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Land Registration (Network Access) (Amendment) Rules 2011

Volume 729: debated on Tuesday 5 July 2011

Considered in Grand Committee

Moved By

That the Grand Committee do report to the House that it has considered the Land Registration (Network Access) (Amendment) Rules 2011

Relevant documents: 23rd Report from the Joint Committee on Statutory Instruments

My Lords, the noble Baroness, Lady Royall, beat me to the punch by whispering across the point that I was going to make. Looking at her sitting in solitary splendour, I am reminded of the advice that you face your opponents but your enemies are behind you.

The rules before us today amend the Land Registration (Network Access) Rules 2008, which make provision about network access agreements. These are agreements with the Chief Land Registrar conferring authority to have access to the Land Registry’s electronic network on a person who is not a member of the Land Registry.

The purpose of these draft rules is to ensure that the criteria that applicants for a network access agreement must meet are consistent with the terms of the Legal Services Act 2007, which makes provision for the regulation of persons who carry on certain legal activities.

It may be helpful if I say something about land registration legislation and the Legal Services Act before considering these rules in more detail. The Land Registration Act 2002 enables the Chief Land Registrar 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. The Land Registration (Network Access) Rules 2008 provide the criteria to be met by an applicant for a network access agreement, and also some of the terms that a network access agreement must contain. A conveyancer with a network access agreement can make electronic applications to the Land Registry that may result in a change to the register of land.

The Legal Services Act 2007 regulates the provision of legal services in England and Wales. Among its provisions, it sets out which legal activities are “reserved”, and who can carry out those reserved legal activities. One category of reserved legal activity is “reserved instrument activity”, which includes preparing certain conveyancing documents for the purposes of the Land Registration Act 2002, and making applications or lodging documents for registration with the Land Registry. Under the Legal Services Act, only an “authorised person” is allowed to carry out a reserved legal activity. “Person” includes a body of persons. The authorised person may be authorised to carry out all or only some of the reserved legal activities. It is a criminal offence to carry on a reserved legal activity if a person is not authorised to do so.

Much of the Legal Services Act 2007 came into force in 2010. Later this year, it is expected that further sections of the Act will come into force that will allow for the introduction of licensed bodies, which are commonly referred to as alternative business structures. The purpose is to relax the statutory and regulatory limitations on the ownership and management of legal practices to allow for greater flexibility and choice in the provision of legal services.

The Land Registration (Network Access) Rules 2008 came into force before the changes made by the Legal Services Act. At that time, the provision of reserved legal activities was subject to the provisions of the Solicitors Act 1974 and various other enactments. The network access rules were drafted to be consistent with those enactments. At that time, the regulation of legal services was based around the regulation of individual solicitors, barristers, licensed conveyancers and notaries. Under the Legal Services Act, there is a move towards the regulation of bodies that deliver legal services.

Now that the Legal Services Act has made changes to the regulation of legal services, and more changes are on their way with the introduction of alternative business structures, it is necessary to amend the network access rules for consistency with the new legislation. It would be inappropriate for the Chief Land Registrar to enter into a network access agreement with a person or body that was not authorised under the Legal Services Act to undertake land registration activities.

The rules before us today amend the criteria to be met by applicants for a network access agreement to bring them into line with the Legal Services Act and to make adjustments to take account of alternative business structures. These rules will allow for a person or body that is authorised under the Legal Services Act to carry on legal activities relating to land registration, or a person or body that employs such an authorised person who will undertake those activities or direct and supervise them, to enter into a network access agreement, provided that they also meet other criteria set out in the network access rules. One class of body that can currently enter into a network access agreement will be unaffected—a government department. This is because of the exemption for public officers from the provisions of the Legal Services Act.

In addition, amendments have been made to the definition of “intervention”, and “disciplinary proceedings” to include reference to licensing authorities which will regulate alternative business structures; and the insurance criterion has been amended so that the words correspond with wording used in the Legal Services Act.

Members of the Committee will see that the amendments will come into force on the day that Section 71 of the Legal Services Act comes into force. That section will allow for the commencement of alternative business structures. In drawing up the amendments, the Government intended to ensure a level playing field for all legal service providers—whether traditional conveyancing practices or alternative business structures. This reflects the policy behind the Legal Services Act.

The Lord Chancellor must consult such persons as he considers appropriate before making rules relating to access to the Land Registry’s electronic network. An impact assessment was also undertaken. The majority of those who responded to the consultation and impact assessment supported the proposals.

In summary, the rules update the criteria for entitlement to a network access agreement with the Chief Land Registrar, reflecting provisions already made by the Legal Services Act. I therefore commend these draft rules to the Committee.

My Lords, the important point that should be appreciated—I am sure that it is—is that when a title is registered, it is an absolute title. It can be obtained by fraud or by any other means, but it is an absolute title, once registration has been granted. That means that the person who owns that title can sell it on and deal with it as if it were his own. Any issue as to how that registration has been obtained is left for litigation. Therefore, it is crucial that the integrity of the register is maintained. So much depends on trust. We trust that the people who make these applications will do so honestly, with proper consideration of all the issues and in the interests of their clients. That is why we have all these rules, which endeavour to ensure that the very competent staff of the Land Registry are not deceived by applications from outside.

What is this all about? It brings the alternative business structures system into the position of being an authorised applicant to deal with the Land Registry. I have expressed my views on these alternative business structures so often that I sound a little like Cassandra. However, I foresee trouble. If there is trouble in the future, it is not the lawyers who will suffer; they will do very well. It is the consumer and the customer who will suffer.

There is a lack of confidence in the way that this has been put forward. The summary of the impact assessment says on page 3, under the heading “Other key non-monetised benefits by ‘main affected groups’”:

“The proposals will avoid the potential costs to Land Registry customers outlined in the base case by ensuring only persons authorised to prepare and make applications relating to land registration are able to do so”.

That states the obvious; it is the position at the moment. The summary goes on:

“Land Registry customers may further benefit if the new definition of ‘conveyancer’”—

that is, these rules—

“leads to better quality conveyancing practices compared to current levels”.

Why it should lead to better conveyancing practices than the current system, under which conveyancing is carried out by qualified lawyers or managing executives, I do not know. The summary continues:

“Ensuring ABS firms fall within the definition should also lead to increased competition in the conveyancing market, which may provide efficiency benefits for society, and direct benefits for Land Registry customers in the form of lower prices and/or increased choice”.

The sort of situation that I envisage, particularly in a tight housing market, is that developers will offer a conveyancing service, or an ABS. They will have an interest in the outcome of the conveyance of their own homes and access to the registry. They may act for both parties. All the checks and balances that have developed over the years to protect the consumer and householder will be weakened.

I have had my usual rant on this subject, so I shall leave it at that. I cannot say that I welcome this measure.

My Lords, I had not intended to intervene on this matter but since “network access” appears in the title of the rules that we are discussing, I seek reassurance from my noble friend about the checks that are being made to ensure that those who are not authorised do not obtain access. Something that has recently come to public notice is the ELMER database, which is operated by the Serious and Organised Crime Agency. This is where reports of suspicious activity are collected for purposes of investigating money laundering. It appeared that the rules were perfectly tightly drawn, and that only SOCA and police forces throughout the country could obtain access to the information that is contained there. There are now 1.2 million records on the suspicious activity report database. Subsequently, now it transpires that actually all sorts of social security departments and other operations are able to get into the database. Given the importance of this, and the critical nature of the functions being carried out, it would be good to know that careful checks are being made to ensure that people who are not entitled to access do not get it.

My Lords, I shall make a brief intervention on this, with a couple of quick questions. In the Explanatory Notes somewhere it says that the first alternative business structures will be established in October this year. Is it anticipated that that is the case? Furthermore, there is mention of an informal consolidated text in the document. What is the state of an informal consolidated text, as opposed to a proper consolidated body of law?

I very much welcome the update of the Land Registry portal guidance notes, which will be important. However, following on from what the noble Lord, Lord Thomas of Gresford, has said, and the noble Lord, Lord Hodgson of Astley Abbotts, there are clearly potential problems with this order. There is to be a post-implementation review in 2015. I have two things to say about that. In view of the concerns expressed by noble Lords, are the five years before there is any sort of review not a little too long? If consumers have been found to be suffering as a result of this order, perhaps the Government might seek to act before then. If the review finds that the policy objectives of the order have not been met and that consumers have been harmed as a result, will the Government seek to act and revise the order in some way to ensure that consumers do not continue to suffer as a result?

I am grateful to noble Lords who have participated. On the important question of when alternative business structures will be introduced, the Legal Services Board and the Ministry of Justice are working towards October 2011 for implementation. The noble Baroness was in government long enough to know that saying that we are working towards that is as firm a commitment as I can make at this precise moment—but that is the objective.

On the question asked by the noble Lord, Lord Thomas, about the importance of the integrity of the Land Registry process, I need no urging on that. I am the Minister responsible for the Land Registry. One thing that I continually impress on colleagues from other departments is that we have a very important public asset in the trust that people put in the Land Registry process, and rightly so. For the great majority of us, the title and ownership of our property—those of us who are house owners—represents the biggest investment that we ever make in our lives. So the integrity of that process is extremely important. Although I have heard before the doubts expressed by the noble Lord, Lord Thomas, about alternative business structures, I would not go so far as to describe him as a Conservative on matters of legal structures.

Our aim is to bring what we hope will be some exciting competitive pressures into the delivery of legal services, and those responsible for delivery will keep a close eye on things. In a recent meeting on related matters, the noble Baroness, Lady Hayter, attending in her capacity as chair of the Legal Services Consumer Panel, expressed confidence in the overall checks and balances being put in place. Alternative business structures will provide opportunities for practitioners from different professions, legal and non-legal, to join up to ensure that it is economically viable for them to continue to provide legal and associated services and gain efficiency savings.

Although we promised a review after five years, Land Registry constantly reviews its practices and will review the network access rules if alternative business structures result, paying particular regard to consumers.

The noble Lord, Lord Hodgson, spoke about the use of databases—I think that he referred to the suspicious activity database. Thorough checks are made before entering into network access agreements and continuing checks are made to make sure that there is no abuse. However, the noble Lord raised an interesting broader point. The advance of technology has meant that the ability of the state and private industry to amass vast amounts of information about the individual could pose a threat to their civil liberties. I shall quote, as I do frequently in other places, something that the noble Lord, Lord Thomas of Gresford, once said to me. He said that in a free society there must be a limit to what the state knows about the individual. In our modern world, vast amounts of information are amassed. What is more, there is almost limitless technological ability to exchange that information unless checks and balances are put in place. That is partly the responsibility of government and Parliament.

I hope that I have covered the points that colleagues have raised. As I have said, the measures bring the various Acts into kilter and anticipate new structures. On that basis, I hope that the Committee will agree the Motion.

Motion agreed.