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Bringing Land Registration into the Twenty-First Century. The Land Registration Act 2002 Author(s): Barbara Bogusz Source: The Modern Law Review, Vol. 65, No. 4 (Jul., 2002), pp. 556-567Published by: on behalf of the Wiley Modern Law ReviewStable URL: http://www.jstor.org/stable/1097595Accessed: 09-04-2015 13:41 UTC

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LEGISLATION

Bringing Land Registration into the Twenty-First Century - The Land Registration Act 2002

Barbara Bogusz*

Introduction

Land registration in England and Wales is embarking on a new voyage. Reforms proposed by the Land Registration Act 2002l (LRA 2002) seek to transport conveyancing into a new technologically advanced era, and remedy the deficiencies and limitations with the Land Registration Act 1925 (LRA 1925) and subsequent amending legislation. The objective of the Act, which will repeal the LRA 1925, is to create a truly transparent accurate and comprehensive Register. The Act has its origins in the consultative document entitled 'Land Registration for the Twenty-First Century' published in 1998,2 which provided a forum for stimulated debate in this area. The joint Law Commission and Land Registry Report of 20013 published simultaneously with the Bill, endeavoured to assist in dissemination of the changes introduced by the Bill, reviewed the current legal position and indicated the departures from the 1998 Consultative Document.

The purpose of this note is to consider some of the key changes that are introduced by the new Act to the system of land registration in England and Wales, and the impact the changes will have on conveyancing law and practice. Some aspects of the reforms, for example, reducing the number of overriding interests or compulsory first registration for leases over seven years duration are particularly welcome. These developments will undoubtedly help to simplify conveyancing and protect third party rights. Other changes, such as the introduction and development of electronic conveyancing (e-conveyancing), leave a number of unanswered questions relating to implementation and regulation. This will require further secondary legislation and a significant change in practice amongst solicitors before the full benefit of e-conveyancing can be brought to all property buyers.

The introduction of e-conveyancing in the LRA 2002 continues a popular theme witnessed in much of the legislation introduced by the Labour Government. The Government, focusing on the concept of modernising the state, has demonstrated a keen interest in bringing the benefits of Information Technology to the public services and the process of government and administration more generally.4 In this commitment to use new technology, the Government is seeking to meet the needs of both citizens and business, and not trail behind technological developments being used in many other European Union (EU) countries. The LRA 2002 in seeking to introduce this technology into conveyancing law and practice, which is

* Faculty of Law, University of Leicester.

1 The Bill received Royal Assent on 26 February 2002. 2 Law Cor No 254. 3 Law Cor No 271. 4 CM 4310 White Paper 'Modernising Government'.

:: The Modern Law Review Limited 2002 (MLR 65:4, July). Published by Blackwell Publishers. 556 108 Cowley Road, Oxford OX4 IJF and 350 Main Street, Malden, MA 02148, USA.



The Land Registration Act 2002

often regarded as outdated and rooted in medieval concepts, is an attempt to re- shape conveyancing to ensure its compatibility with the commercial world of the twenty-first century.

The Land Registration Act 2002 in context

Land law underwent fundamental reform as a result of the 1925 legislation. This was viewed as extensive but evolutionary and the limited statutory amendment since then has demonstrated that the legislation has stood the test of time. The LRA 1925 incorporated many principles and practices that had developed over centuries and developed a comprehensive, if cumbersome, system of land registration for England and Wales. The LRA 2002 represents a concerted effort to deal with the deficiencies still remaining in the 1925 legislation and also seeks to move land law forward and create the necessary framework in which all registered conveyancing can be conducted electronically.

Following the outcome of lengthy collaboration between the Law Commission and the Land Registry which led to the publication of a joint report and the laying of a Bill before Parliament,5 the Land Registration Act has now become law. Though evolutionary, the legislation seeks to be compatible with, and reflect, the advances in the expectations of the general public and the important role which new technology has in modern commerce and government. The Law Commission and Land Registry in their joint 2001 report concluded that 'the public rightly seeks a more expeditious and much less stressful system of dealing with land'.6 These expectations have perhaps become the norm as Information Technology has gained in popularity, particularly with the amount of information made readily accessible and also that the Interet is now used by many as a medium for purchasing a variety of goods and services. The Government, by paving the way for e-conveyancing, now seeks to extend 'on-line' purchasing to the final frontier. Land law, traditionally regarded by many lawyers as archival work and form filling, will be brought in to the technological revolution of the twenty-first century.

The LRA 2002 is in many respects a logical development in the land law regime of England and Wales. Since 1990 registration of all transactions has been compulsory, thereby reducing the amount of land that still remains unregistered. The LRA 1925, drafted at a time when registration was not the norm did not meet the needs of a conveyancing system which has developed into requiring obligatory registration of all conveyancing transactions. Therefore, the Law Commission concluded that the principles contained within the LRA 1925 were deemed as providing uncertainty and a lack of clarity to all those persons who had acquired or were seeking to acquire an interest in land.

Substantive objectives of the Act

The LRA 2002 introduces a number of key changes relating to the registration of land. The motivation behind these changes is to promote certainty within

5 The Bill was introduced in the House of Lords on 21 June 2001 with the First Reading taking place on 8 November 2001.

6 Law Cor No 254 para 1.4.

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conveyancing transactions for buyer, seller and those individuals who may possess one of numerous third party rights. The overarching concept of the 'mirror principle', that the Land Register reflect accurately all interests in the property concerned, remains a fundamental one to the system of registered conveyancing and is strengthened by the new Act in several ways.

The promotion of the mirror principle is vital if the Act is to achieve the fundamental objective of establishing a system of e-conveyancing. To enable an effective system of electronic dealing in land, the Register must be a complete and accurate reflection of the state of title in the land at any given time. Without this it will not be possible to investigate title on-line with an absolute minimum of additional inquiries or physical inspections of the property. The LRA 2002 is therefore revolutionary in this sense and marks a major departure from one of the traditional practices of property dealing. The maxim caveat emptor or 'buyer beware' is an important principle of land law. It places an onus on the purchaser to physically inspect the property and ask questions of the purchaser with regard to the occupation rights of others or of any other third party rights in the property. This occurs despite the fact that the land is registered. It is difficult to conceive that prudent purchasers will not wish to inspect the property, but in circumstances where they cannot, it places a heavy responsibility on solicitors to ensure that information is accurately compiled and that a physical inspection has occurred. It seems, therefore, that before any solicitor will participate in e-conveyancing, he or she must ensure that they have sufficient professional insurance indemnity.

Overriding interests

One significant step towards achieving the mirror principle has been the phasing out or complete removal of a number of overriding interests by the Act. The move towards e-conveyancing, will undoubtedly facilitate the elimination of overriding interests. This is because the Law Commission envisages that the majority of interests in land will only be capable of being created when simultaneously registered.7 Such interest will therefore never be capable of being overriding as they will rely upon registration for their protection and enforcement.

These un-registrable rights, deemed so important8 that they do not require registration and which have to date been given statutory protection, undermine the concept of the 'mirror principle'. The very fact that an individual has a right which cannot be discovered by inspecting the Land Register can create problems for a purchaser who, though prudent, has been misinformed by the vendor as to the presence of other persons on the property who may have acquired third party rights.9

The Law Commission recognised that overriding interests are somewhat of a double-edged sword and do provide important protection to individuals who are often in a vulnerable position. In their joint report the Law Commission and Land Registry noted that:

7 ibid para 2.27. 8 For example Lord Denning in Strand Securities v Caswell [1965] Ch 958 at 979 spoke of the purpose

of the overriding interest in s 70(1)(g) LRA 1925 as being to 'protect the person in actual occupation of land from having his rights lost in the welter of registration'. Such a person, he continued, may 'simply stay there and do nothing' but will nonetheless be protected.

9 This was the case in Williams & Glvnn's Bank v Boland [1979] Ch 312 where the husband misinformed the bank as to his wife's occupation of the property, which led to her overriding interest under s 70(1)(g) LRA 1925 being binding on the Bank.

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Overriding interests present a significant impediment to one of the main objectives of the Bill, namely that the Register should be as complete a record of the title as it can be, with the result that the title can be investigated entirely on-line.l?

Yet in the next paragraph the Report states: The guiding principle on which it [the Bill] proceeds is that interests should be overriding only where it is unreasonable to expect them to be protected on the Register.l

The Act seeks to achieve a balance that reflects the needs of the parties in such circumstances. The legislation will continue to protect those rights, which, if not afforded the status of an overriding interest, could lead to the loss of a home or the perpetration of a fraud. Most significantly, the new Act continues to protect overriding interests if there is actual occupation by the claimant. This means that a plaintiff in the Williams & Glynn's Bank v Boland12 position, who is unaware of a spouse or partners re-mortgaging of the property, would continue to be given protection under the new Act. This protection is very welcome.

Claimants who are in actual occupation will be able to establish an overriding interest only if they have an interest which is either a beneficial interest under a trust or if the interest arose informally (for example, an equity arising by estoppel). This limitation of the type of interests capable of forming the subject matter of an overriding interest proved to be a controversial issue in debate at the Grand Committee stage within the House of Lords. In the Grand Committee Baroness Buscombe moved amendments to extend the categories of beneficiaries that are defined by the Bill.13 The amendments were intended to bring the Bill in to line with Law Commission recommendations. In a previous debate,14 Baroness Buscombe raised the situation of a widow who acquired a life interest under a strict settlement in the former matrimonial home under the will of her husband. In such circumstances the widow would only be entitled to protection if in actual occupation and the property were subject to a trust for sale. If the 'magic formula' of the trust for sale is omitted from the will, then the widow will not be entitled to any protection in such circumstances.

The Government's view was that there would be comparatively few people in this position and therefore extending the categories of interest to cover a strict settlement would not be justified. Lord Bassam speaking on behalf of the Government concluded that there was no evidence that the Bill would lead to hardship.'5 Though the Government's view may be true it will be of little comfort to the individuals who lose their rights to remain in the property merely because the will was drawn up informally or without professional advice and excluded the creation of a trust for sale.

Compulsory first registration for leases

Tenants will be among the first to be affected by the Act. A lease which is for a duration of seven years or more will now be subject to compulsory registration with its own individual title. This is a substantial change from the 1925 legislation

10 Law Com No 271, para 2.24. 11 ibid para 2.25. 12 [1979] Ch 312. 13 HL Deb 8 November 2001 cc 314-9. 14 HL Deb 30 October 2001 c 1324. 15 HL Deb 30 October 2001 c 1326.

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which only required leases of greater than twenty-one years to be registered.16 The reason for this change is a practical one. In the 2001 survey of the British Property Federation's Annual Lease Review17 it was found that the average lease length has continued to fall and is now just over 10 years. Hence the most common property transaction in England and Wales is now most unlikely to be recorded on the Register that is due to become "a complete and accurate reflection of the state of the title of the land at any given time".

Leases which are granted for a term of less than seven years will continue to operate as overriding interests in the same way that section 70(1)(k) of the LRA 1925 currently provides for leases under twenty-one years. The policy behind short leases being overriding interests is to keep the Register free of such short leases because of the risk that they may clutter the Register. With the introduction of e- conveyancing, it will be possible to register short leases with no apparent difficulty and ensure that they are subsequently removed from the Register upon expiry. Furthermore, once electronic registration is a reality, it may be possible to register leases for a shorter duration than seven years, as their removal should no longer prove to be a problem.

There is one question that remains following this change and that relates to the position of leases which are for a term of three years or less. Section 33 of the LRA 2001 excludes such leases from being registered as a notice on the Register. However, such a lease can still operate as an overriding interest. Therefore a lease over three years, but less than seven years, in duration may be entered on the Register.18 The Act seeks to encourage this, but it will not yet be compulsory.19 The primary reason for this encouragement is to place less reliance on the overriding interest for the protection of lease, but rather to ensure that the Register is as detailed and comprehensive as possible. This again is intended to ensure that interests are placed on the Register which is fully transparent and therefore facilitate easier e-conveyancing through the removal of such interests. If this proves to be successful, the Act gives the Lord Chancellor the power to enable the Registrar to reduce the period for compulsory registration further up to three years.

The policy behind these provisions within the Act is to place less of an emphasis on overriding interests and limit them to only those situations where they are absolutely necessary. Where alternative means of protection are available, such as registration, these are to be encouraged. However, for leases less than three years it will be impossible for them to be protected other than by an overriding interest, leaving a proportion of leases which can only be discoverable through inquiry. Further, a lease for a period of less than three years is not required by the law of contract to be created by deed. Any requirement of registration of such leases would undoubtedly introduce new inflexibilities in to the registration arrangements and place additional costs and burdens on a purchaser. It is unlikely that the power for compulsory registration could be reduced below the three-year threshold. Perhaps the only alternative is for the practice of orally created leases to be limited and wherever possible for leases to be created for a longer period. This practice may be desirable if the benefits of e-conveyancing are to be fully realised.

16 s 8 LRA 1925. However, leases for less that twenty-one years could be overriding interests under s 70(1)(k) if coupled with actual occupation.

17 Available at <http://www.bpf.propertymall.com/publications/> 18 s 37 LRA 2002. 19 ibid.

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Third party rights

The Act will protect purchasers and make title to registered land more secure by simplifying the operation of the Register. This change will also enhance the protection afforded to third parties who have an interest over registered land. The major change comes through cautions and inhibitions having been dispensed with, and replaced with a redefinition of notices and restrictions. Under the 1925 legislation a caution did not confer a priority on the third party, rather it gave the right to receive notice of dealings with the affected registered estate or charge and to raise objections. The LRA 2002 no longer provides for such new cautions to be registered but existing cautions will remain in the Register by virtue of transitional provisions that are contained in paragraphs 1 and 2(3) of Schedule 12.

Notices will be used to protect encumbrances over registered land that are intended to bind third parties, for example a lease, easement or restrictive covenant. Restrictions will be used to regulate the circumstances in which a dealing with registered land is to be registered. Under section 34 of the Act a person claiming to have the benefit of an interest capable of being the subject matter of a notice may, subject to the formal rules, apply to the Registrar for an entry of an agreed or unilateral notice in respect of the interest. Section 34(3)(a) to (c) sets out the circumstances in which the Registrar may approve an application by a third party for an agreed notice. Sub-sections (a) and (b) are cases where the relevant registered proprietor has actually consented to entry of the notice. Whereas sub-paragraph (c) covers the position where the applicant has to the Registrar's satisfaction established, for example, that the registered proprietor had granted him an easement. In such circumstances the registered proprietors consent is not required for registration.

The Act also provides for the entry of unilateral notices on the Register. These are particularly important as they provide a large degree of protection to a third party. Once again, the Act through these provisions is providing for a scheme of registration for such third party rights whilst seeking to minimise the reliance on non-registrable protection. Unilateral notices can only be removed by the beneficiary or by another person who has applied to the Registrar and the Registrar is satisfied that removal is justified.20 A registered proprietor may move to cancel the notice21 and in such circumstances the beneficiary will be notified and given an opportunity to object. If the beneficiary does not exercise his right to object then the Registrar must cancel the notice.22 The Act tries to balance both competing interests but does so through the medium of the Register, rather than by other informal mechanisms such as overriding interest. Clearly these provisions fall within the primary objective of the legislation which is intended to facilitate e- conveyancing by promoting certainty and transparency of the Register. These provisions recognise that this can only be achieved if the Register not only accurately reflects all interests in land, but also provides for their removal.

20 s 35(3) LRA 2002. 21 s 36(1) LRA 2002. 22 s 36(3) LRA 2002.

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Adverse possession

The law on adverse possession does not readily fit within a system of compulsory land registration.23 As the law currently stands a squatter will be in adverse possession of land if he can extinguish the owner's title to that land after twelve years, the period within which actions for the recovery of the land must commence.24 If the proprietor fails to take any such action within the twelve year period, he will hold the land on trust for the squatter who may apply to be the registered proprietor of a new estate, where the registered land is a freehold, or as proprietor of the registered estate where the estate is leasehold.

The Law Commission described adverse possession as 'an embodiment of the policy that defendants should be protected from stale claims and that claimants should not sleep on their rights'.25 Though the changes which are introduced by the Act to the law on adverse possession cannot be considered as being radical when considered within the overall context of the changes which are introduced to the conveyancing process, they will make claims by squatters more difficult to substantiate. There are two reasons for the inclusion of these changes within the Act. Firstly, it is perceived that it has become too easy for a squatter to acquire title to the land. The twelve year limitation period, though not an inconsiderable period of time does not defeat all claims for adverse possession. Secondly, it is difficult to justify the continuation of the principle in relation to registered land. As the Law Commission stated in its 1998 Report 'where title is registered, the basis for title is primarily the fact of registration rather than possession'.26

The essence of the new scheme is that a squatter will be able to apply to be a registered proprietor after 10 years adverse possession.27 However, once any application is lodged the registered proprietor will be notified of the application and will, in the majority of cases, be given the opportunity to object to it. If such an objection is lodged, then the application will automatically fail.28 This, however, will not be the conclusion of the matter. The proprietor will still need to take steps to regain possession of the property and evict the squatter or otherwise regularise his position within two years. If the squatter continues to remain in adverse possession after two years, he will be entitled to be registered as the proprietor.29 Though it is difficult to forecast with absolutely certainty, it appears that a claim for adverse possession will rarely succeed under the new statutory regime. It is hard to conceive that a registered proprietor will object to a claim after ten years, but then fail to take any action to regain possession of the land within the next two years.

The legislation undoubtedly marks a shift in balance in favour of the proprietor. It has been viewed as merely redressing the balance which to date has favoured the squatter.30 This is a welcome development both morally and legally. From a moral perspective adverse possession has been difficult to justify on the grounds that

23 For a discussion of this point see the judgment of Neuberger J in J A Pye (Oxford) Holdings Ltd v Graham [2000] Ch 676. -

24 ss 15 and 17 Limitation Act 1980. 25 Law Com No 271, para 2.71. For further discussion and detail of why the doctrine of adverse

possession actually exists see para 2.71-2.73 of the report. 26 Law Com No 254, para 10.11. 27 s 96 LRA 2002. 28 s 98(1) LRA 2002. 29 s 98(4) LRA 2002. 30 Lovells Property Newsletter, September 2001.

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ownership of land should be based on more than merely factual possession for an arbitrary period and that the squatter has the necessary animus possidendi (intention to possess).31 In Powell v McFarlane Slade J saw factual possession as being determined by reference to the 'nature of the land and the manner in which the land is commonly used or enjoyed'.32 The case law has continually viewed the erection of fencing or any act of enclosure of the land33 as being sufficient for adverse possession. This is a difficult concept to accept, that minor acts which neither improve the land nor require any significant expenditure, are deemed sufficient to acquire an estate in the land. The changes introduced by LRA 2002, affording the owner the opportunity to object to a claim for adverse possession, even if such acts of enclosure have occurred, is undoubtedly welcome.

From a legal perspective, the Act reflects the true position that the basis of title to registered land is the fact of registration and is not based (as is the case in unregistered land) on the concept of possession. The Act intends to ensure an accurate register and restricting adverse possession in this way is necessary to the achieve this. Adverse possession is therefore difficult to validate in the way it perhaps was in 1925. Arguments justifying adverse possession such as preventing the neglect of land or that there was a social need for wider land ownership are not so relevant today in a property owning democracy. Land ownership is not limited to a small proportion of the population, who, as was progressively becoming the case, did not have the resources to maintain the quality and value of their land. Adverse possession had a role to play when feudal landowners could no longer manage the estates they owned and when there was a need for some form of land redistribution.

Adverse possession with this egalitarian dimension is difficult to justify, at least in its present form, within a jurisdiction where land prices are high and the commercial market in land is particularly buoyant. The concept of alienability of land, which went to the heart of 1925 legislation, is very much a reality today. The economic reality of land being an important commercial commodity, that is freely and widely traded, makes adverse possession appear to be a very outdated concept. In this sense the LRA 2002 has very much lived up to the objectives of the Law Commission's Consultation Document of 1998 and as far as adverse possession is concerned, brought land registration in to the twenty-first century.

The introduction of e-conveyancing

The joint Law Commission and Land Registry consultation document of 2001 states that that the primary objective of the Bill is to 'create a framework in which it will be possible to transfer and create interests in registered land by electronic means'.34 The report noted that the essential feature of electronic conveyancing is that it will require a comprehensive and current system of land registration.35 The substantive land law changes outlined above are intended to provide the structure for this to be achieved. One further impact of e-conveyancing will be the removal

31 For a discussion of what amounts to the animus possidendi see Powell v McFarlane (1997) 38 P & CR 452 at 470 per Slade J.

32 ibid at 471. 33 See for example Seddon v Smith (1877) 36 LT 168 at 169 per Cockbur CJ who stated that 'Enclosure

is the strongest possible evidence of adverse possession.' 34 Law Cor No 271, para 1.10. 35 ibid.

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of the 'registration gap' between transfer and registration of title. This eliminates the issues raised by the defendant in Abbey National v Cann36 where the plaintiff claimed an overriding interest that had priority over the mortgage. Mrs Cann's actual occupation began before the mortgage was registered and crucially before the purchase of the property was completed.37 This was rejected by the House of Lords as giving rise to an overriding interest and their Lordship's decided that the mortgage had priority from the moment of creation and not from the point of registration. With the introduction of e-conveyancing such confusion should be eliminated and the registration gap 'filled' with registration of the mortgage taking place immediately upon completion. Though important, all these amendments outlined are only half the picture. In addition to these substantive developments, changes in both practice and procedure to the traditional rules of land transfer will be required if e-conveyancing is to function efficiently.

The framework of the electronic system will be based on the abolition of the numerous legal rules requiring land transfer documents to be in writing and signed, so far as this is necessary to facilitate the use of an electronic system. Section 53 of the Law of Property Act 1925 and section 2 of the Law of Property (Miscellaneous Provisions) Act 1989 impose strict requirements in respect of contracts for the sale or disposition of any interest in land. All such contracts must be made in writing and must be signed by or on behalf of the parties to the agreement.

Clearly in a system of e-conveyancing this will no longer be appropriate. The Act deals with this to some extent through section 91. This provision does not disapply the formal statutory or common law requirements relating to deeds and documents but rather deems compliance with them. Therefore, the electronic document is treated as being in writing and where appropriate will be treated as a deed. Though a significant development, section 91 is merely a preparatory step towards creating an efficient system of e-conveyancing. Issues relating to the authentication of documents and in particular the use of the 'digital signature' raise the need for an efficient computer system being developed for attaching digital signatures to the relevant documents. Furthermore, the success of these reforms will also be largely dependent upon the security and reliability of e-conveyancing. In the world of e-commerce generally, security fears are currently delaying advances in this new legal electronic era, and it remains to be seen whether the digital signature will be put to greater use more generally once the system of e- conveyancing is up and running.38

The development and introduction of such a computer network is not dealt with in any significant detail by the Act. It is anticipated that subordinate legislation will set out further the detailed technical, practical and legal arrangements concerning this. Under s.8 Electronic Communications Act 2000, the Lord Chancellor has been given the power to disapply - by means of secondary legislation - any statutory regulation that requires a transaction to be carried out in a specific way. For example, this would include the requirement that a sale of land must be in writing and signed by all parties, or the need for transfer of land to be by way of a deed. Limited progress has already been achieved on introducing the necessary secondary legislation and a draft order has been published, with the Lord

36 [1991] 1 AC 56. 37 The vendor merely letting her move in some of her possessions early. 38 The issue of security for electronic signature is currently causing some concern for solicitors who are

questioning its viability. See L. Moloney 'Writing not yet on the wall for digital signatures' The Times 12 March 2002 p. 28; Gerrard, M. 'E-asy as Houses' The Law Society Gazette April 19 2001 available at < http://www.lawgazette.co.uk/features/mainfeaturearticleframe.asp?ArticleID=37 >.

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Chancellor's department taking responsibility for the consultation process that accompanied publication of the draft order.

The Law of Property (Electronic Communications) Order was published in March 2001 for a consultation process that is being co-ordinated by the Lord Chancellor's department.39 The purpose of the draft order is to remove the legal obstacles that may prevent the use of electronic forms of communication in relation to dealings with land. Those obstacles are the formal requirements that apply to most dispositions of land and to contracts for the sale or other dispositions of land. These formal requirements are of different kinds. First, it is normally necessary to use signed writing to create or dispose of any interest in land, whether legal or equitable.40 Secondly, most conveyances of a legal estate in land have to be made not only in writing but also by deed.41 Thirdly, most contracts for the sale or other disposition of land can only be made by signed writing and must meet certain other conditions.42 It is necessary to ensure, therefore, that these formal requirements are no longer a bar to those conveyancing transactions which could be conducted in electronic form.43 At the same time, it is also necessary to ensure that the security of title to registered land, which HM Land Registry guarantees under the provisions of the Land Registration Act 1925,44 is not compromised through the move to e-conveyancing.

There are no plans to extend electronic conveyancing to dealings with unregistered land except in relation to (i) dispositions of unregistered land which trigger compulsory first registration of title, and (ii) contracts to make a disposition of unregistered land. There are two solid reasons for this. Firstly, there are concerns relating to the method of secure storage of electronic instruments dealing with unregistered land. Secondly there seems little practical point in making the necessary legislative changes given the fact that unregistered conveyancing has at best a very limited future. The position today is that most dispositions of unregistered land now trigger compulsory first registration of title.45

Though the consultation process has concluded the Lord Chancellor's Department is yet to publish the final conclusions. The order, if and when it is implemented, will be important for two reasons. First, it will provide the practical framework for lawyers who will use e-conveyancing. Secondly, and perhaps most importantly, the order will change irrevocably the operation of land law in England and Wales. The antiquated system of manual form filling will be swept aside in

39 See < http://www.lcd.gov.uk/consult/general/e-conv.htm > for further information on the consultation process.

40 Law of Property Act 1925, s 53(1)(a). See also n 44 below. 41 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.

42 Law of Property (Miscellaneous Provisions) Act 1989, s2. The order will insert a new section 2A into the Law of Property (Miscellaneous Provisions) Act 1989. This section lays down how a contract for the sale or other disposition of either registered or unregistered land is to be made in electronic form. It contains provisions that are intended to ensure that such a contract has exactly the same effect as one made on paper.

43 The draft order will legalise electronic transfers by introducing a new section 144A that 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 that are laid down in other statutes.

44 See s 83 (as substituted by the Land Registration Act 1997). 45 See Land Registration Act 1925, ss 123, 123A.

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favour of electronic forms, thereby creating a more dynamic market in land transfers which is not just limited to these shores. The new legislation is therefore important in the wider European context by providing a framework for the development of an internal market in land across the European Union where the move towards e-conveyancing is also gathering pace.

E-conveyancing in a European context

The provisions relating to e-conveyancing will, for the first time, make the transfer of land in England and Wales subject to provisions contained within two European Directives. The Directive on Electronic Commerce46 and the Directive on Electronic Signatures47 have both been incorporated into domestic law through the Electronic Communications Act 2000. The implementation of these Directives will have a knock-on effect of improving access to land information to purchasers anywhere within the internal market. Currently, European property markets are predominantly national. Providing such access to on-line information may facilitate lending institutions to operate beyond national boundaries and foster a European market in mortgage services. Further, increased competition between international lenders could lead to more competitive mortgage rates for the EU citizen. High speed cross-border euro payments, through real time money transfers are already a reality, directly as a result of an agreement between the European Central Bank and the Bank of England. The creation of a real internal market in land would give an added dimension to the free movement of capital within the Internal Market.

The European Union has identified the importance of electronic commerce for the internal market as a growth area. In its Directive on Electronic Commerce the EU promotes the development of a legal framework for information society services, thus eliminating internal frontiers allowing the free movement of services and establishment. This Directive together with the Directive on Electronic Signatures has had an indirect impact on the issue of electronic conveyancing of registered land. The Electronic Communications Act 2000, implementing these two Directives, contains provisions which will remove limitations on storing data in formats other than on paper, so facilitating the use of electronic communication and electronic storage of data for conveyancing purposes.48 The initial motivation for this is reflected in the primary objective of the Act, where electronic conveyancing would facilitate the maintenance of the Register as reflecting an accurate state of the title of the land in any given period, thereby allowing on-line inspections by lawyers in any Member State.

As part of the process towards achieving this objective, the Land Registry is currently involved in a European Commission funded programme entitled 'The European Land Information Service'.49 The purpose of this project is twofold. Firstly it examines methods for improving access to, and expanding the use of,

46 Directive 2000/31/EC of the European Parliament and of the Council of 8 June 2000 on certain legal aspects of information society services, in particular electronic commerce, in the Internal Market. OJ L 2000/178 1, 16.

47 Directive 1999/93/EC of the European Parliament and of the Council of 13 December 1999 on a Community framework for electronic signatures. OJ L 2000/13 12, 20.

48 s 8 Electronic Communications Act 2000. 49 Further information about this pilot project can be found on the Land Registry website at <http://

www.landreg.gov.uk/pressoffice/default.asp?fl= 1 &pubid=LRP03/02 >.

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public sector information within the Internal Market. Secondly, the programme is evaluating how such information can be utilised more widely through the increased dynamism of the digital content market. The Land Registry of England and Wales together with the equivalent bodies in several other EU Member States50 and Accession States51 are participating in the programme. This pilot programme is an important step forward to improving international access to property registers. The project will additionally endeavour to find common principles for collecting and storing property related information, such as agreed principles for access to data, and a common legal and regulatory framework. However, though an exciting project, any formal conclusions are clearly several years away from being a reality.

Conclusions

The enactment of the LRA 2002 will undoubtedly revolutionise land law and conveyancing law and practice. The Act is merely the first, though perhaps the most important part, of a modernisation process which ultimately could witness the development of an internal market in land law and related mortgage services within the European Union. Furthermore, the reform of many archaic principles and procedures demonstrates progression in the Government's underlying objective of modernising the state and its administrative structure. The LRA 2002 tackles the deficiencies in the system of land registration in a co-ordinated and structured manner. This is to be applauded, and nothing less would be expected from legislation that has its roots in two detailed reports and a very wide consultation process.

The central purpose of the new Act being the introduction of e-conveyancing, means this acts as a hub for all other developments. The particular importance of the mirror principle to registered e-conveyancing underpins all the substantive amendments. Yet the Act does not appear to have provided a clear and comprehensive framework for the operation of e-conveyancing. There is still a need for additional secondary legislation, and some practitioners are already voicing concerns over the security of electronic signatures and the format which on-line searches will take.52 These can be explained, partly at least, as an initial reluctance arising out of a step in to the unknown. However, they must also be regarded as legitimate concerns of the profession who will be charged with implementing this new system. The Lord Chancellor's Department must listen to the practitioners when devising the regulatory framework within which e- conveyancing operates if this is to bring the benefits which the Law Commission and Land Registry have identified.

50 These include Austria, Finland, The Netherlands and Sweden. 51 Currently only Lithuania but Poland is also embarking on a programme of computerisation for its

system of land registration. 52 See n 38 above.

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