Automated Registration of Title

March 1, 2003

Registers of Scotland Executive Agency (RoS), the Government Agency responsible for maintaining 15 property and court registers in Scotland, has been developing its registration and information systems in order to provide greater electronic access for those involved in the conveyancing process. This initiative is in line with Government policy on e-commerce, and the Digital Scotland initiative. Access to the information held on the Registers is already available via the Internet through the medium of the Registers Direct system. On the registration side, RoS is considering ways in which technology can open up choices for those involved in the conveyancing process in the way in which they make applications for registration in the Land Register of Scotland. At the forefront of this considerative process lies the initiative that is currently known by the acronym ARTL, which stands for Automated Registration of Title to Land.

By way of background information, since the inception of the General Register of Sasines in 1617 (a Register of Deeds relating to rights in land), conveyancing and registration in Scotland has been predicated on the use of paper deeds and documents containing handwritten signatures. These deeds and documents are transmitted between the various solicitors, lenders, clients and Government departments involved in a conveyancing transaction by traditional postal or personal delivery. The process is bureaucratic, cumbersome, expensive and inefficient.

ARTL aims to streamline the current process of registration, and with it conveyancing. It intends to achieve this by introducing an innovative process linked to tried and tested Web-based technology to the business of registration in the Land Register. ARTL will offer an alternative to the current paper-based process by enabling authorised persons – solicitors and lenders in the main – to carry out registration online using digital technology. Paper deeds and paper application forms will be replaced by digital equivalents. In addition, conveyancers will no longer have to separately contact a number of different Government departments, namely the Inland Revenue Stamp Taxes Office, Companies House and Registers of Scotland. Instead the ARTL system will create a one-stop shop.

ARTL in practice

No specific software or equipment beyond a Web browser is required in order to interact with the ARTL system. The solicitors involved in a property transaction enter the essential client and transaction details into the ARTL system. For those firms who are technology driven, adoption of XML standards will open the door for third-party case management systems to populate the fields in ARTL. All of the processing, including the creation of the necessary digital deeds, is carried out by the ARTL system with nothing being stored on the solicitor’s computer.

The ARTL system uses this information to prepare and validate a digital application and generates error-free digital deeds, which are then digitally signed by or on behalf of the granter. The system also assesses whether stamp duty is liable. When the applicant’s solicitor instructs the ARTL system to register the transaction, stamp duty and registration fees will be debited from the account of the solicitor seeking registration. This will be achieved through electronic fund transfer. The details provided by the solicitor along with the digital deeds will then be validated automatically and the system will populate the updated title position into the Land Register itself.

It is at this point that RoS staff will have their first involvement with the registration process. Staff will conduct a registration check to verify the title position. Once satisfied, RoS staff will confirm the automated registration. This permits a process that currently takes several weeks to be performed overnight.

Currently when registration is completed the applicant is sent a paper certificate of title and any charge holder is sent a paper charge certificate. Whilst the option to create paper certificates of title will be retained applicants under ARTL will be given the choice to receive their certificate of title in electronic format or not to receive a certificate at all but simply to receive notification that their title or charge has been registered. Mortgage lenders are generally keen to take this opportunity to dispense with paper tokens of title, so avoiding the expense of handling and storing paper certificates.

Technology and digital signatures

For the introduction of ARTL it will be essential that there is the ability to transact with confidence over the Internet. The most obvious way that this can be achieved is through the application of a Public Key Infrastructure (PKI). There have been a number of PKI vendors appearing on the market recently with a couple being set up specifically for use in the legal community. One of the most prominent of these is ‘Lawseal’, which has been set up by the Law Society of Scotland in partnership with the Royal Bank of Scotland and Trustis Limited. The use of digital certificates will enable the Keeper to verify the identity of solicitors using the system prior to accepting applications for registration. Also, through the use of Web server certificates, it will be possible to set up secure sessions for solicitor’s interaction with the system that will add an extra level of security to the transaction.

When ARTL was initially envisaged, there was no ability, or desire, to create digital deeds as part of the automated registration process. The original idea was that the packet of data that was entered by the solicitor would be enough evidence to allow changes to the details held on the title sheet. This ‘data packet’ approach met with some acceptance from the more technologically advanced firms but was not popular with the more traditional firms or with the institutional lenders. To increase the acceptance of ARTL as a concept, the ability to create and sign the necessary digital deeds was added into the pilot system. Since the introduction of these digital deeds there has been a greater acceptance of ARTL in the legal community.

Scotland has a long cultural and legal tradition of the buyer and seller being fully involved in the conveyancing process. It would be seen by all as a backward step if the introduction of ARTL meant that the deeds necessary for the transfer of property, albeit that these deeds will be digital deeds were no longer to be signed by the clients. For this to succeed, we need certification authorities willing to provide low-cost digital certificates to the citizens of Scotland. The ARTL team has met with a number of certification authorities to discuss the possibility of providing such certificates and the results of these discussions have proved positive so far.

Development and implementation of ARTL

In order to deliver a system of online registration that stakeholders in the conveyancing process will use, the project has sought actively to engage the legal profession and the lending institutions from the outset. It was also considered that a long lead-in time would be required, not only to engender confidence in the e-environment from a profession who are rightly cautious and risk averse but also to enable technology and IT suppliers to meet the demands of the e-conveyancing ande-registration environment. This is particularly true as regards the provision of low-cost, secure and trusted digital signatures. It is only recently that a marketplace in the provision of digital signatures has begun to emerge, initiatives such as ARTL can only add to the demand for these services that will help ensure that there is competition between suppliers.

The consultative approach to ARTL was evidenced by the strategy of engaging the profession through a pilot system of online registration. From January 2001 through to April 2002, a pilot exercise involving over 60 law firms, 5 lenders and 2 local authorities was in operation. Under the pilot, participating firms continued to submit their applications for registration in paper form but at the same time conducted an online registration. The results were compared to ensure the same changes to the register were created but more importantly it provided a vehicle for raising and addressing the many issues, concerns and problems that are associated with such a revolutionary change in the way conveyancing and registration are undertaken. This allowed the ARTL system to be developed to accommodate the requirements of all stakeholders.

Following completion of the pilot, RoS has been engaged in ongoing consultation with stakeholders. These consultations have shown that there is overwhelming demand for the principle of introduction of automated registration, tempered by the concern that the details of the system must be correct to meet the needs of the legal profession and mortgage lenders. RoS are, by dialogue with solicitors’ representative bodies, the Council of Mortgage lenders and several individual firms and lenders, steadily working through these issues. Central to the consultation process is a memorial that was issued to four conveyancing professors in Scotland seeking their opinion on the legal and practice changes that are necessary to enable ARTL. That opinion is expected shortly and will form the cornerstone of the future strategy for implementing ARTL.

Although unable to be certain as to the timing of enabling legislation, RoS hope to go live with ARTL in 2006.

Legal and cultural change

If ARTL simply involved a change to a business process, it could have been, and presumably would have been, introduced long since. Instead there are more general legal, business and cultural hurdles to be overcome in successful implementation of ARTL. In short it will spearhead the most radical change to the practice of conveyancing and registration in the last 100 years.

Scots property law is founded on the use of paper duly executed by a hand-written signature, and legislative change is therefore necessary. With the exception of stamp duty, the legislative changes required fall within the devolved competence of the Scottish Parliament and RoS expect to seek enabling legislation in that forum. The timescale for achieving legislative reform will depend on whether primary legislation is required for any of the changes. If changes can be made through subordinate legislation, use will be made of s8 of the Electronic Communications Act 2000, which permits secondary legislation to amend primary legislation for the purpose of enabling non-compulsorye-commerce initiatives. Indeed some legislation is already in place. The acceptability of electronic signatures is already provided for through the Electronic Signatures Directive and s7 of the Electronic Communications Act 2000.

The need for legislative change is not an obstacle to ARTL. Scottish Ministers are committed to enablinge-registration and will provide the legislative vehicle to create the statutory framework for it to function. Much more of an obstacle is the need to overcome the legal profession’s strong cultural attachment to physical deeds with hand-written subscription. Solicitors are rightly cautious about the transformation of a process that has served their clients well. Achieving cultural change, and the change in business practices that must go with it, requires to be a managed process. The RoS approach has been to keep the stakeholders informed and involved throughout the development process, listening to issues and, as need be, either allaying fears or acting to remove concerns.

Achieving buy-in

So what can ARTL offer?

  • ARTL transactions will attract reduced registration fees, thereby cutting the cost of conveyancing to both the public and those lenders who meet the legal and registration costs of the debtor inre-mortgage transactions.
  • Solicitors and lenders will benefit from dematerialization. Less paper means less storage and an end to replicating lost paper documents.
  • Savings in time and administration. Online communications with other stakeholders can be instantaneous and much less costly than traditional postal methods.
  • Delays are minimised. Registration can be completed on the day a transaction settles, thereby minimising the risks to the client and lender.
  • Paper deeds are easy to forge. A secure controllede-registration environment in which solicitors and lenders can interact with the Land Register, supported by digital certificates as a means of authentication backed up by a secure audit trail makes fraud much more difficult to perform and easier to trace.
  • Streamlined conveyancing ¯ solicitors need only interact with one Government body.
  • ARTL offers in-built quality assurance, thereby ensuring that both the digital deeds and the application to register contains all relevant information.

Wider Impact of ARTL

The project is blazing a trail that will have wider significance in the development of electronic delivery of legal and other online services in Scotland and the rest of the UK. ARTL is limited in its direct aim to e-enabling the registration which concludes certain routine types of conveyancing transaction. ARTL has sparked a debate within Scottish legal circles as to how best technology can be applied to the provision of legal services. It will inevitably lead toe-conveyancing as solicitors and lenders realise that the benefits that can be obtained from interacting with the RoS online can also be realised through interacting with their fellow professionals online. ARTL has also encouraged the growth of digital signature providers by creating a market for digital signatures. The application of digital signatures to digital deeds by the parties to those deeds will go a long way to achieving the Government’s aim of achieving significant take-up of digital signatures amongst the general public. This in turn will bolstere-commerce and online service delivery in both the public and private sector.

Ian Davis is Director of Legal Services at the Registers of Scotland Executive Agency.