Electronic titling systems

A recently published research paper by Benito Arruñada does a comparative study on electronic titling systems, covering: functioning systems of New Zealand and Ontario; proposed Australia and UK.

Abstract

Initiatives in electronic conveyancing and registration show the potential of new technologies to transform such systems, reducing costs and enhancing legal security. However, they also incur substantial risks of transferring costs and risks among registries, conveyancers and rightholders, instead of reducing them; entrenching the private interests of conveyancers, instead of increasing competition and disintermediating them; modifying the allocation of tasks in a way that leads in the long term to the debasement of registries of rights with indefeasible title into mere recordings of deeds; and empowering conveyancers instead of transactors and rightholders, which increases costs and reduces security. Fulfilling the promise of new technologies in both costs and security requires strengthening registries’ incentives and empowering rightholders in their interaction with registriesr.

1. Introduction

Electronic automation has made possible new ways of contracting, registering and settling transactions. In essence, technology has enabled the automation of many tasks performed by conveyancers when preparing and authenticating contracts and communicating with each other and with the registries. Many registries’ tasks have also been automated, including not only communication and archiving but also some routine compliance checks.

The least problematic changes are the use of information technologies for archiving and accessing information, by keeping the register in digital form and providing online access to the elements of the register that are open to conveyancers, parties or the general public. A second step is to make it possible for users and/or professionals to lodge documents at the registry electronically. In principle, these documents could be the digital version of those in the paper system. However, to fully exploit the potential of the new technologies, electronic lodgment is often accompanied by substantial standardization of documents and transactions. To this effect, the structure of the transactions has to be carefully examined and forms preapproved by the registry.1 For these standardized transactions, parties themselves or their legal representatives complete the forms in an electronic workspace by entering the specific data on the transaction they want to contract and register (e.g., the identity of the buyer or mortgagee, the name and incorporators of a new company), often “pre-populating” them with data from registry’s databases that identify each property and its owner or identify each company in subsequent filings. If necessary, documents in the workspace can be electronically shared by parties and their representatives for review, amendment and approval, which is useful in conveyancing. After all parties have granted their consent, the document is submitted electronically for registration. The most ambitious systems also provide for transferring funds between parties.

The most problematic issues relate to: (1) who is allowed to lodge documents at the registry; (2) the nature of the review performed by the registry staff before registration; and, encompassing both of these aspects, (3) how the new system ensures that rightholders have granted their consent.

First, to speed up reform, reduce opposition to reform and, allegedly but doubtfully, enhance security, the new system may reserve access to professional conveyancers, by granting them exclusive lodgment access to the registry. For example, in New Zealand, Singapore and British Columbia, only conveyancers may lodge documents electronically. Alternatively, the system may be open to other participants, at least to those who register for that purpose. This is the case of Ontario and the English 2002 Land Registration Act which allows “do it yourself conveyancing”.

Second, lodged documents may be subject to a variable mix of automatic and human preregistration checks for compliance. Most systems have instituted electronic lodgment but retain manual review by registrars before registration. The idea of allowing conveyancers not only to lodge their instruments electronically but also to alter the register after automatic controls by an “electronic registrar” but without manual intervention by the registry staff (often called “agency registration”) is generally rejected or only applied to simple transactions. Thus, the pioneer Electronic Land Registration System in Ontario maintains ultimate control by registrars, and the same solution has been adopted in British Columbia and Singapore (Low, 2005). The system under development in England also introduces validation by the registry prior to execution and completion. The New Zealand Landonline system is exceptional in that conveyancers directly alter the register subject only to automatic checks for some impediments to registration, such as caveats and pending dealings, with no manual intervention by registry staff prior to registration. Thus, it provides the paradigm case of agency registration.

Third, reforms introducing electronic conveyancing differ in how they ensure that rightholders have granted their consent to the transaction. Expediency has led some reformers also provide for transferring funds between parties. not only to allow but to actually require conveyancers to sign the documents electronically on behalf of their clients; clients sign only the authorization documents to be kept by conveyancers. (Interestingly, in some countries conveyancers were happy to sign on behalf of their clients while in others they were opposed to bearing the risks of such representation. A major factor here seems to be previous practice, as both solutions are in place in paper-based systems.3) Alternatively, the system may require the digital signature of rightholders on any document, lodged, which is safer. This may allow parties to dispense with witnesses, including conveyancers, for authenticating purposes. Security may also be enhanced by having the system notify rightholders and even request their consent before registering any relevant alteration in their rights.

The rest of the paper examines in more detail some systems of electronic conveyancing and registration at different stages of development with a view to obtaining guidance on these issues. It focuses especially on the New Zealand experience which, as a lone example of agency registration, is an exception to the general policy of retaining manual control of registration.

Link to the paper