rose to move, That the Grand Committee do report to the House that it has considered the Land Registration (Network Access) Rules 2008.
The noble Lord said: These draft rules are an important building block in creating a system of electronic conveyancing in England and Wales, as envisaged by the Land Registration Act 2002. The creation of a legal framework for electronic conveyancing was perhaps the most important single purpose of the Land Registration Act 2002. In a joint consultation by the Law Commission and the Land Registry, which preceded the drafting of that Act, the concept was supported in principle by almost 80 per cent of respondents. The Act enables the Land Registry to set up a land registry network to be used for electronic conveyancing. It provides that a person who is not a member of the Land Registry staff may have access to the network only if authorised by a network access agreement entered into with the Chief Land Registrar. These draft rules make provision about those network access agreements.
The Information Commissioner’s Office has been consulted on the rules and is comfortable with the measures that are being made at this stage of design and development to minimise the data protection risks. The office is pleased that the Land Registry has attached importance to data protection compliance in the development of this work, and it will continue to provide advice and guidance as it progresses. A draft of these rules was the subject of a public consultation in the first half of last year. Amendments have been made to the rules to take account of concerns expressed by respondents. Further details are given in the report on the responses to the consultation paper. Copies of this report have been placed in the Library, and an electronic copy is available on the Land Registry’s website.
The most common concern expressed by respondents related to the proposed provisions for the limitation and exclusion of liability which the rules required to be included in network access agreements. As well as making some modifications to the draft rules to meet many of these concerns, the Land Registry proposes to set up a scheme under which ex gratia payments would be made to people, other than professional conveyancers, who suffer loss in the event of problems with the network caused by an error or fault on the Land Registry’s part. It will therefore benefit the conveyancers’ clients—the actual sellers or buyers, mortgagers and so forth.
Once these rules are in force and the network is in place, electronic conveyancing by way of the network will be introduced in stages and will be piloted on a voluntary basis. These rules need to be in place before the first of these stages, so that professional conveyancers can enter into network access agreements in readiness for undertaking transactions on the network.
If this draft is approved by Parliament, it is planned that, from later this summer, certain applications will be able to be made by way of the network. The first stage of electronic conveyancing, which is currently planned to start by the end of this year, will involve electronic charges for use in remortgages and second mortgages of registered land. Rules, subject to the negative procedure, will make provision that allows these charges to be created in electronic form using the network. They will also make provision as to how to go about transactions carried on by means of the network. Further rules, subject to the negative procedure, will deal with the procedure for appealing against a decision by the registrar on entry into, or termination of, a network access agreement. Both these sets of rules were the subject of a public consultation in the latter part of last year. In the second stage, which is due to begin in 2009-10, the intention is to introduce transfers of registered land. Again, secondary legislation, under the negative procedure, will be required to allow for these dispositions to be effected electronically.
These draft rules are essential first steps in establishing a Land Registry network to enable electronic conveyancing to move forward and I commend them to the Committee. I beg to move.
Moved, That the Grand Committee has considered the Land Registration (Network Access) Rules 2008. 13th report from the Joint Committee on Statutory Instruments.—(Lord Hunt of Kings Heath.)
I thank the Minister for his explanation of the order, which is quite straightforward. I do, however, have a number of questions to put to him that I hope he will be able to answer.
First, we have some concern about security, but I am grateful for the fact that he has already consulted the Information Commissioner, who is satisfied with the position. As I understand it, the only people who can get themselves registered are those listed somewhere in the order. They would be solicitors, barristers, or whatever—the appropriate person. We have to go to Schedule 1(2):
“For the purposes of this paragraph, ‘qualified person’ means … a solicitor … a licensed conveyancer … a barrister … a duly certificated notary public”.
What is the current position on access to the Land Register, particularly access by people such as the press? If the press have a tame barrister, can he apply for access and then make use of that information in whatever way the press often want to make use of such information? I hope the Minister will be able to deal with that question.
My next question relates to cost. I am grateful that it is made clear there will be no charge for entering into such an agreement, but does the Minister think that in due course it will bring down the fairly considerable cost of registering land with the Land Registry? Does he think—it is obviously not necessarily the Government who should answer this question—that it might have an effect on what solicitors would charge the individual who has to register land? The Minister will be aware that it costs a considerable amount of money to register land.
My third question regards timing, which I think the Minister touched on in his explanation. We have been registering land for some time now, and it is envisaged that a lot more will be on the register by 2012. When these rules come into effect, that will all be done electronically. At the same time, will the Land Registry be putting all the old paper stuff on to the electronic network? If so, when, and when will those who will be entitled to have access to the Land Registry get the chance to go back and look at the old stuff that was registered in a paper manner?
The noble Lord, Lord Henley, makes a good point about the electronic registration of existing entries on the register. I think that registration was introduced in 1925; certainly it was operative on a voluntary basis when I was engaged in conveyancing in the 1960s, and it was extended gradually over the country. I note that, even now, not all interests have to be registered. Presumably there are some areas of land that do not require registration now. Accordingly, it will be a very big job to cover the existing records. I imagine that it will happen as it did with registered land originally: registration will take place electronically only when there is some disposition of the property in question.
Electronic conveyancing sounds very good, but what happens if the system crashes? I have been trying to find out where the liability lies from Schedule 2 of the agreement. The Monitor in this Room has failed at least twice today, and that is a good warning about what can go wrong. If there is no absolutely failsafe procedure as a backup to the electronic registration of land, all I can say is that future lawyers are going to make a fortune and I wish I could be there to see it.
My next question to the Minister is about the voluntary nature of registration. It says in the Explanatory Notes that the intention is to have pilot schemes on a voluntary basis. Is it envisaged that at some point it will become compulsory to work through electronic conveyancing? I was at a breakfast meeting this morning at the Law Society, where the noble and learned Lord, Lord Falconer, was promising us a technological future that will greatly increase the profits of lawyers; or was it that it would help consumers? I cannot quite remember. Something along those lines was said. The noble Lord, Lord Henley, raised the issue of whether it will be less expensive to convey property in the future.
One other area of interest is the position of people who wish to do their own conveyancing. I have done so myself. I do not see any provision in the rules that deals with the position of a person who says, “I think it is a very simple procedure now that it is being done electronically. I am a whizz with the computer. I can do it myself and avoid having to pay the expenses of a solicitor”. It is a considerable temptation to people in this day and age to do precisely that. Again, that is usually profitable to the legal profession, but still people should have the choice.
Finally, it is all very well to have an electronic system, but a piece of paper in the hand is valuable and makes you think that you actually own the property. The deeds of my house in Gresford go back to 1805 and there are some wonderful parchments from that date that are prized. It makes you think that you own the place. I recall when I started in the 1950s and 1960s, the managing clerk had beautiful copperplate handwriting to engross conveyances. That gave a sense of ownership.
However, there is a practical side to it. When one has a dispute with a neighbour about who must repair a fence that has blown down, it is handy to have immediate access to a piece of paper with a plan attached either to a land certificate or to a conveyance and to look at what exactly is there. Under the electronic conveyancing provisions, it looks as though one will have to go to a lawyer to get access to the system, so the lawyer can look and tell you, and he will charge you for that privilege. All sorts of practical questions arise when we come to dealing with the rules. They are only paving the way for more regulations in the future. Subject to that, we do not intend to object to the passing of the rules, but we would like clarification on my points.
I am grateful for those comments and for the general welcome for the rules, although I sense that the noble Lord, Lord Thomas of Gresford, is rather suspicious of these modern methods. He prayed in aid the collapse of our system earlier this afternoon, which meant that we could not see the results of the Division in the Chamber.
The development of electronic conveyancing, none the less, has many advantages for customers, and I hope that we are first and foremost thinking of the public. A paper will still be kept, so I do not think that the parchment is under threat. I think that the noble Lord, Lord Thomas, accepts that the parchments will continue to be there, but he was arguing that if anyone wanted to get hold of them they would have to go through a process in parallel to the electronic system. We have to accept that. Overall, there surely are advantages to be had in electronic conveyancing.
I understand the question raised by the noble Lord, Lord Henley, about data security and protection. As I said in my opening remarks, we have consulted the Information Commissioner’s office. The Land Registry has for many years held databases, including personal data, so the need to keep data secure is not a new obligation. All Land Registry information systems meet the international security management standard ISO 27001, with which I am sure we are all familiar. The systems are also subject to a comprehensive and robust auditing and monitoring regime. In particular, at least every six months, the Land Registry commissions independent penetration testing firms to test the security of its systems, including the latest hacker techniques. Any weakness is detected and dealt with in priority order. There is then a retesting to ensure that no residual weakness is present. These tests will also be applied to the electronic conveyancing network when it is established.
On the very relevant question of data backup, all Land Registry data are continuously backed up, whereby three copies of all its data are held in mainframe computers on separate sites. In addition, a fourth copy is made once a day. Full backups of systems are kept on tape, and changes that occur during the day are logged. This ensures that the registry can continue to operate, even if one of its data centres is lost or unavailable. The Land Registry operates strict controls as to how changes to its IT infrastructure are managed, risk-assessed and tested prior to deployment. The network is a closed system.
Access will be possible only for Land Registry employees and individuals, firms and organisations that have entered into a network access agreement. The term used for them in the draft rule is “subscribers”. The full network access agreement used by conveyancing professionals provided to the subscriber may allow others and, broadly, their staff access to a set of services appropriate to their job function. Among other requirements, the details of those users have to be supplied to the registrar. They must be supervised by a qualified person and the subscriber and their staff are obliged to keep secure all their security measures, including their log-on names, passwords and so on. The full network access agreement provides for the subscriber to allow individual parties to a transaction, whose identification they will have checked, to access the network either by way of a read-only network access agreement or a signature network access agreement with the registrar. The Land Registry will issue the individual with user identification and passwords. There will be no anonymous access to the network. The client or borrower will have access only to information relating to the particular transaction with which they are involved.
I accept that the noble Lord, Lord Thomas of Gresford, was concerned that, even if the security is okay, if the system goes down, the advantage of electronic conveyancing is lost. I agree with him. I am not going to make any foolish commitments; I have been for too long involved with and responsible for various IT projects to do that, but I am satisfied that the Land Registry, which is an efficient organisation, will do everything that it can to ensure that there are no crashes and that when there are, it will be up and running. However, from a security point of view—and one has to be careful about the guarantees that one can give—the Land Registry has gone through a full process which has been checked out with the office of the Information Commissioner, which has made it clear that it will continue to take a close interest and that the Land Registry can look to it for advice.
There are two points in relation to the media. The register has been open to the media since December 1990. The noble Lord suggested a way in which a solicitor might allow a member of the media to gain access to inappropriate information. I will pray in aid my admiration for the integrity of the profession, whom I dearly love, and there are additional safeguards within the profession’s standards and all that goes with them.
I understand the point raised about costs. The noble Lord, Lord Thomas of Gresford, referred to possible failures in the system which would lead to lawyers earning lots of fees. He will know from my current fascinating debates on legal aid that lawyers are looking for every sort of fee they can get, and no doubt they will take note of what he has said. I understand the point about costs, of course, but the system of land registration is extremely effective and I pay tribute to the work of the Land Registry. In 2007-08, 97.2 per cent of Land Registry customers rated the overall service they received as excellent, very good or good, which is a pretty good record. The electronic conveyancing programme is designed to improve the existing system further. It is far bigger than just an electronic form-filling activity, and over time it will bring benefits in terms of time and cost savings to businesses beyond those measured during the administrative burden exercise, and obviously the cost situation will be kept under close review.
On the timetable, I have already alluded to the need for caution in introducing the system, which is only right. It has always been the view of the Government, the Land Registry and, indeed, the registry’s customers that this is a change that could not happen overnight and needs to be done in stages. As the noble Lord, Lord Thomas of Gresford, pointed out, the existing paper-based system has developed over very many years, if not centuries, and we would certainly be worried about a “big bang” approach and the potential harm that that could cause to the housing market. Therefore, it is being brought forward in stages. Towards the end of this year it will be possible to create electronic charges using the network and for parties to sign up to them using electronic signatures. In 2009-10, the ability to create electronic transfers will be added. This will normally involve two conveyancers, one for the seller and one for the buyer, and further transaction types will be added subsequently.
I turn to mandatory matters. Section 93 of the Land Registration Act 2002 contains a provision for rules that would mandate the use of electronic dispositions. Such rules can be made only following consultation and would require the affirmative resolution of both Houses. However, at this stage I do not have any proposals to bring forward on that matter.
The issue of DIY conveyances was raised in the other place when this order was debated. The Land Registration Act 2002 specifically recognises the interests of those who wish to do their own conveyancing. Paragraph 7 of Schedule 5 to the Act imposes on the chief land registrar,
“a duty to provide such assistance as he thinks appropriate for the purpose of enabling persons … who wish to do their own conveyancing to do so by means of the network”.
It is the registrar’s intention to make such provision in due course, but this is an early stage and the system is being introduced incrementally. It will be some time before the full range of transactions can be carried out on the network. That is why current energies are better devoted to building the best basic system and then increasing the range of transactions, but I can assure noble Lords that we will not forget the importance of ensuring that this system becomes accessible to DIY conveyancers in the future.
While the noble Lord was talking, a suspicion grew in my mind that the whole of this exercise may be funded by fees as opposed to general taxation. What is the intention here? Will it be the consumers who bear the cost?
The Land Registry organisation requires fees to be paid, and I do not see why that is a problem. The registry is self-funding and makes no call on public funds to carry out its core business. The fees charged to customers prescribed by an order made by the Lord Chancellor with the consent of the Treasury are regularly reviewed. As the new system, e-conveyancing, will enable a more efficient service to be provided to customers, it is not unreasonable to ask them to pay for it.
The costs of introducing something of this sort will be huge. Is that really a burden to be carried forward by fees to infinity?
No. Capital and development costs, which are expected to total between £270 million and £310 million, will be met from the Land Registry’s reserves. However, the operational costs once the network is up and running will be recovered from fee income. I think that that is a very reasonable way to approach it.
Does the noble Lord think that the Land Registry might in due course be able to reduce its fees by providing what he claims will be a more efficient service?
The noble Lord is not going to tempt me down that route. What I will say is that it is clearly very important that a careful eye is kept on the costs of the Land Registry, for all the reasons that both noble Lords have given. I assure him that my department will do that. We want an efficient system and we want fees to be kept as low as possible.
On Question, Motion agreed to.