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The Inevitability of E-Conveyancing: A Global Perspective, Lecture notes of Law

The shift towards e-conveyancing systems in Scotland, Denmark, and Australia, highlighting the benefits and potential concerns. It emphasizes the inevitability of this transition and provides recommendations for practitioners to prepare. Topics include electronic document submission, e-registration, cost savings, and security measures.

What you will learn

  • What steps should practitioners take to prepare for the transition to e-conveyancing?
  • How does Scotland's ARTL project facilitate e-registration?
  • What are the potential concerns with e-conveyancing systems?
  • How does Denmark plan to streamline the loan process with e-conveyancing?
  • What are the benefits of e-conveyancing systems?

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CONVEYANCING
AT
A
CROSSROADS:
THE
TRANSITION
TO
E-CONVEYANCING
APPLICATIONS
IN
THE
U.S.
AND
ABROAD
Michael
E.
Doversberger*
INTRODUCTION
A
real
property
interest
is
arguably
the
most
sacred
form
of
ownership, and
is
"the
largest
and
most important transaction
in most
people's
lives.
..."
A
home or business
is
not
only
of
personal
importance
for
many
but
also
the most significant
financial
asset they possess.
Society,
therefore,
has
an
interest
in
ensuring that conveyances
of
real
property
are
undertaken
in
a
controlled and predictable
manner. However,
in
an
increasingly
digital
world focused
on
speed
and
efficiency,
the
paper-
centric
U.S.
real
estate
conveyance
process
has
become
archaic. This
has
resulted
in
an uncomfortable
position
for parties
to
real
estate
transactions,
as
the
transition
to
new electronic processes
is
sometimes
viewed
as
undermining
the
reliability
of
the
past.
Despite
the
significance attached
to
a
real
estate
transaction,
the
pending
digital conversion
cannot
be
ignored.
How
society
reacts
to
these changes
will
determine
the
ease
with
which
the
transition
to
e-conveyances
occurs.
Part
One will
begin
with
a
brief
discussion
that
highlights
the
international support
of
e-conveyance
applications and
the general
embrace
of
"secure,
paperless,
electronic,
end
to
end,
pre-sale
to
post-completion
conveyancing."
2
This section
will
specifically
address
conveyancing
applications
in
Canada,
Scotland,
Ireland,
Denmark,
and
Australia.
Part
Two will
then
provide
a
detailed analysis
of
the
comprehensive English
e-
conveyance system, including
how
it
operates, the
problems associated
with
it,
the
legal
implications
of
the
system,
and
where
England stands
today
in
implementing e-conveyance applications. Part Three
will address
U.S.
barriers to
e-conveyance applications,
the
enactment
of
enabling
laws,
and
how the digital
age
and
new
technology
are
working against
these
barriers.
This section
will
also
discuss
some
of
the
key
issues
and
concerns
U.S.
*
J.D.
candidate,
Indiana Univ.
School
of
Law
at
Indianapolis; May
2010.
B.B.A.
University
of
Notre
Dame,
2007.
The
author
thanks
his
wife,
Kristin, for
her
unwavering
support
and
patience.
1.
Sam
Stonefield,
Symposium:
Choosing
the
Digital
Future:
The
Use
and
Recording
ofElectronic
Real
Estate
Instruments,
24
W.
NEW
ENG.
L.
REv.
205,220
(2002).
2.
The
eConveyancing Task
Force
of
the
Law
Soc'y
of
Ir.,
eConveyancing:
Back
to
Basic
Principles,
PROP.
VALUER
26, 26
(Aug. 2008),
available
at
http://www.magico.ie/
files/admin/uploads/W153Field-2_33070.pdf.
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pf4
pf5
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pf9
pfa
pfd
pfe
pff
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pf13
pf14
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pf17
pf18
pf19
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pf1b
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pf1d
pf1e
pf1f
pf20

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CONVEYANCING AT A CROSSROADS:

THE TRANSITION^ TO^ E-CONVEYANCING

APPLICATIONS IN^ THE^ U.S.^ AND^ ABROAD

Michael E. Doversberger*

INTRODUCTION

A real property interest is arguably the most sacred form of ownership, and is "the largest and most important transaction in most people's lives... ." A home or business is not only of personal importance for many but also the most significant financial asset they possess. Society, therefore, has an interest in ensuring that conveyances of real property^ are undertaken in a controlled and predictable manner. However, in^ an increasingly digital world focused on speed and efficiency, the paper- centric U.S. real estate conveyance process has become archaic. This^ has resulted in an uncomfortable (^) position for parties to real estate transactions, as the transition to new electronic processes is sometimes viewed as undermining the reliability of the past. Despite the significance attached to a real estate transaction, the pending digital conversion cannot be^ ignored. How society reacts to these changes will determine the ease with which^ the transition to e-conveyances occurs. Part One will begin with a brief discussion that highlights the international support of e-conveyance applications and the general embrace of "secure, paperless, electronic, end to end, pre-sale to post-completion conveyancing."^2 This section will specifically address conveyancing applications in Canada, Scotland, Ireland, Denmark, and Australia. Part Two will then provide a detailed analysis of the comprehensive English^ e- conveyance system, including how it operates, the problems associated with it, the legal^ implications^ of^ the^ system,^ and^ where^ England stands^ today^ in implementing e-conveyance^ applications.^ Part^ Three^ will^ address^ U.S. barriers to^ e-conveyance applications,^ the^ enactment^ of^ enabling^ laws,^ and how the digital age and new technology are working against these barriers. This section will^ also^ discuss^ some^ of^ the^ key^ issues^ and^ concerns^ U.S.

*** J.D.** candidate, Indiana Univ. School of Law at Indianapolis; May 2010. B.B.A. University of Notre Dame, 2007. The author thanks his^ wife,^ Kristin, for^ her^ unwavering support and patience.

1. Sam Stonefield, Symposium:^ Choosing^ the^ DigitalFuture:^ The^ Use^ and^ Recording ofElectronic Real Estate Instruments, 24 W. NEW ENG. L. REv. 205,220^ (2002).

  1. The eConveyancing Task Force of the Law Soc'y of Ir., eConveyancing: Back to Basic Principles, PROP. VALUER 26, 26 (Aug.^ 2008),^ available^ at^ http://www.magico.ie/ files/admin/uploads/W153Field-2_33070.pdf.

IND. INT'L & CoMP. L. REv.

jurisdictions face in their inevitable transition to increased e-conveyance applications. Perhaps the most important objective of^ this Note^ is^ not to^ highlight the inefficiencies of the current U.S. land conveyance system or the benefits of e-conveyancing applications, but rather to emphasize that the switch to increased e-conveyancing is inevitable. To these ends, Part Four of this Note will provide an overview of how the digital age has already impacted practitioners in the United States, and will recommend steps to prepare for the increasing legal and technological impact e-conveyancing will have. Only by embracing the pending transition can the benefits of e- conveyancing applications be fully realized.

PART ONE: A GLOBAL TRANSITION TO INCREASED E-CONVEYANCING APPLICATIONS

Numerous changes in both technology and culture are forcing the real estate conveyance process to change. Greater interconnectivity brought by advances in technology and the^ internet, for^ instance,^ has rendered^ the paper-centric models^ of^ conveyancing^ outdated.^3 Dictated^ by^ societal preferences and^ demand,^ technology^ is^ reshaping international^ conveyance processes.^4 As John A. Gose states:

The real estate conveyancing world^ has^ experienced^ more changes during the past^15 years^ than^ in^ the^ prior^^300 years. After 450-plus years, the real estate conveyancing world is going through a major change brought^ on^ by^ a^ new electronic world-a world that could not be^ imagined^ by the creators of the parchment, paper world.'

Ontario,Canada

Ontario, Canada has responded to this transformation by^ developing an electronic conveyancing system. Ontario's electronic system began^ in the 1980s when the Ontario Ministry of Consumer and Business Services started working with Teranet, a private company based in Toronto, on^ the development of an e-registration system. 6 As stated on the Teranet website:

The task involved updating a complex 200-year-old paper- based system and creating a database containing records for

3. JOHN SPRANKLING ET AL., GLOBAL ISSUES IN^ PROPERTY^ LAW^116 (2006). 4. See generally id. 5. John^ A.^ Gose,^ Real^ Estate^ Conveyances^ from^ Livery^ of^ Seisin^ to^ Electronic Transfer: Real Estate TransactionsEnter the^ Digital/Electronic^ World,^^33 REAL^ EsT.^ ISSUES, No. 2, 59, 64 n.2 (2008), availableat http://www.cre.org/publications/33-2.pdf. 6. Id.

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IND. INT'L & COMP. L. REV.

popular tool for conveyancers. With only 300 transactions per month six years ago, OneMove currently facilitates 6,000 transactions per month.' 7 Possibly because of OneMove's success, Teranet appears to be moving towards greater interconnectivity among its users.' 8 Although both OneMove and Teranet have reduced the time and effort needed for a real estate transaction, it is unclear how much money has been saved.' 9

Scotland

Scotland's Automated^ Registration^ of^ Title^ to^ Land^ ("ARTL") project2 was also developed in^ response^ to^ societal^ preferences^ in^ favor^ of electronic commerce. 2 ' ARTL will^ allow^ e-registration^22 and^ will^ be available on the internet.2 3^ Using^ ARTL,^ an authorized^ conveyancer^ is^ able to register deeds electronically by answering a series 24 of online questions, and owners will be able to pay some taxes online.2 5 Potential benefits of ARTL include decreased costs^ for^ paper^ and postage, less bureaucracy and more control^ for^ users,^ reduced^ risk associated with delayed registration, and^ potentially^ discounted^ registration fees.^26 Paper documents will initially^ still^ be^ acceptable,^ as^ there^ are security concerns with the new system.^27 Certification (^) processes, accreditation requirements for direct e-registration users,^ and^ an^ auditing system may help mitigate these concerns.^28 By 2001, forty-one solicitor firms^ and^ numerous^ lenders^ were participating in an ARTL pilot program.29 The^ participants^ gave^ generally positive feedback.o In part because pilot participants were initially required to use both the standard paper process and^ ARTL's^ electronic process,^ the number of participants was rather low. 3 1^ Nonetheless, the^ incentive^ to

17. Id. 18. Id. 19. Id.

  1. Registers^ of^ Scotland,^ History^ of^ ARTL,^ http://www.ros.gov.uk/artl/history.html (last visited Apr. 26, 2010) [hereinafter History of^ ARTL]. 21. See generally Alistair Rennie et al., (^) The Age of e-Conveyancing?, J. ONLINE, June 1, 2001, availableat http://www.journalonline.co.uk/Magazine/46-6/1000947.aspx.
  2. History of ARTL, supra note 20. 23. Registers of Scotland, (^) What is ARTL?, http://www.ros.gov.uk/artl/whatis_ artl.html (last visited Apr.^ 26, 2010).
  3. Rennie et al., supra note 21.
  4. Id. 26. Id 27. Id. 28. Id, 29. Id. 30. Id. 31. See^ generally^ id.^ (for^ the^ proposition^ that^ the^ "electronic registration^ is^ merely^ an experimental replication of the paper-based registration" and^ that^ more^ participation^ is required to fully test the system).

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submit feedback and shape the development of ARTL helped make the pilot program a success.^32 Legislative support was also crucial. " The legislature responded to ARTL positively and modified the law regarding the validity of digital deeds.^34 By the end of 2008, ARTL was transitioning from design to a live 31 application. In^ fact,^ "[t]he^ first^ full live^ transfer^ of^ a^ property title^... successfully (^) took place... [using ARTL on] Thursday 17th (^) April 2008, marking a key milestone for the ARTL project."^6 The success of ARTL seems to be Scotland's first major step towards comprehensive e- conveyancing.3 7

Ireland

Like Scotland, Ireland plans to increase the availability of e- conveyance applications. The Law Society of Ireland has expressed concern that the "current [conveyance] process is not adapted to deal with modern society."^38 Specifically, paper-based conveyancing cannot handle the increased volume, diversity, and modem expectations for speed and transparency. 39 Further, Irish (^) conveyancing "is hampered by a complex, cumbersome legislative framework and thus inherent delay.Ao The Law Society of Ireland suggested that simply making the paper- based system digital was not enough and that the entire process needs to be re-engineered to fit with the electronic environment. 4 1 Ultimately, "[u]nder e-conveyancing, the Law Society believes the total transaction time for the conveyance of a family home from initial viewing of the property to completion, registration of ownership and discharge of the prior mortgage could be five working days.A 2

Denmark

Also overburdened by paper documents, Denmark's conveyancing process requires numerous hardcopies for "purchase agreements, loan

32. Id. 33. Id.

  1. History of ARTL, supra note 20. 35. Law Society of Scotland, ARTL-Automated Registration of (^) Title to Land, http://www.lawscot.org.uk/MembersInformation/convey_essens/artl (^) (last visited Apr. 26, 2010). 36. Id. 37. Rennie et al., supra note 21. 38. Law Soc'y of Ir., supra note 2, at 26. 39. Id.
  2. Id.
  3. Id. at 26, 29.
  4. Conveyance Overhaul Proposedto Speed Up Property Deals, IRISH EXAMINER, July 23, 2008, available at http://archives.tcm.ie/irishexaminer/2008/07/23/story68023.asp.

2010]^285

CONVEYANCING AT A CROSSROADS

Australian legal publication noted:

Just a glance at the number of 'stakeholders' involved^ in the national e-conveyancing project gives^ a^ sense^ of^ its scale and complexity. The list runs to^ not^ only^ lawyers' representatives, state government (^) land registries and banks, but a range of service providers that assist^ law^ firms^ and the state to deal with the huge number of^ transactions involved. 57

However, the Australian system has been^ slowed^ by^ internal^ disputes. The National Electronic Conveyancing System ("NECS")^ was^ a cooperative arrangement between industries and state governments^ for^ a national e-conveyance system by 2010.58 Despite^ the^ NECS,^ some^ states^ are not willing to adapt their individual systems to the^ NECS^ criteria." Initially, the State of Victoria's e-conveyance^ pilot^ (a^ system^ which eventually would make cross-border real estate^ transactions^ easier)^ was^ to serve as a model for other states.^60 However, Victoria,^ has^ declined^ to^ share any of its conveyancing software with^ other^ Australian^ states^ unless^ they agree to certain conditions.'^ Specifically,^ Victoria^ and^ the^ State^ of Queensland prefer^ "a^ state-centric^ approach^ with^ each^ jurisdiction^ using similar software but without the^ nationwide^ interoperability."^62 In^ any event, "[t]he^ fate^ of^ the $44^ million^ e-conveyancing^ project^ is^ uncertain since the major banks pulled out..^.^ [based,^ in^ part,^ on]^ frustration^ over Victoria's flagging commitment^ to^ NECS.^63 Although debate rages^ over what form of e-conveyancing is^ best^ in^ Australia,^ global^ demand for^ e- conveyance applications cannot be denied.

PART Two: COMPREHENSIVE^ E-CONvEYANCING^ IN^ ENGLAND

A. HistoricalOverview

Compared with other nations, England's e-conveyance system is fairly comprehensive. To^ best^ understand^ the^ system's^ development,^ it^ is crucial to keep in mind the historical underpinnings^ of^ the^ English^ land

57. Shaun Drummond, Legal Constraints Slow e-Conveyance Victoria, LAW. WKLY., Sept. 15, 2006, LEXIS, News Library, LWYRWK File. 58. Kidman, supra note 56. 59. Drummond, supra note 57. 60. Kidman, supra note 56. 61. Karen Dearne, Rebellion Frustrates e-Conveyance, THE AUSTL., Oct. 30, (^) 2007, available at http://www.theaustralian.com.aulaustralian-it/rebellion-frustrates-e-conveyancel story-e6frgamo-1 111114752889. 62. Id. 63. Id.

2010]^287

IND. INT'L & COMP. (^) L. REV.

transfer system, which ultimately is the system that gave rise to U.S. land conveyance processes. 4 Under the English feudal^ system,^ real^ property transfers were performed in a ceremony called the "livery of seisin," which was essentially a transfer of interest by possession.^65 The transferee's possession of the property notified any third party of the real estate transaction" and established a legally recognizable claim to the land. ' As English^ society^ developed,^ a^ system^ of^ notice^ by^ possession^ was no longer adequate and a new method of conveyancing was needed.^67 England responded through its Statute of Uses, which allowed for^ the use^ of deeds. Subsequently, the Statute of Enrolments was added to mandate that sales of freehold estates must be put in writing.^69 Additionally, the Statute of Enrolments required the payment of a tax and was arguably the first statutory recording law.^70 The Statute of Wills, permitting a testator to devise real property in a will,^7 1 and the Statute of Frauds, requiring that "all transfers of interests in real property be in writing and signed 'by the party to be charged,"' 7 2^ also facilitated the development of a formal conveyancing system. Although English laws required conveyances to be written, they did not require use of a single, original document. As stated by authors David E. Ewan, John A. Richards, and Margo H.K. Tank:

Indeed, real property conveyances often used indenture (the practice of writing two or more copies of the document on a single large sheet of parchment, which was then cut apart with a jagged or wavy line-the indenture-into two parts) to document the^ transaction.^ This^ created^ more^ than^ one original document.... In other words, there may be many original deeds. Originality was not important because there was a^ talismanic^ effect^ of^ having^ one^ original document; instead, originality was important only insofar as it allowed one to be confident of^ the^ accuracy^ of^ the^ information displayed in^ the^ medium.7 4

As a result, a^ written^ agreement^ was^ utilized^ simply^ as^ the best way^ to

  1. David E. Ewan et al., It's^ the^ Message,^ Not the^ Medium!,^^60 Bus.^ LAW^ 1487,^^1499 (2005). 65. Id. 66. Id. 67. Id. 68. Id. 69. Id. at 1499-1500. 70. Id. at 1500. 71. Id. 72. Id. 73. _Id.
  2. Id._

(^288) [Vol. 20:

IND. INT'L & Comp. (^) L. REV.

substantial investment of time and capital. The Land Registry's e- conveyance system has been in development for^ over^ a^ decade.^ The system focuses on "listening to potential users and meeting their needs, learning the lessons available from previous projects, and addressing the fears and concerns raised." 84 Unfortunately, cost estimates were unclear from the beginning due to uncertainties.ss Some costs were definite, such as IBM's winning contract bid to oversee development and to design the information technologies system, which was estimated to cost £21 million over five years.^86 But it was clear that hidden costs were going to be significant. Further, when implementing the system, "it is not prudent to switch from a tried and tested system of conveyancing unless it can be demonstrated that any proposed system will reduce or banish many,^ if^ not all, of the negative aspects of^ the^ current^ system.'^ 8 7 Despite these uncertainties, the e-conveyance project continued. Shifting from a concept to a functioning model, however, required significant effort. "[F]or most jurisdictions the laws relating to property transfer are extremely complicated, and so it is not a simple matter to convert paper-based systems built up over several centuries to straightforward electronic processes."8 8^ Feedback, proposals, suggestions, and questions (^) were sent to and from concerned parties, 89 and slowly, England's model of comprehensive e-conveyancing, set out in detail below, began to emerge.

C. Laying the Legal Foundation

Of course, without the support of Parliament, the legal foundations needed for^ the^ Land^ Registry's^ e-conveyancing^ applications^ would^ have been impossible.^ In^ 1998,^ the^ Law^ Commission^ and^ Land^ Registry published a report titled "Land Registration for the Twenty First Century," setting out preliminary proposals.^90 The Land^ Registration^ Act^2002 "came into force on^13 October^ 2003,^ [and]^ contain[ed]^ legislative^ provisions^ to enable the^ implementation^ of^ e-conveyancing^ in^ the form^ envisaged."^9 '

83. Ian Grant, Land Registry e-Conveyancing System to Include PKI, COMPUTERWEEKLY.COM, Jan.^ 17,^ 2008,^ http://www.computerweekly.com/Articles/2008/ 01/1 7/228972/land-registry-e-conveyancing-system-to-include-pki.htm.

  1. LAND REGISTRY, E-CONVEYANCING: A LAND REGISTRY CONSULTATION REPORT^17 (2003), available at http://wwwl.landregistry.gov.uk/assets/library/documents/eccir.pdf [hereinafter CONSULTATION REPORT]. 85. BuTr, supra note 8, at 5. 86. (^) IBM Bags £21m E-Conveyancing Deal, GHOSTDIGEST, July 14, 2005, http://www.ghostdigest.co.za/code/A_723.html. 87. RAJASEKHAR, supra note 78, at 14. 88. Id. at 6. 89. Id. at 3-4. 90. STRATEGY FOR THE IMPLEMENTATION, supra note 82, at 8. 91. Id.

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This was "an attempt to reshape conveyancing to ensure its compatibility with the commercial world of the twenty-first century."^92 By 2003, and after the passage of supportive legislation aimed at "dematerialisation," 93 a plan for the "implantation of e-conveyancing was^ approved."^ 9 4

D. Components and OperationofE-Conveyancing

With legal backing, the Land Registry's proposed e-conveyance applications incorporate numerous components that collectively constitute the system.^95 One component is the central service, which links^ conveyance participants and helps coordinate contracting and registration.9 6^ Another is a method of electronic funds transfer ("EFT"), which is connected to^ the central service.^97 The EFT service "will enable the whole^ nexus^ of payments associated with a property transaction to be agreed in advance and then settled electronically and with immediate effect at the time when all the funding is confirmed as being available and the transaction is completed." 98 Finally, there is a channel access^ service, which^ will^ allow users to access both the central service and the EFT.^99 The actual interface, however, may be customized by individual users.'0 0 User access to the full array of e-conveyance applications may^ be limited, with "[t]he highest level of access...^ given^ to^ conveyancing professionals so that they can produce documents and^ carry^ out online^ all the transactions necessary for a valid conveyance of land or property." 0 '^ As stated by authors Robert Abbey and Mark Richards:

The relationship with the [land] registry will^ be contractual, under a 'network access agreement[,]' and the registry^ will be obliged to contract with any solicitor or^ licensed conveyancer who meets specified criteria. 0 2

The criteria for use will be based on feedback from^ an^ extensive

92. Barbara Bogusz, Bringing Land Registration into the Twenty-First Century - The Land Registration Act 2002, 65 MOD. L.^ REV.^ 556,^557 n.4^ (2002). 93. Beardsall, supra note 79, at 3. 94. Burr,^ supra^ note^ 8,^ at^ 4. 95. Id. at 8. 96. Id. 97. Id 98. STRATEGY FOR THE IMPLEMENTATION, supra note 82,^ at^ 17-18. 99. BUTr, supra note 8, at 4. 100. Id. 101. The Introduction of E-Conveyancing, DIY Conveyance (UK), http://www.diyconveyance.co.uk/introduction-econveyancing.html (^) (last visited Apr. 26, 2010).

  1. ROBERT ABBEY & MARK RiCHARDS, A PRACTICAL APPROACH TO CONVEYANCING^53 (9" ed. 2007).

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CONVEYANCING AT A CROSSROADS

Land Registry contends that pinpointing those responsible for^ delays^ in^ the conveyancing process "gives them the impetus to get things^ moving^ again for fear of damage to their reputations."ll 4 It^ is^ hoped^ that^ a^ chain^ matrix "will facilitate a simpler, more co-ordinated exchange of contracts and completion.""' Thus, a buyer theoretically will not be left^ in^ the^ position where he has contracted to buy a new home, but then his current home sale fails, leaving him financially distressed."' 6 Therefore, "[fjor buyers and sellers, this should mean better information, greater^ certainty^ and^ less stress."I 7 Reaction to the chain matrix idea has been mixed. Although "[t]wo- thirds of respondents [to a consultation study] supported the overall concept of a chain matrix, with almost a third giving a strong endorsement[,] ... 20% of respondents did not support the concept.""' 8 As discussed in^ more detail below, the chain matrix prototypes, in practice, faced significant,^ if not prohibitive, hardships. Under the proposed system, a buyer and seller would electronically communicate, as well as send or receive any documents, like a^ contract draft." 9 The conveyancer will still "have to^ study^ these^ documents^ and make any further enquiries or negotiate any amendments to the draft contract in exactly the same circumstances as now." The hope is that under e-conveyancing, any amendments will be incorporated and approved electronically, without involving traditional post.1^20 Similarly,^ mortgage preparations will also be conducted online. In addition to having a chain manager facilitate the transaction,^ the Land Registry will also have a greater role in the pre-contract stage of^ the transaction. For instance, when "the seller's conveyancer uses^ the^ E- Conveyancing service to transmit the draft contract from his^ case management system to the buyer's conveyancer, automatic validation checks would compare contract data with Land Registry data and electronic messages would indicate any discrepancies." 22 Theoretically, this^ check will be beneficial in spotting problems; however, its effectiveness has^ not been proven in practice. There is concern that the validation checks^ will improperly find errors when the contract is fine, resulting in unneeded

Can Chew Entering the Matrix, GUARDIAN, Apr. 12, 2007, Technology^ Guardian^ section,^ at 6, available at http://www.guardian.co.uk/technology/2007/apr/12/comment.egovernment [hereinafter (^) Bitten (^) Oft].

114. Getting Ready to Go Digital, FIN.^ TIMES^ ADVISER,^ Nov.^ 1,^ 2007,^2007 WLNR 21968346, available at http://www.ftadviser.com/FinancialAdviser/Archive/Supplements/ article/20071101/dd9a95ec-ea4b-11dc-abcd-0015171400aa/Getting-ready-to-go-digital.jsp. 115. STRATEGY FOR THE IMPLEMENTATION, supra note 82, at 16 (emphasis removed). 116. Burr,supra^ note^ 8,^ at^ 14. 117. STRATEGY FOR THE IMPLEMENTATION, supra note 82, at **16.

  1. CONSULTATION REPORT,** supra note 84, at 163. 119. Burr, supra note 8, at 12.
  2. Id. at 13.
  3. ABBEY &^ RICHARDS,^ supra^ note^ 102,^ at^ 52.
  4. STRATEGY FOR THE IMPLEMENTATION, supra note^ 82,^ at^^18 (emphasis^ removed).

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delays.1^23 A similar concern is that the checks will give the conveyancer a false sense of assurance that the contract is sound when, in fact, the automatic checks simply missed an error. 124 At the point when both parties agree to the contract, it would need to be signed electronically and then exchanged electronically.1^25 For this reason, a secure and reliable method of electronic signatures cannot be overlooked. (^) As previously discussed, a deed historically had to "be (^) signed, witnessed and delivered.. ." and "an electronic contract or transfer could not comply with^ these^ requirements."l^ 2 6^ However,^ the^ Electronic Communications Act^2000 now^ supports^ "the^ use^ of^ electronic communications" 27 and^ allows^ documents^ to^ be^ validly^ signed^ with electronic signatures.1^28 In addition to legislative support,^ the^ high financial^ stakes^ involved^ in a real property transfer require^ exceptional^ reliability^ and^ security^ with regard to electronic contracting. To^ these^ ends,^ "[e]lectronic^ signatures^ are the key to the process. These are not^ fancy graphics^ or^ jokes^ at^ the^ end^ of^ e- mails, but the use of mathematically complex encryption^ keys^ to^ guarantee the authenticity of a document." 29 With each electronic^ document,^ there^ is a digital signature file that is transferred with it^ that^ "verifies^ that^ the document was signed by a particular person, and^ the^ content^ of^ the document hasn't been changed in anyway, not even^ a^ single^ character,^ since it was signed."'1^30 Utilizing such technologies, the^ expectation^ is^ that^ both the general public and conveyancers will be able to^ use^ the^ system^ without concern of fraud. Moreover, a "pre-completion search at the Land Registry^ will^ not^ be required as there will no longer be a registration gap to worry about^.^.^ ." thereby reducing the possibility of priority disputes involving^ a^ subsequent purchaser.131 This simultaneous registration mitigates problems caused^ by third-parties who claim an interest in a recently purchased or^ sold property.13 2^ However, there is some initial concern over^ duplicate^ paper^ and electronic lodgments, or of multiple paper and electronic mortgages, which may result in complicated priority disputes. 3 3^ If the system operates as

123. Bur, supra note 8, at 13.

  1. Id. 125. RAJASEKHAR, supra note 78, at^ 5. 126. BuTr, supra note 8, at 17-18. 127. Office of Public Sector Information, Electronic Communications Act 2000, http://www.opsi.gov.uk/acts/acts2000/ukpga_20000007_en_1 (last visited^ Apr.^ 26,^ 2010). 128. BuTr,supra note 8, at 17. 129. Emma Slessenger et al., Apologies for Any e-Conveyance, PROP. WK., June 6, 2001, availableat http://www.propertyweek.com/story.asp?storyCode=3007849. 130. Burr, supra note 8, at 18. 131. Id. at 16. 132. Bogusz, supra note 92, at 558, 564. 133. LAND REGISTRY,^ REPORT^ ON^ RESPONSES^ To^ E-CONVEYANCING^ SECONDARY LEGISLATION PART Two 37, available at^ http://wwwl.landregistry.gov.uk/assets/library/

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upgrade title, and utilize other online services.'1 A validation system for electronic signatures is also scheduled to be implemented.1 45 The validation system was developed, in part, (^) by government defense research agencies, and also with input from lawyers, mortgage professionals, and other governmental organizations. 46 In September of 2005, "Easy Convey Ltd.... a leading developer of electronic conveyancing products^ and^ services^ ...^ announced^ that^ one^ of^ its clients ... filed^ the^ UK's^ first^ online^ Stamp^ Duty^ Land^ Tax^ return."l^47 The process was openly supported by^ its^ user, who^ stated the^ paperless^ e- conveyance application greatly reduced^ the^ time^ and^ effort^ involved^ in the process.14 8^ By 2006, the National Land Information Service^ had^ performed over seven million searches for electronic information.1^49 Even some of the true innovations of e-conveyancing, like^ the^ chain matrix, have been prototyped. The chain matrix pilot took place^ in^ three separate cities between autumn of 2006 and spring of 2007,^ and^ the^ Land Registry planned to apply user feedback and adapt the^ matrix accordingly. 50 Having a sufficient number of chain participants was a key element in the proper measurement of the chain matrix's^ utility.'^5 '^ The expectation was that "[a]round 900 potential users [would] have access to the prototype, with numbers expected to rise during the trial period."' 5 2 Potential users included "solicitors and estate agents who, along with support staff, completed their Chain Matrix training... as [the] Land Registry's team of instructors went on the road visiting the three trial areas of Portsmouth, Fareham and Bristol."' The prototype launched^ on^ March^ 29,^ 2007,154^ and^ the English^ law firm Coffin Mew LLP was the first to enter a chain during the Land Registry's testing.'^55 Speaking^ for^ the^ firm,^ Conveyance^ Manager^ John Blake stated that the firm was "delighted to be the first to use the Land Registry's new Chain^ Matrix."'^56 "The^ intention^ is^ to^ test^ the^ system,^ which

  1. BuTr, supra note 8, at 25-26.
  2. Grant, supra note 83.
  3. Id.
  4. Press Release, Easy^ Convey^ Ltd., e-Conveyancing^ Now^ a^ Reality^ as^ Easy^ Convey Client Files First Online Stamp Duty (^) Land Tax Return 1 (Sept. 6, 2005), http://www.easyconvey.com/PR/060905SDLTPR.pdf.
  5. Id. at 2.
  6. BuTT, supra note 8, at 26. 150. Id. at 28. 151. Id. at 29. 152. Land Registry, Chain Matrix, http://wwwl.landregistry.gov.uk/ar07/services/ chainmatrix (last visited Apr. 26, 2009). 153. Id. 154. Id. 155. Coffin Mew LLP, Chain Matrix First for Coffin Mew LLP, http://www.coffinmew.co.uk/currenttopics/archive/ct%20chain%20matrix.htm (last^ visited JApr. 26, 2010). 156. Id.

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will eventually (^) incorporate an Electronic Funds Transfer system... [and] replace the existing slow and cumbersome system used at present to transfer money on the day of completion."' 7 The prototype was to^ be^ evaluated both at the midway and ending point of the testing.' 58 A^ voluntary^ trial^ of the complete e-conveyance system,^ minus^ the^ EFT^ service,^ was^ then scheduled for October 2007, the housing^ market's^ slowest^ period.'"^9 Unfortunately, the chain matrix and subsequent pilots were unsuccessful. Much of its failure was because the chain matrix^ pilot "attracted less (^) than half the participants originally hoped for." 60 As a result, the chain matrix development and use of the EFT service^ has^ been indefinitely postponed.161 Michael Cross stated that:

One reason for failure was apathy from the people expected to use it. Conveyancers were reluctant to try it out, partly because their own case management systems did not^ plug in.. .. The trial also found no evidence^ that^ people^ would pay to use the service, undermining the business case. Privacy may also have been a worry: 'Many citizens were either not aware or not convinced of the benefits of Chain Matrix and many prevented their conveyancer from entering their transactions onto Chain Matrix,' the^ [Land Registry] evaluation says. In the event, only 200^ out^ of 1,467 clients who signed up to view the matrix^ did^ so. While the technology worked well, with^ the^ system available 99.5% of the time, the pilot covered^ only^^229 chains instead of the 500 hoped for. A knock-on casualty of the postponement was the procurement of an [EFT] service to pass money from buyers to sellers as the e-conveyancing system transferred title to the property. Although solicitors had raised concerns about the system's security, the Land Registry denied that this was a reason for cancellation. The registry hopes to revive the matrix concept in some form [and believes the market wants increased sale

transparency].1 62

157. Id. 158. Land Registry, supra note^ 152. 159. Burr, supra note 8, at 31; see also Land Registry, Electronic Conveyancing^ Pilot Launches in October 2007, http://www.landreg.gov.uk/about-us/pressoffice/notices/ default.asp?article-id=8426 (last visited^ Apr.^ 26,^ 2010). 160. Michael Cross, Technology: Web Plan for Property Sales After Lack of Interest in Pilot, THE^ GuARDIAN^ (U.K.),^ Apr.^ 10,^ 2008,^ Technology^ Guardian^ section,^ at^ 3,^ availableat http://www.guardian.co.uk/technology/2008/apr/1 0/property. 161. Id. 162. Id.

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practitioners, lenders, Land Registry and other organisations involved in the conveyancing process will be capable of being electronic, as will all exchanges of formal documentation."l 74 Moreover, "there are problems of risk. .. allocation." 7 Thus, "increasing the speed of conveyancing has to be balanced by the need for reliability."' 76 As Cross states:

The registry's core function, to provide a definitive proof of title, is^ by^ definition^ a^ monopoly,^ based on^ absolute^ trust. Becoming a middleman in every single property transaction is another function entirely, and one that may not fit as easily with monopoly^ status.^ The^ system^ itself,^ handling transactions worth Elm every minute, will have to be bulletproof. 77

Any mishaps^ with^ the^ conveyancing^ system^ could^ cast^ doubt^ on^ the entire system and also disrupt the UK economy. 7 1 Moreover, "[a]n electronic system might be more vulnerable for hackers and electronic fraud or disruption... [and the] use of technology... may encourage the development of new methods for defrauding individuals." The Land Registry hopes to combat these fears with advanced security technology, increased dependence on private systems instead of the internet, use of network access agreements,1^80 and audit trailing software. Additionally, every six months, the Land Registry will commission an independent firm to test the system security.^18 ' If a system weakness is discovered, it will be corrected and then retested.1^82 Nonetheless, concerns over any resulting liability due to fraud remain.183 As stated in a Land Registry consultation study:

[One] respondent did not see why solicitors (and their insurers), if they were forced to use electronic signatures, should be expected to bear the liability for any fraudulent

http//wwwl.landregistry.gov.uk/assets/rft-dowloads/workshopl/planningbk1final.pdf [hereinafter PLANNING BOOK].

174. STRATEGY FOR THE IMPLEMENTATION, supra note 82, at 17 (emphasis removed). 175. Raymond Perry, E-conveyancing: Promise and Reality, INTERNET^ NEWSLETTER^ FOR LAWYERS, Sept./Oct 2003, http://www.venables.co.uk/n0309econveyancing.htm. 176. Electronic Conveyancing^ Is^ Just^ a^ Click^ Away,^ KALTONS^ TECH.^ SOLIC., http://web.archive.org/web/2006092621504 1/www.kaltons.co.uk/articles/240.cfm (last visited Apr. 26, 2010). 177. Bitten Off,^ supra^ note^ 113,^ at^ 6. 178. Id. 179. Haim Sandberg, Real Estate E-Conveyancing: Vision and Risks 6 (C. of Mgmt. Sch. of Law, Isr., Working Paper), available at https://lawlib.wlu.edu/works/516-1.pdf^ (last visited Apr. 26, 2010). 180. BuTrr, supra note 8, at 46. 181. REPORTON RESPONSES, supra note 133, at 25. 18 2. Id. 183. See Interview by^ April Stroud,^ supra^ note^ 108.

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clients who manage to beat the system. Indeed, the Law Society agreed that when a solicitor's PC has been unknowingly hacked to perpetrate fraud it is essential that it should be very clear that the burden of proof should be on the Land Registry to show that there was carelessness or fraud on the part of the conveyancer. Conveyancers were, of course, willing to be responsible^ for^ security^ within^ their own offices to prevent signature theft and^ for adherence^ to whatever protocols are laid down^ for^ the^ use^ of^ an electronic conveyancing system.

In response, the Land Registry has proposed an indemnity fund^ to compensate parties who suffer a loss in certain situations.' 8 5^ However,^ this does not mean that the Land Registry will not require a negligent solicitor to compensate the fund for any payments made.^186 The effect is that "[t]he future will clearly require conveyancing practitioners to be experts in 'software updates and virus warnings' as well (^) as in the law and practice of

conveyancing."l 87

Despite the general public's familiarity with using electronic personal identification numbers with debit or credit cards, a form of a digital signature, much skepticism remains regarding other forms of digital signatures. 18 In fact, "48% of respondents expressed concern over the use of an e-signature." 89 As the Land Registry points out, however, the current system is far from being free of abuse, and e-conveyancing may actually reduce the risks.1^90 With increased use of electronic documents, forgery will be more easily detected, resulting in a forged document's invalidation.' 9 ' Further, "the password and other security measures that will be needed for [an electronic signature means forgery] is not likely to happen without the knowledge of [an authorized user]... ."92In any event, the use of electronic signatures and e-conveyancing applications as a whole must find an appropriate balance between usability and security.' 93 Another concern is that some users disfavor the additional transparency that the chain matrix might create.1 94 After all, some parties

  1. CONSULTATION REPORT, supra note 84, at 147. 185. Burr, supra note 8, at 46. 186. ABBEY & RICHARDS, supra^ note^ 102,^ at^ 54. 187. Id. 188. Burr,supra note 8, at 47. 189. CONSULTATION REPORT, supra note 84, at 18. 190. Burr,supra note 8, at 46. 191. REPORT ON RESPONSES, supra note 133, at 26. 192. Id. 193. RAJASEKHAR, supra note 78, at 7.
  2. See The Free Library, supra note 111.

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