It is true that network transaction rules[189] can achieve the effect that a transaction and its registration coincide. But if by some mischance in a particular case that did not happen, a transaction might still have some effect between the parties (as it would now) if it were not registered. There is a risk that the mere fact that this could happen might undermine one of the goals of ensuring simultaneity of transaction and registration, namely that a person could rely on the register as being conclusive as to priority. It is therefore necessary to have statutory provision to ensure the linkage between a transaction and its registration.
The application of the power
13.80 The power in Clause 93 will apply to a disposition of-
(1) a registered estate or charge; or
(2) an interest which is the subject of a notice in the register; where the disposition is one specified by rules.[190]
The scope of the power will, therefore, be determined by rules. This means that the power can (and doubtless will) be exercised progressively. As the use of electronic conveyancing becomes the norm in relation to particular transactions, the power to require them to be made electronically and simultaneously registered could then be exercised. Given the considerable importance of this power, the Lord Chancellor is required to consult before he makes any rules under it.[191] There are two points that should be noted about the power.
(1) a profit à prendre in gross that has not been registered with its own title;[192]
(2) a franchise that has not been registered with its own title;[193]
(3) an equitable charge;
(4) the benefit of an option or right of pre-emption.
13.82 The extension of the system of title registration to interests that were protected by notice and not registered with their own titles was canvassed in the Consultative Document,[194] and we have already explained how the system of priority searches could, under the Bill, be extended to such interests.[195]
13.83 The second point is more technical. For the purposes of Clause 93, a "disposition", in relation to a registered charge, includes postponement.[196] We have explained in Part VII of this Report that registered charges are to be taken to rank as between themselves in the order shown in the register.[197] If, say, by agreement between two chargees, charge A is to be postponed to charge B over which it would otherwise have priority, the communication and the necessary entry in the register could be required to be made electronically and would only be effective when registered. This is in accordance with one of the main aims of introducing electronic conveyancing, which is to make the register conclusive as to the state of title. This can only happen if transactions that affect priorities are required to be registered in order to have effect.
Registration requirements
13.84 As we have explained, when exercised, the power under Clause 93 will mean that a specified disposition or contract that is electronically communicated to the registrar will only take effect when the relevant registration requirements are met.[198] The Bill explains what is meant by the relevant registration requirements for these purposes.[199] First, as regards registrable dispositions, they are the requirements set out in Schedule 2. These have been explained in Part IV of this Report.[200] Secondly, as regards any other disposition, or a contract, the requirements are such as will be set out in rules.[201] When Clause 93 is applicable, Clause 27(1), which provides that a registrable disposition does not operate at law until the registration requirements are met, is disapplied.[202] The reason for this is that under Clause 93, a disposition has no effect whether at law or in equity, until the registration requirements are met.
Rules
13.85 Under Clause 93, the dispositions (and, therefore, also contracts to make such dispositions[203]) that will be subject to the requirement that they be made in electronic form and simultaneously registered will be specified in rules.[204] Such rules will be made by the Lord Chancellor by statutory instrument and will be subject to annulment in pursuance of a resolution of either House of Parliament.[205]
Ü Þ
Note 1 See above, paras 2.52 and following. [Back] Note 2 See Law Com No 254, Part XI. [Back] Note 3 See paras 13.7 and following. [Back] Note 4 Law Com No 254, para 11.21. [Back] Note 5 Law of Property Act 1925, s 53(1)(a). [Back] Note 6 Law of Property Act 1925, s 52(1). A deed must make it clear on its face that it is a deed and must be validly executed: see Law of Property (Miscellaneous Provisions) Act 1989, s 1(2). The requirements for execution vary according to the person or body making the deed. However some form of subscription is required, as is delivery of the deed. [Back] Note 7 See Law of Property Act 1925, s 52(2). [Back] Note 8 See Law of Property Act 1925, s 52(2)(a); Administration of Estates Act 1925, s 36(4). [Back] Note 9 Law of Property (Miscellaneous Provisions) Act 1989, s 2. For those contracts that are not required to meet the requirements of s 2, see s 2(5). [Back] Note 10 Law Com No 254, paras 11.22, 11.23. [Back] Note 11 Even before the Consultative Document had been published, the Law Commission and HM Land Registry were in discussions with the Department of Trade and Industry about the possibility of using powers under the proposed Electronic Communications Bill to overcome the formal requirements for dealings with land. The Electronic Communications Bill was in fact amended during its passage through Parliament to ensure that it could be employed for this purpose. [Back] Note 12 In this case, the Lord Chancellor. [Back] Note 13 Electronic Communications Act 2000, s 8(1). [Back] Note 14 Ibid, s 8(2)(a). [Back] Note 15 Ibid, s 8(2)(c). [Back] Note 16 Ibid, s 8(1)(a). [Back] Note 17 Cf below, para 13.10. [Back] Note 18 Electronic Conveyancing: A draft order under section 8 of the Electronic Communications Act 2000; CP: 5/2001. [Back] Note 22 See Cl 132; and Schedule 13. [Back] Note 23 See respectively, Cls 91 (below, para 13.11); and 94 (below, para 13.32). The third element of the draft Order could not be included in the Land Registration Bill because of its application to unregistered land. It therefore goes beyond the scope of the Bill. [Back] Note 25 See paras 13.30, 13.74. [Back] Note 28 See The Execution of Deeds and Documents by and on behalf of Bodies Corporate (1998) Law Com No 253, paras 1.14, 9.9. [Back] Note 31 Cl 91(2)(b). This goes beyond the Law of Property (Electronic Communications) Order. It is envisaged that it will become possible to transfer electronically certain legal and equitable interests that are protected by a notice on the register but are not registered estates or charges. See below, paras 13.22, 13.81. [Back] Note 32 Cl 91(2)(c). For dispositions that trigger the requirement of compulsory registration under Cl 4, see above, paras 3.23 and following. [Back] Note 34 See Land Registration Rules 1925, Schedule 1 (which was inserted by Land Registration Rules 1997, r 2(2)). Whereas approximately 50% of all applications to HM Land Registry are in some way defective, so that the registrar is obliged to raise requisitions upon them, the number of errors in relation to the new forms of application is much less. [Back] Note 36 See Cl 91(5), below, para 13.19. [Back] Note 38 References in Cl 91 to an electronic signature are to be read in accordance with Electronic Communications Act 2000, s 7(2): see Cl 91(10). Section 7(2) provides that for the purposes of that section, an electronic signature “is so much of anything in electronic form as-(a) is incorporated into or logically associated with any electronic communication or electronic data; and (b) purports to be incorporated or associated for the purpose of being used in establishing the authenticity of the communication or data, the integrity of the communication or data, or both”. [Back] Note 39 On electronic signatures generally, seeDigital Signature Guidelines, which was produced for the Judicial Studies Board by a working group chaired by Lord Saville of Newdigate. It is published by the Judicial Studies Board in electronic form and is available from the websites of both the Judicial Studies Board (www.jsboard.co.uk) and the Law Commission (www.lawcom.gov.uk). The Law Commission was represented on the working group by Judge Diana Faber, who was then a Commissioner. [Back] Note 40 This is explained in some detail inDigital Signature Guidelines, above, paras 18-26. [Back] Note 41 Which can be made available on a smart card. There are strict safeguards employed in relation to the use of such smart cards. [Back] Note 42 Or the disponor’s agent. [Back] Note 43 Or their agents. [Back] Note 44 See, for example, under the present law, Land Registration Rules 1925, Schedule 1, Form TR1. In practice, this is not always done. [Back] Note 45 See too below, para 13.19. [Back] Note 47 It should be stressed that this is only by way of example and that dual key cryptography is just one form of electronic signature. [Back] Note 48 See para 13.14. [Back] Note 49 For the purposes of Cl 91, references to the certification of an electronic signature are to be read in accordance with Electronic Communications Act 2000, s 7(3): see Cl 91(10). Section 7(3) provides that “an electronic signature incorporated into or associated with a particular electronic communication or particular electronic data is certified by any person if that person (whether before or after the making of the communication) has made a statement confirming that-(a) the signature, (b) a means of producing, communicating or verifying the signature, or (c) a procedure applied to the signature, is (either alone or in combination with other factors) a valid means of establishing the authenticity of the communication or data, the integrity of the communication or data, or both”. [Back] Note 51 For the means by which a corporation can execute a document in electronic form, see below, paras 13.24 and following. [Back] Note 52 As was provisionally proposed in the Consultative Document: see above, para 13.6. [Back] Note 53 See the suggested Land Registration Act 1925, s 144A(4). [Back] Note 54 Which is all that the draft Order can do, given the terms of Electronic Communications Act 2000, s 8: see above, para 13.8. [Back] Note 55 The corporations in question are those to which neither the provisions of the Companies Act 1985 nor any other statute governing the execution of documents by particular corporations or classes of corporation apply. [Back] Note 56 See further below, para 13.30. [Back] Note 57 This gives rise to certain problems as to an agent’s authority to make contracts and other dispositions on behalf of his or her clients. These are, however, addressed by the Bill: see below, para 13.60. [Back] Note 58 Steiglitz v Eggington (1815) Holt 141; 171 ER 193; Powell v London and Provincial Bank [1893] 2 Ch 555, 563. [Back] Note 59 Cl 91(5); above, para 13.19. [Back] Note 60 Notably Law of Property Act 1925, s 53(1)(a), which provides that “no interest in land can be created or disposed of except by writing signed by the person creating or conveying the same, or by his agent thereunto lawfully authorised in writing …”. [Back] Note 61 See Cls 91(2)(b) (above, para 13.12); 93 (below, para 13.81). [Back] Note 62 This could include both legal estates (such as a profit à prendre in gross or a franchise, which was not registered with its own title) and equitable interests (such as the benefit of an option or other estate contract or an equitable charge). [Back] Note 63 Cl 93; below, para 13.74. [Back] Note 64 Law of Property Act 1925, s 136. [Back] Note 65 Companies Act 1985, s 735(1). [Back] Note 66 Companies Act 1985, s 718 and Schedule 22. [Back] Note 67 SI 1994 No 950 (as amended). [Back] Note 68 See above, para 13.18. [Back] Note 69 This is the language employed by Electronic Communications Act 2000, s 7(1). [Back] Note 70 Cl 91(4); above, para 13.18. [Back] Note 71 Companies Act 1985, s 36A. [Back] Note 72 See Powers of Attorney 1971, s 7, which provides that a donee of a power of attorney who is an individual may execute any instrument with the authority of the donor of the power which is as effective as if it were done in the name of that donor. It is expressly provided that this power can be exercised on behalf of any corporation sole or aggregate to make a conveyance of its land: seeibid, s 7(2); Law of Property Act 1925, s 74(3). [Back] Note 73 Again, this follows from Cl 91(4); above, para 13.18. [Back] Note 74 Defined by the subsection as “a purchaser in good faith for valuable consideration and includes a lessee, mortgagee or other person who for valuable consideration acquires an interest in property”. [Back] Note 75 The subsection also creates a presumption of delivery in relation to a deed. That is irrelevant to electronic documents: see above, para 13.13. [Back] Note 76 See especially Companies Act 1985, ss 35, 35A, 35B. [Back] Note 77 Cf Companies Act 1985, s 35A (which deals only with the power of the board of directors to bind the company). [Back] Note 78 Cf The Execution of Deeds and Documents by and on behalf of Bodies Corporate (1998) Law Com No 253, para 5.35. [Back] Note 79 See above, para 13.27. [Back] Note 80 While an electronic document can be regarded as having been signed under Cl 91(4), but for Cl 91(9), it would not be obvious that this would include a purported signature for the purposes of Companies Act 1985, s 36A(6). [Back] Note 81 See above, para 13.14. [Back] Note 82 Including local authorities, building societies, industrial and provident societies and corporations sole. The Secretary of State is a corporation sole. [Back] Note 83 As in relation to charities (see Charities Act 1993, s 60) and friendly societies (see Friendly Societies Act 1992, Schedule 6, para 2). [Back] Note 85 This is because only statutory requirements can be altered under the Order: see above, para 13.8. [Back] Note 86 The section was intended to reverse the effect of a number of rather troublesome judicial decisions as to what was to happen on the completion of a conveyance. [Back] Note 87 See Schedule 10, para 6; above, para 9.77. [Back] Note 89 Many estate contracts by their nature have a comparatively short life. While not all contractual obligations are merged in the subsequent transfer, most are. It is therefore unlikely that it will be necessary for the Registry to retain a copy of such contracts for very long. [Back] Note 90 See paras 2.52-2.58. [Back] Note 92 The network may well be provided by a private sector partner. [Back] Note 94 See Cl 92(2); Schedule 5. [Back] Note 95 See paras 2.51, 2.57. [Back] Note 96 See below, para 13.74. [Back] Note 97 Schedule 5, para 1(1). [Back] Note 98 Schedule 5, para 1(2). [Back] Note 99 There will be an exception to this in relation to other emanations of the Crown (such as the Crown Estate) which cannot contract with HM Land Registry (the Crown cannot contract with itself). In relation to any such bodies, there will simply be an agreement in exactly the same terms. [Back] Note 100 See above, Part X. [Back] Note 101 See above, para 10.26. [Back] Note 102 See above, para 9.61. [Back] Note 103 See above, para 9.45. [Back] Note 104 Schedule 5, para 1(2). [Back] Note 105 Schedule 5, para 1(3). [Back] Note 106 Such as entering restrictions. [Back] Note 107 Schedule 5, para 1(4). [Back] Note 108 Schedule 5, para 11(1), (2). [Back] Note 109 Schedule 5, para 11(3). [Back] Note 110 See Schedule 8; explained above, paras 10.29 and following. [Back] Note 111 It is well known that one of the main reasons for the demise of the Solicitors’ Indemnity Fund was the number of claims for negligent conveyancing. As we have explained above, at para 13.12, approximately 50% of all applications to HM Land Registry are in some way defective. [Back] Note 112 We have had a number of discussions with well-known firms of solicitors over the last two years. We have been repeatedly told that, where such a firm is acting in a conveyancing transaction, the firm acting for the other party often fails to do the work properly and simply relies upon the better-known firm to make good its shortcomings. There is entirely justified resentment of such practice. [Back] Note 113 The amount currently paid out on indemnity claims is remarkably low given the volume of business that HM Land Registry transacts. For example, in the financial year 1999 -2000, despite millions of transactions handled by the Registry, there were only 703 claims for indemnity, and the net amount paid was £891,504. Some 98.66% of applications in that period were processed free of error. These figures are taken from HM Land Registry’sAnnual Report and Accounts 1999 ¾ 2000. [Back] Note 114 Cf above, para 13.40. [Back] Note 115 We note that some years ago, The Law Society considered the introduction of a conveyancing “chartermark” for conveyancing solicitors who met specified standards. However, nothing came of that proposal. It may now perhaps merit reconsideration. [Back] Note 116 Cf above, para 13.38. [Back] Note 117 See below, para 13.55. [Back] Note 118 Schedule 5, para 10. [Back] Note 119 Cf Schedule 5, para 2(4); below, para 13.54. [Back] Note 120 Schedule 5, para 2(1). Those who have direct access to the register of title by means of Land Registry Direct (see above, para 2.41), already pay a fee for such access. [Back] Note 121 Schedule 5, paras 2(2)(a), 11. [Back] Note 122 See Cl 93; below, para 13.74. [Back] Note 123 Cf above, paras 2.59-2.61 [Back] Note 124 Schedule 5, para 2(2)(b). Qualifying transactions are those that involve registration and are capable of being effected electronically: Schedule 5, para 12. The rules will be made by the Lord Chancellor. [Back] Note 125 Cf above, para 13.37. [Back] Note 126 Schedule 5, para 2(2)(c). [Back] Note 127 See para 13.64. [Back] Note 128 Schedule 5, para 2(3). These rules may vary during the period of a network access agreement. The obligation will be to comply with the rules as they stand at any given time. [Back] Note 129 With the advice of the Rule Committee: see Cl 124; below, para 17.5. [Back] Note 130 Schedule 5, para 5(1). [Back] Note 131 Schedule 5, para 5(2). [Back] Note 134 See para 8.91. [Back] Note 135 See Cl 64; above, paras 9.29 and following. [Back] Note 136 See above, paras 2.1(2), 2.17, 2.26, 2.56, 2.59, 2.60. [Back] Note 137 See para 13.74. [Back] Note 138 Under Cl 93; below, para 13.74. We explain at para 13.79, that there are reasons why that power may have to be exercised, to ensure that the principle of making a disposition or a contract and simultaneously registering it is effective. [Back] Note 139 Schedule 5, para 2(4). The rules will be made by the Lord Chancellor, and he will be under an obligation to consult before making them:ibid, para 11(1), (2). [Back] Note 140 Cf above, para 13.38. [Back] Note 141 Schedule 5, para 3(1). [Back] Note 142 Schedule 5, para 3(2). The rules will be made by the Lord Chancellor, who must consult such persons as he considers appropriate before he does so:ibid, para 11(1), (2). The rules must be made by statutory instrument that is subject to annulment in pursuance of a resolution of either House of Parliament: Cl 125(4). [Back] Note 143 A person in whose favour a network access agreement has been made, must comply with the relevant conditions of access as they stand at any given time. If, for example, the network transaction rules are changed, he or she must comply with the revised rules. [Back] Note 144 As we have explained above, para 13.38, there will be different levels of access, and what may suffice for one may not suffice for another. [Back] Note 145 Schedule 5, para 3. The rules referred to in (c) are those specifically made under Schedule 5, para 3. [Back] Note 146 What these may be will depend upon the terms of the agreement. Those terms cannot be a matter for legislation. [Back] Note 147 As we have explained above, in para 13.55, where an existing agreement is terminated, rules may provide for the suspension of termination pending an appeal. [Back] Note 148 Schedule 5, para 4(1). This does not displace any contractual remedy that a person may have if it transpires that his or her network access agreement was wrongly terminated. [Back] Note 149 Schedule 5, para 4(2). Rules may make provision about such appeals:ibid, para 4(3). Such rules will be land registration rules which will be required to be laid before Parliament only: Cls 125(3); 129(1). [Back] Note 150 Cl 109(2); see below, para 16.23. [Back] Note 151 Cf below, para 13.64. [Back] Note 152 Schedule 5, para 6. [Back] Note 153 See above, para 13.20. For electronic signatures, see above, para 13.14. [Back] Note 154 Smith v Webster (1876) 3 ChD 49; H Clark (Doncaster) Ltd v Wilkinson [1965] Ch 694,702. There are related questions in relation to a solicitor’s authority to execute a deed and to sign a declaration of a trust of land on behalf of his or her client. In the course of preparing the Bill we have addressed those situations in detail. We do not consider that it is necessary to discuss them here. [Back] Note 155 Schedule 5, para 8. [Back] Note 156 See above, para 13.52. [Back] Note 157 A failure to obtain the authority in the prescribed form would be a breach of the rules, but would not invalidate the disposition or contract. [Back] Note 158 See above, para 2.52. [Back] Note 159 It may not be required in relation to chains of commercial transactions, particularly as there may be issues of commercial confidentiality involved. [Back] Note 160 Schedule 5, para 2(2)(c); above, para 13.51. [Back] Note 161 Or his delegate: see below, para 13.65. [Back] Note 162 Rules will no doubt define what constitutes a chain for these purposes. [Back] Note 163 Schedule 5, para 9(2). It is not yet certain whether HM Land Registry will be responsible for these functions or whether they will be contracted out. The Bill permits such contracting out. [Back] Note 164 That is the information provided in pursuance of a network access agreement included under Schedule 5, para 2(2)(c):ibid, para 9(3). See above, paras 13.51, 13.64. [Back] Note 165 Schedule 5, para 9(1). A network transaction is a transaction carried on by means of a land registry network:ibid, para 12. [Back] Note 166 Schedule 5, para 9(1). [Back] Note 167 As we explain below, para 17.2, the 1925 legislation does in fact leaves something to be desired in this regard. It is often quite arbitrary whether a matter is in the Land Registration Act 1925 or the Land Registration Rules 1925. [Back] Note 168 It will almost certainly be necessary to conduct pilot schemes in particular areas to test the proposed systems. [Back] Note 169 In 1990 alone, 9 sets of land registration rules were issued, with a further 38 sets since then. [Back] Note 170 See para 17.5. Land registration rules are subject to scrutiny by a technical committee, the Rule Committee: see Cl 124. This Committee has operated very effectively for more than 75 years: cf Land Registration Act 1925, s 144(1). [Back] Note 171 In particular, network transaction rules under Schedule 5, para 5; above, para 13.52. These are technical rules that make provision “about how to go about network transactions” and should therefore be land registration rules just as are the equivalent rules in relation to paper-based conveyancing at present. [Back] Note 172 See the definition of “land registration rules” in Cl 129(1). [Back] Note 173 That is the rules under Schedule 5, paras 1, 2 and 3, above, paras 13.39, 13.50, 13.54, 13.55. [Back] Note 174 See Schedule 5, para 11(1), (2). The words “consult such persons as he considers appropriate” in para 11(2) are the ones commonly employed in a statute when it is intended that there should be public consultation. [Back] Note 177 When HM Land Registry was planning to introduce new forms in 1997, it consulted widely on its proposals before the rules were laid. [Back] Note 178 See Law Com No 254, para 11.11(2). In other words, there would, in such cases, have continued to be a “registration gap”. [Back] Note 179 That is, those which involve registration and are capable of being effected electronically: see Schedule 5, para 12. [Back] Note 180 Schedule 5, para 7(1). [Back] Note 181 Schedule 5, para 7(2). It would be wholly inappropriate for the Registry, in effect, to be in competition with conveyancing practitioners. The Registry has neither the wish nor the resources to do so. [Back] Note 182 See above, paras 2.59-2.61. [Back] Note 183 See above, para 2.60. [Back] Note 185 Cf Brown & Root Technology Ltd v Sun Alliance and London Assurance Co [2000] 2 WLR 566; above, para 1.20. [Back] Note 186 See Law Com No 254, para 7.17, where the authorities are explained. [Back] Note 187 See Cl 28, above, para 5.5. [Back] Note 188 See above, paras 2.60, 2.61, 13.74. [Back] Note 189 Schedule 5, para 5, above, para 13.52. [Back] Note 192 For the power to register such interests with their own titles under the Bill, see Cl 3; above, para 3.20. [Back] Note 193 For the power to register such interests with their own titles under the Bill, see Cl 3; above, para 3.19. [Back] Note 194 See Law Com No 254, Part VII. [Back] Note 195 See Cl 72; above, para 9.68. [Back] Note 197 Cl 48; above, para 7.15. [Back] Note 198 Cl 93(2), above, para 13.75. [Back] Note 200 See paras 4.16 and following. [Back] Note 201 In the case of a contract, the requirement is likely to be the entry of a notice. [Back]
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