» Foreword
» How to respond
» Summary of proposals
» Part I- Introduction
» Part II- Commentary on draft order
» Part III- Your views
Appendicies
» I - Draft Order
» II - Relevant legislation
» III - Partial Regulatory Impact Assessment
» IV - Membership of working group for draft order
» General Principles of Consultation
This paper has been prepared by the Lord Chancellor's Department in association with HM Land Registry and the Law Commission. It sets out for consultation our draft proposals for the creation of a legal framework for the creation and transfer of interests in land in England and Wales by electronic documents and our preliminary assessment of their likely impact. The consultation is aimed at everyone involved in or affected by conveyancing in England and Wales. This consultation is being conducted in line with the Code of Practice on Written Consultation issued by the Cabinet Office. It falls within the scope of the Code. The Code criteria set out on page 66 have been followed.
Copies of the consultation paper are being sent to the following professional organisations and representative bodies.
PROFESSIONAL BODIES
British Bankers Association
Chancery Bar Association
Chartered Institute of Taxation
City of London Law Society
Council for Licensed Conveyancers
Ecclesiastical Law Association
Financial Law Panel
General Council of the Bar
Incorporated Society of Valuers and Auctioneers
Institute of Chartered Accountants in England and Wales
Institute of Chartered Secretaries and Administrators
Institute of Legal Executives
National Association of Estate Agents
Northern Chancery Bar Association
Notaries Society
Property Litigation Association
Royal Institution of Chartered Surveyors
Society of Licensed Conveyancers
Society of Public Teachers of Law
Society of Trust and Estate Practitioners
The Law Society
The Law Society of Scotland
The Law Society of Northern Ireland
REPRESENTATIVE BODIES
British Property Federation
British Retail Consortium
Building Societies Association
Confederation of British Industry
Consumers' Association
Council of Mortgage Lenders
Country Land and Business Association
Federation of Small Businesses
House Builders Federation
Housing Corporation
National Consumer Council
Society for Computers and the Law
The National Association of Citizens Advice Bureaux
Trades Union Congress
GOVERNMENT BODIES
Association of Community Councils for Rural England
Association of Council Secretaries and Solicitors
Association of District Councils
Association of Larger Local Councils
Association of Local Government
Association of London Government
Cabinet Office
Companies House
Crown Estate
Department of the Environment Transport and the Regions
Department of Trade and Industry
European Commission
HM Customs and Excise
HM Treasury
Inland Revenue
Land Registers of Northern Ireland
Legal Services Commission
Local Authority Valuers Association
Ministry of Agriculture Fisheries and Food
National Assembly for Wales
Northern Ireland Assembly
Office of Fair Trading
Office of the E-Envoy
Ordnance Survey
Public Record Office
Registers of Scotland
Scottish Executive
Small Business Service
The Office of Law Reform, Northern Ireland
The Scottish Law Commission
Treasury Solicitors Department
Valuation Office
Please send your response and comments by 25 June 2001 to:
Representative groups are asked to give a summary of the people and organisations they represent when they respond.
The Department may wish to publish responses to this consultation document in due course. Please ensure your response is marked clearly if you wish your response or name to be kept confidential. Confidential responses will be included in any statistical summary of numbers of comments received and views expressed.
Further copies of this consultation paper can be obtained from the above address, or:
In England and Wales the law requires the key documents in any sale, lease or mortgage of land to be made on paper. This is an obstacle to the growth of e-commerce. The Electronic Communications Act 2000 gives Ministers power, subject to parliamentary approval, to change the law to authorise or facilitate the use of electronic communication and electronic storage.
Ministers propose to use this power to improve the conveyancing process by permitting the creation of electronic conveyancing documents such as contracts, transfers, conveyances, leases and mortgages. The use of the electronic conveyancing documents will be voluntary, but they will in general only be permitted for registered land.
When made, the order will create a new system of formalities for the creation and disposal of interests in land and establish a new legal framework in which electronic conveyancing documents will have the same effect as their paper equivalents. The order will do so by amending the Land Registration Act 1925 and the Law of Property (Miscellaneous Provisions) Act 1989. It will however need to be supplemented by new land registration rules and stamp duty legislation before it can be brought fully into force.
The terms of the draft order specify that electronic conveyancing documents will have to meet certain conditions. The most important are that the documents will have to be electronically signed with a certificated electronic signature and will have to specify when they are intended to take effect. Electronic documents, other than contracts, will also have to be made in a form prescribed by HM Land Registry. These formats will be issued as new procedures are developed to process them. The first is likely to relate to mortgages. The relevant rules will be the subject of a separate consultation exercise. Other conditions may be added in the light of experience.
A Partial Regulatory Impact Assessment has been prepared. It indicates that the proposals are likely to benefit consumers and businesses. The purpose of this paper is to seek views upon the proposals and their likely effect.
1. In this part of the paper we briefly describe both the background to the making of the draft order and its terms.
• Electronic Communications Act 2000
2. In 1999 the Government introduced the Electronic Communications Bill into Parliament. The Bill included a power to amend primary and secondary legislation to authorise or facilitate the use of electronic communication and electronic storage. This power is now contained in section 8 of the Electronic Communications Act 2000. It is however subject to limitations. Firstly, it can only be used for a purpose specified in section 8 and, secondly, the Minister making the order must be satisfied that the records of things done electronically will be no less satisfactory than in other cases. Importantly, the section provides that orders cannot require the use of electronic communication or electronic storage. The use of electronic conveyancing documents authorised under the section 8 order will therefore be voluntary.
3. The possible application of that power to remove legislative obstacles to electronic conveyancing was recognised at an early stage. In spring 2000, the Lord Chancellor's Department, HM Land Registry and the Law Commission set up a small working group to take forward the creation of a new legal framework to authorise electronic conveyancing documents by means of a section 8 order. This group drew in representatives from some of the principal stakeholders in the conveyancing field and a draft order was prepared in autumn 2000. The membership is of the group is listed in Appendix IV. The draft order has been revised in the light of comments made by stakeholders and Government departments and is now issued for public consultation. The Lord Chancellor's Department is grateful to all those who contributed to the preparation of the draft and, in particular, to Charles Harpum, the Law Commissioner responsible for property and trust law, Her Honour Judge Diana Faber, the former Law Commissioner responsible for commercial law and Chris West, the Solicitor to HM Land Registry. In November 2000 an Interdepartmental Steering Group on electronic conveyancing chaired by the Lord Chancellor's Department was set up to oversee and co-ordinate the e-conveyancing programme. The changes proposed in this paper form part of that programme.
• The Legal Problem
4. In England and Wales contracts for the sale or creation of interests in land have to be made in writing and signed by the parties. Similarly, deeds must be in writing and the signature of the party or parties making the deed must be witnessed. All conveyances, transfers, leases, mortgages and legal charges must be deeds. Thus, notwithstanding the growing use of electronic communication at all the other stages of a conveyancing transaction, the two key stages of making the contract and completion must be achieved by using paper documents. Any subsequent application for registration at HM Land Registry must therefore also be made on paper.
• The Scale Of The Legal Problem
5. The conveyancing process touches upon the wealth and happiness of a great number of individuals and businesses every year. Two sets of statistics will illustrate this. Firstly, there are some 22 million titles to land in England and Wales which are, or may fall to be, registered at HM Land Registry. Of these, more than 17 million are already registered. It is estimated that by 2009 unregistered freehold and long leasehold land will be confined to properties which virtually never change owners. Secondly, there are about three million transfers of registered land each year. About one million of these are residential sales. All of these transactions must be documented on paper.
• Existing Electronic Conveyancing Services
6. The proposal to permit electronic conveyancing documents is being made against a background of burgeoning electronic service provision elsewhere in the conveyancing field. Two examples will illustrate the advances being made. First, the National Land Information Service is transforming the provision of information about property. When using NLIS practitioners will submit a single search to one place instead of sending numerous enquiries to very many different bodies. As the databases of the various data providers, particularly local authorities, are brought on-line, a huge 'virtual' database of property information will become available. Secondly, ever more of the information held by HM Land Registry and the services it offers are becoming available online. Over 97% of the titles registered are now computerised. All these are now accessible by the web based Land Registry Direct service. By 2004 it will be possible to obtain by computer copies of the title registers, the title plan and any relevant supporting title documentation for all registered titles.
7. These public sector developments are matched by the increasing use of e-commerce techniques and technology in the private sector. Recent statistics show that the vast majority of solicitors use desk top computers as part of their everyday work and that only a small minority of the profession do not have access to their own computer. In commercial transactions virtual dealing rooms and document databanks are becoming more common, whilst in the residential sector the potential for using information technology to improve the services offered to consumers by way of electronic marketing, electronic seller's packs and chain management services is readily apparent.
| Q1. Do you agree that electronic conveyancing documents should be a permissible alternative to paper documents? |
• Security and Authentification
8. HM Land Registry's property ownership records are the foundation of modern conveyancing. Its guarantee of title underpins public and commercial confidence in the working of the property market. It is essential that electronic conveyancing does not adversely affect the authority of the register. It is also essential that the users of electronic documents are confident that they are to be trusted. In practice the integrity and authenticity of electronic conveyancing documents is likely to be guaranteed by the use of electronic signatures. The Government is supporting the development of the co-regulatory scheme by the Alliance for Electronic Business. Although other electronic signatures will be permitted this scheme will provide a recognised standard for electronic signature products in the United Kingdom. An electronic signature will be linked to the person creating the document by a certificate issued by a trusted third party.
| Q2. Do you agree that electronic signatures will be a satisfactory means of ensuring trust in electronic conveyancing documents? |
• Summary of the Draft Order
9. In effect the draft order falls into two parts. The first deals with documents which pass or create ownership such as transfers, mortgages and leases and the second with contracts. The draft order is described fully in Part II, which includes examples of how electronic conveyancing documents might be created. These are for illustrative purposes. The final form of the electronic conveyancing system has not yet been designed. It may be that other methods of creating electronic documents will be developed. The text of the draft order is set out at Appendix I.
• Electronic Dispositions
10. The draft order inserts a new section 144A into the Land Registration Act 1925. An electronic document which satisfies the requirements of the new section will satisfy any statutory requirement of writing, signature and, in the case of a corporation, sealing. The document will also be regarded as a deed. Electronic documents of this kind will only be available in relation to dispositions of registered land and dispositions of unregistered land which trigger the requirement of compulsory registration. They must also be effected by a kind of document for which HM Land Registry has prescribed a form.
11. The other requirements are that:
There is power to add other conditions should the need arise. If these requirements are met, the electronic document will be as effective as an equivalent paper document.
• Electronic Contracts
12. The draft order inserts a new section 2A into the Law of Property (Miscellaneous Provisions) Act 1989.
13. An "electronic contract" will be as effective as an equivalent paper contract if it meets the conditions set out in the new section. These are that:
14. Electronic contracts will be able to be made both in relation to registered and unregistered land.
• Commencement
15. The draft order will create a legal framework for electronic documents. However other legislation will be necessary before it can come into force. Most obviously, land registration rules will be required to prescribe electronic formats for dispositionary documents.
16. The use of electronic documents for key stages of the conveyancing process is a significant development that will potentially affect the property of millions of individuals and businesses. For this reason it is intended that the draft order will be made under an affirmative resolution procedure. This means that it will be debated in the Houses of Parliament and can only come into force if both Houses approve it. When the order is approved a commencement date will be set.
• Impact Of The Proposed Changes
17. Our initial impression is that the introduction of electronic conveyancing documents will encourage or make possible considerable improvements in speed and efficiency of the conveyancing process. Adoption of electronic methods will however be voluntary so there will be no direct compliance costs. Where electronic conveyancing is used we anticipate that it will provide some opportunity for reducing direct costs. Our reasons for this conclusion are set out in the partial regulatory impact assessment set out in Appendix III. As this is only a preliminary assessment we would be grateful for further information. A set of questions seeking that information is set out in Appendix III. We would welcome replies to these questions.
| Q3. Do you agree with the assessment of the effect of electronic conveyancing documents set out in the regulatory impact assessment? |
| Q4. Do you think that the voluntary system of electronic conveyancing will be used, and if so, how long will it take to become the accepted method of residential or commercial conveyancing? |
• Structure of the Paper
18. In this part, we have briefly described the proposals and their background. In Part II, we explain the draft order and describe how it will apply in practice. In Part III, we summarise the specific issues on which we would welcome your views. The draft order is set out in Appendix I; the text of relevant legislation in Appendix II; the partial regulatory impact assessment in Appendix III, and the membership of the working group which assisted in the preparation of the draft order in Appendix IV.
• Introduction: The Move To Electronic Conveyancing
1. At present, as we have briefly explained, the process of conveyancing ¾ the process by which land is bought or sold, or rights are created over it ¾ is conducted for the most part by means of paper documents, such as written contracts and deeds of conveyance and transfer. The law usually requires such formalities ( Endnote 1 ) and the legislation that governs conveyancing presupposes the use of such paper documents. Most titles to and dealings with land are now registered under the Land Registration Act 1925. Those titles are kept on a computerised register and it is already possible to conduct searches of that register on line for those who subscribe to Land Registry Direct However, dealings with registered land are still conducted in paper form. This has begun to change and it is intended that there should be a move over the next few years to a system of paperless electronic conveyancing in relation to registered land. This could be conducted through the medium of a secure Intranet and only authorised persons would have access to it. The change to an electronic system will have a profound effect on the way in which conveyancing is conducted and should speed up and simplify the process considerably. It is already possible for mortgages to be discharged electronically, ( Endnote 2 ) and it is anticipated that it will be possible to carry out other functions electronically in the near future, such as the creation of a legal mortgage.
2. Many of the changes that will be needed to create an integrated and effective system of electronic conveyancing will require primary legislation. As we explain below, the preparation of the draft legislation is at an advanced stage. ( Endnote 3 ) However, it will be necessary to find legislative time for what will be a substantial Bill and which, even when enacted, will take some time to implement. In the meantime, the Government wishes to introduce electronic conveyancing to the extent that it is possible without primary legislation. The draft Order will enable that to happen.
• The Objective of the Draft Order
3. 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 disposition 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. ( Endnote 4 ) Secondly, most conveyances of a legal estate in land have to be made not only in writing but also by deed. ( Endnote 5 ) There are some exceptions to this, ( Endnote 6 ) such as assents by personal representatives, where the conveyance of a legal estate can be made instead by signed writing. ( Endnote 7 ) Thirdly, most contracts for the sale or other disposition of land can only be made by signed writing and must meet certain other conditions. ( Endnote 8 ) 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. At the same time it is 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, ( Endnote 9 ) is not compromised.
4. It is not appropriate for all conveyancing transactions to be conducted in electronic form. The draft Order must be viewed against the background of the work of the Law Commission and HM Land Registry in creating the legal framework for the conduct of electronic conveyancing of registered land. In a Consultative Document published in 1998, Land Registration for the Twenty-First Century, ( Endnote 10 ) the Law Commission and HM Land Registry recommended the introduction of electronic conveyancing in relation to dealings with registered land. They also proposed a fundamental overhaul of the legislation on registered land to enable the potential of a system of paperless conveyancing to be exploited fully. A draft Bill together with a final Report is due to be published in the first half of 2001.
5. 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. The reasons for confining electronic conveyancing in this way are as follows.
6. First, there is a concern about the secure storage of electronic instruments dealing with unregistered land. Where title is registered, electronic documents will be required to be transmitted in encrypted form to HM Land Registry, which will provide secure systems for the storage of data in dematerialised form. In the unlikely eventuality that such data were ever lost or corrupted, the Registry would be under a statutory duty to pay indemnity for any loss suffered in consequence. There are no equivalent safeguards in relation to unregistered land. Although it might be possible to develop protocols, these would be a matter for agreement between the parties to the relevant transaction and would provide only limited safeguards. The draft Order will make changes to the Law of Property (Miscellaneous Provisions) Act 1989 so that contracts for the sale or other disposition of unregistered land can be made electronically. However, most contracts have a comparatively short life span and, in many cases, will lead to a disposition that does itself trigger compulsory first registration. ( Endnote 11 ) Those who intend to enter into contracts concerning unregistered land that may be long lasting, such as options, will no doubt consider whether the electronic medium is the most appropriate one.
7. Secondly, there seems little point in making the necessary legislative changes given the fact that unregistered conveyancing has at best a very limited future. Most dispositions of unregistered land now trigger compulsory first registration of title. ( Endnote 12 ) The only significant category of transactions that does not is the grant of and dealings with leases that are granted for a term of 21 years or less. ( Endnote 13 ) Such leases are incapable of substantive registration. One of the main reasons why short leases were not registrable under the Land Registration Act 1925 was because of the burden that it would have placed on the Land Registry. However, such difficulties will disappear under a system of electronic conveyancing. Both the forthcoming proposals of the Law Commission and HM Land Registry for the replacement of the Land Registration Act 1925 and the introduction of electronic conveyancing provide an opportunity to review the length of leases that are substantively registrable. As a matter of logic, once it is possible to grant and assign leases electronically, there will be a strong case to reduce the length of substantively registrable leases to those granted for more than 3 years. Such leases are normally made with legal advice because they have to be granted by deed. ( Endnote 14 )
8. It should be noted that there is no legal barrier to making dispositions of, or contracts relating to, land in electronic form which are not subject to any formal requirements. ( Endnote 15 ) This means, for example, that leases granted for 3 years or less to take effect in possession can already be granted in electronic form. ( Endnote 16 )
| Q5. Do you agree that electronic conveyancing of unregistered land should be restricted to dispositions of unregistered land which trigger compulsory first registration of title and contracts to make a disposition of such land? |
• The Draft Order and Section 8 of the Electronic Communications Act 2000
9. Part II of the Electronic Communications Act 2000 contains provisions to facilitate the use of electronic communications and electronic data storage. So far as relevant, section 8 of the Act gives the appropriate Minister ( Endnote 17 ) power to modify by order made by statutory instrument the provisions of any enactment in such manner as he may think fit for the purpose of authorising or facilitating the use of electronic communications or electronic storage (instead of other forms of communication or storage). ( Endnote 18 ) Two of the purposes for which such an order may be made are where legislative provisions¾
require or permit something to be done or evidenced in writing using a document, notice or instrument; ( Endnote 19 ) and
require or authorise something to be signed or sealed by a person, delivered as a deed or witnessed. ( Endnote 20 )
It is these two purposes that apply in relation to the draft Order.
10. By section 8(6)(a) of the Electronic Communications Act 2000, it is not possible to require that electronic communications or storage should be used. If it is decided in future to make electronic conveyancing compulsory, primary legislation will be needed to bring it about.
• Introduction
11. There are two main elements in the draft Order.
12. First, it inserts a new section 144A into the Land Registration Act 1925 so as to make provision for dispositions in electronic form of (i) registered land; or (ii) unregistered land to which the requirement of compulsory registration applies under section 123. ( Endnote 21 ) This new section makes provision as to how such electronic dispositions are to be made. It is intended to ensure¾
that dispositions in electronic form have precisely the same effect as those made on paper; and
the security of such dispositions, given that HM Land Registry guarantees registered dispositions. ( Endnote 22 )
There are certain additional amendments to the Land Registration Act 1925 ( Endnote 23 ) consequent upon the new section 144A.
13. Secondly, it inserts 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.
• Electronic Dispositions of Registered Land: How Electronic Dispositions will be Made an Example
14. Before giving a detailed technical explanation of the proposed new section 144A, it may be helpful to show how it is intended to operate by way of a simple example, namely a mortgage by an owner of registered land. This example is given because a legal mortgage is likely to be one of the first types of transaction that will be capable of being made in electronic form. It is explained how such a mortgage would be created first, in paper form under the present law and practice, and then secondly, in electronic form under the proposed section 144A of the Land Registration Act 1925. The example concerns Mrs Smith, the registered owner of 9, Acacia Avenue, who wishes to mortgage her land to secure a loan to her from the Bountiful Bank Plc. In each case she instructs Mrs Jones, a solicitor, to act for her. The mortgage is required by law to be made by deed ( Endnote 24 ) and should be registered. ( Endnote 25 )
15. Mrs Smith's mortgage: the present law and practice. At present, any terms of the mortgage which are open to negotiation ( Endnote 26 ) may be agreed by an exchange of paper drafts. The mortgage document will not be in prescribed form because there is none for a mortgage of registered land at present, ( Endnote 27 ) though in practice, many mortgage lenders employ standard forms of mortgage, copies of which are deposited at the Land Registry. Mrs Smith will execute the deed of mortgage herself (it is unlikely to be executed by Mrs Jones on her behalf and it does not need to be executed by the mortgagee. A document that is intended to be a deed has to make that fact clear on its face, but does not actually have to say that it takes effect as a deed. ( Endnote 28 ) Mrs Smith executes the deed by signing it in the presence of a witness, who attests her signature. ( Endnote 29 ) The deed is unlikely to be dated at the time when Mrs Smith executes it. She then returns the deed to Mrs Jones. Mrs Jones will then date the deed and deliver it, ( Endnote 30 ) when the transaction is completed and the loan made available to Mrs Smith. "Delivery" is a technical concept and it occurs when there are words or acts to indicate that the maker considers the deed to be binding on him or her. Delivery, in other words, fixes the date at which the deed takes effect. In favour of a purchaser ¾ a term which includes a mortgagee ( Endnote 31 ) ¾ a solicitor ( Endnote 32 ) is conclusively presumed to have authority to deliver a deed. ( Endnote 33 ) After the deed of mortgage has been executed, the Bank submits it to the Land Registry for registration by post.
16. Mrs Smith's mortgage: what will happen under section 144A. Mrs Smith's solicitor intends that the mortgage should be made in electronic form under section 144A of the Land Registration Act 1925. At least in the early days of electronic conveyancing, it is anticipated that Mrs Jones will obtain Mrs Smith's express authority to execute the mortgage on her behalf (rather than arranging for Mrs Smith to execute it herself). ( Endnote 34 ) The Bountiful Bank Plc has a standard form of charge that is in the form that will be prescribed for charges in electronic form by the Land Registration Rules 1925. ( Endnote 35 ) The document could be made available to Mrs Jones by the Bank via a secure Intranet and the terms of the draft could be agreed by her with the Bank, again using the Intranet. ( Endnote 36 ) Once that is done, the date and time at which the charge is to take effect is fixed by the parties and is inserted into the electronic document. Mrs Jones then executes the document as agent for Mrs Smith. ( Endnote 37 ) She does this by incorporating her own electronic signature into the document. ( Endnote 38 ) A certifying authority then certifies Mrs Jones's signature. ( Endnote 39 ) The loan is made available to Mrs Smith at the date and time when the charge is expressed to take effect. ( Endnote 40 ) Finally, the Bank transmits the charge in electronic form to HM Land Registry to be registered by the registrar. HM Land Registry intends to introduce at the earliest opportunity a system by which both the execution of the charge in electronic form and its registration will occur simultaneously. ( Endnote 41 ) However, this will require primary legislation.
17. It will be clear from these examples that there are striking legal differences between the mortgage instrument in paper and electronic forms. First, the electronic mortgage has to be in a prescribed form, the paper mortgage does not. Secondly, the paper instrument has to make it clear on its face that it is a deed. The document creating the electronic mortgage need say nothing. It is not a deed but is to be regarded for the purposes of any enactment as if it were. Thirdly, the mortgagor's electronic signature incorporated into the electronic mortgage document does not have to be witnessed, whereas her signature on the paper deed does. However, the electronic signature has to be certified as being the maker's by a certifying authority. ( Endnote 42 ) Fourthly, an electronic mortgage document does not have to be delivered, but must instead achieve the same objective by specifying the date and time when it is to have effect. Finally, transmission of the electronic mortgage document to the Land Registry will be in electronic form and not in paper form as presently happens with the paper deed.
18. The example of a mortgage given above concerns an instrument that must be made by deed. Although many dispositions of land require a deed, some only require signed writing and do not need to be witnessed or delivered. ( Endnote 43 ) Under the proposed section 144A, the requirements will in fact be the same for both types of instrument when made in electronic form. This is a point of some considerable significance, though it is one that had been anticipated by the Law Commission in 1998. ( Endnote 44 )
• The General Scheme of the New Section 144a of the Land Registration Act 1925
19. The new section 144A 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.
• The Applicability of the Section
20. For section 144A to apply, the following requirements must be met.
21. First, there must be a document made in electronic form that purports to effect a disposition. ( Endnote 45 )
22. Secondly, that disposition must either be of registered land or of unregistered land to which the requirement of compulsory registration applies under section 123. ( Endnote 46 ) For these purposes, "registered land" means "land or any estate or interest in land the title to which is registered" under the Land Registration Act 1925. ( Endnote 47 ) An assignment of an equitable interest in registered land would not, therefore, fall within the provision. The dispositions of unregistered land that are subject to the requirement of compulsory registration under section 123 of the Land Registration Act 1925, (as substituted by Land Registration Act 1997) can be loosely summarised as follows¾
most transfers of a freehold estate or of a leasehold estate with more than 21 years to run;
the grant of most leases for more than 21 years; and
certain legal mortgages of a freehold estate or a leasehold estate with more than 21 years to run, where the obligation is to register the estate charged.
23. Thirdly, the disposition must be of a kind for which the Lord Chancellor has prescribed a form of electronic disposition. ( Endnote 48 ) For these purposes, a "disposition" not only has the wide meaning given to it by the Law of Property Act 1925 ( Endnote 49 ) but also includes any variation of such a disposition. ( Endnote 50 ) The only restrictions on the types of disposition that can be effected electronically under section 144A are those mentioned above in paragraph 22. It is intended that, in due course, a form will be prescribed for all dispositions that could be made in electronic form under the section. These forms are likely to be similar to those that have been successfully employed in paper form since 1997 in relation to applications for registration. ( Endnote 51 )
24. Fourthly, a document in electronic form must satisfy the four conditions that are laid down in section 144A(3). These are explained below.
• The Four Conditions
25. First, the document must make provision for the time and date when it takes effect. ( Endnote 52 ) At present, as illustrated by the example given above, ( Endnote 53 ) it is the usual practice for conveyancing documents to be signed and otherwise executed by the parties to them, but not dated. The instrument takes effect at the time when the conveyancers are ready for it to do so and it is dated shortly in advance. Where the document is a deed, this will be signified when it is delivered. The concept of delivery will not apply to documents in electronic form. An electronic document will not in fact be a deed, but is merely to be regarded as one for the purposes of any enactment. ( Endnote 54 ) It follows, therefore, that the concept of delivery is inapplicable. ( Endnote 55 ) Clearly there has to be another means of fixing the operative moment of a document in electronic form. The requirement that an electronic document must make provision for the time and date when it takes effect ( Endnote 56 ) achieves that. It will also enable the continuation of the present practice of completing when all parties are ready to do so. The time and date are likely to be inserted shortly before the document is to take effect.
26. Secondly, the document must have the electronic signature of each person by whom it purports to be authenticated. ( Endnote 57 ) An electronic signature is not a "signature" in the ordinarily accepted sense. It is a means by which an electronic document can be authenticated as that of the party making it. ( Endnote 58 ) There are several ways in which this can be done. ( Endnote 59 ) In practice, the method that tends to be most widely employed commercially is "public" or "dual" "key cryptography". ( Endnote 60 ) In the barest outline, the way in which this will work in electronic conveyancing is as follows. One party to a disposition, typically a seller or mortgagor of registered land, will send to the other party, the buyer or mortgagee (and HM Land Registry), some text which the sender will have encrypted using a "private key". ( Endnote 61 ) The recipient will be able to decode the text by means of a "public key", which will normally be obtained from the certification authority. That authority will have supplied the sender with his or her private key and the public key will only decipher the encoded text if it was indeed encoded by that private key. The recipient can tell whether there has been any interference with the message by, say, a hacker.
27. Normally it will only be the disponor ( Endnote 62 ) whose electronic signature will be required. However, the section specifies that the electronic signature is needed "of each person by whom it purports to be authenticated". ( Endnote 63 ) This is because a disponee may sometimes need to be a party to the document. In particular, where there is a disposition of registered land and the disponees are to be joint proprietors, both the disponor and the disponees ( Endnote 64 ) will execute the transfer or application. ( Endnote 65 ) This is because the transfer form sets out the trusts upon which the land is to be held and, in this way, there will always be written evidence of the trust to satisfy the requirements of section 53(1)(b) of the Law of Property Act 1925. That provides that "a declaration of trust respecting any land or any interest therein must be manifested and proved by some writing signed by some person who is able to declare such trust...". ( Endnote 66 )
28. Thirdly, each electronic signature must be certified. Certification is the mechanism by which the "private key", mentioned above, ( Endnote 67 ) can be linked to a particular individual who signs a document electronically. ( Endnote 68 ) A private key will be issued to an individual by a certifying authority, which will have satisfied itself as to his or her identity, and will take appropriate steps to ensure that it is not employed by anyone else. The private key will commonly be incorporated in a smart card issued to the individual, which will also contain an electronic certificate from the certifying authority. The certificate will, therefore be sent electronically by the person signing the electronic document together with the document that he has just signed. Certification fulfils a similar function to the witnessing of the maker's signature that is required for a deed made in paper form. ( Endnote 69 )
29. Fourthly, there must be compliance with such other conditions as may be prescribed by rules. The purpose of this fourth requirement is to provide some flexibility in relation to the creation of dispositions in electronic form. It is possible that, with experience of electronic documents, it may be thought advisable to add further requirements, having regard (in particular) to the need for the security of transactions. For example, there are various levels of assurance that can be achieved in relation to the security of electronic signatures, and it might be appropriate to require compliance with a specified standard.
| Q6. Do you agree that the four conditions are appropriate? |
| Q7. Do you consider that the degree of security envisaged is appropriate? Examples of practice from other fields where e-commerce is already used would be most welcome. |
• Deemed Execution
30. Section 144A depends for its operation on section 144A(4). An electronic document that meets the requirements of section 144A(1) - (3) is to be regarded for the purposes of any enactment as a document which is (a) in writing and (b) is signed by each individual, and sealed by each corporation, ( Endnote 70 ) whose electronic signature it has.
• Deeds
31. Section 144A(5) is a similar deeming provision and is important for exactly the same reasons. Any document to which section 144A applies is to be regarded as a deed for the purposes of any enactment. One result of this should be mentioned. Where the electronic document is signed electronically by joint disponees or by their agent, the fact that the document is to be regarded as a deed will mean that it necessarily satisfies the requirements for a valid declaration of trust under section 53(1)(b) of the Law of Property Act 1925. These requirements have been explained in paragraph 27, above.
• Execution By Agents
32. It will of course be possible for an agent to sign a document in electronic form on behalf of his or her principal. In practice this will be important for at least two reasons. First, as we have explained, ( Endnote 71 ) it is likely that, at least in the initial stages of electronic conveyancing, solicitors, licensed conveyancers and other authorised practitioners will sign electronic documents on behalf of their clients. Secondly, it will provide a means by which all corporations can execute dispositions in electronic form. This is explained more fully below. ( Endnote 72 )
33. Section 144A(6) contains a further deeming provision, which relates to agents. It provides that where an electronic disposition under section 144A is authenticated by an individual as agent, it is to be regarded for the purposes of any enactment as authenticated by him under the written authority of his principal. There are certain provisions that require that a disposition can only be made by an agent on behalf of his principal if he is authorised to do so in writing. ( Endnote 73 ) The result of section 144A(6) is that where an electronic disposition had been made by an agent, it would not be possible to raise any question as to whether the agent did in fact have written authority to make it.
| Q8. Do you agree that agents should be given a deemed authority to authenticate electronic dispositions? We would welcome examples from other fields where e-commerce is already used. |
• Execution By Corporations
34. There are a number of ways in which a corporation (whether aggregate or sole) may execute a disposition of its land. We explain what these are and how it will be possible for a corporation to execute a document in electronic form under section 144A.
• Execution by Corporations which are Companies for the Purposes of the Companies Act 1985
35. The provisions of the Companies Act 1985 which govern the execution of documents apply to the following types of corporation¾
corporations that are companies for the purposes of the Companies Act 1985; ( Endnote 74 )
unregistered companies for the purposes of the Companies Act 1985; ( Endnote 75 ) and
foreign companies for the purposes of the Foreign Companies (Execution of Documents) Regulations 1994. ( Endnote 76 )
There are two relevant provisions of the Companies Act 1985 as to execution, namely section 36A(2) and (4).
36. Section 36A(2) provides that "a document is executed by a company by the affixing of its common seal". We can see no reason why a company itself should not have an electronic signature and this is recognised in the proposed section 144A(4)(b) of the Land Registration Act 1925. ( Endnote 77 ) It would no doubt be the case that that signature could only be incorporated into or otherwise logically associated with an electronic document at the direction of one or more authorised officers of the company. However, were that done, a document would then take effect as if it had been sealed by the company. ( Endnote 78 )
37. A company does not, however, have to have a common seal. ( Endnote 79 ) Where it does not, it must execute instruments in some other way. It may appoint an agent to act on its behalf, whether under a power of attorney or otherwise. ( Endnote 80 ) Alternatively, section 36A(4) of the Companies Act 1985 provides that "a document signed by a director and the secretary of a company, or by two directors of a company, and expressed (in whatever form) to be executed by the company has the same effect as if it were executed under the common seal of the company". Where a document is in electronic form and is signed electronically by the relevant company officers, section 36A(4) will apply. ( Endnote 81 )
38. Where an electronic document has apparently been executed in accordance with section 36A(4) of the Companies Act 1985, section 36A(6) of the Companies Act 1985 may be relevant. Section 36A(6) provides that "in favour of a purchaser ( Endnote 82 ) a document shall be deemed to have been duly executed by a company if it purports to be signed by a director and the secretary of the company, or by two directors of the company...". ( Endnote 83 ) The provisions of Part III of the Companies Act 1985 provide a significant measure of protection for those dealing with a company in respect of acts which it lacked the capacity to do under its constitution. ( Endnote 84 ) However, that protection is not complete. It does not apply in relation to¾
the unauthorised acts of individual directors;
the acts of directors acting otherwise than as a board of directors; ( Endnote 85 ) or
the acts of persons who have ceased to be office-holders but whose resignation had not yet been filed with the Registrar of Companies. ( Endnote 86 )
However, the presumption of due execution under section 36A(6) will apply in such cases to protect a purchaser. Section 144A(7) of the Land Registration Act 1925 puts this beyond doubt by providing that if section 36A(4) of the Companies Act 1985 ( Endnote 87 ) applies to a document because of section 144A(4) of the Land Registration Act 1925, section 36A(6) shall have effect in relation to the document with the substitution of "authenticated" for "signed". ( Endnote 88 ) This reflects the requirement contained in section 144A(3)(b) that an electronic document must have the electronic signature of the each person by whom it purports to be authenticated. ( Endnote 89 )
• Execution by Other Corporations
39. There are many significant categories of corporation ( Endnote 90 ) that cannot avail themselves of the provisions of the Companies Act 1985 which relate to the execution of documents. Some such corporations have express statutory powers that are similar to those found in the Companies Act 1985 in that they make provision for the signature of an instrument by specified persons. ( Endnote 91 ) Section 144A of the Land Registration Act 1925 will of course be capable of applying to electronic documents signed in accordance with such statutory provisions. However, other corporations have no statutory powers of execution and in relation to these the common law rules apply. At common law, any instrument that effects a disposition of property by a corporation must be executed under that corporation's seal. That requirement cannot be modified under the powers conferred by section 8 of the Electronic Communications Act 2000 because it is a common law and not a statutory rule. ( Endnote 92 ) That being so, some other method is required to enable such corporations to execute electronic documents under section 144A of the Land Registration Act 1925.
40. Under section 7 of the Powers of Attorney Act 1971, a donee of a power of attorney who is an individual may execute any instrument with the authority of the donor of the power which is as effective as if it were done in the name of that donor. It is expressly provided that this power can be exercised on behalf of any corporation sole or aggregate to make a conveyance of its land. ( Endnote 93 ) Corporations can, therefore, use this power to authorise the execution on their behalf of documents in electronic form. The attorney will execute the document using his own electronic signature and will then be taken to have signed it for the purposes of section 7 of the Powers of Attorney Act 1971 under section 144A(4)(b) of the Land Registration Act 1925. ( Endnote 94 )
• Execution by Agents on Behalf of a Corporation
41. In any event, any corporation can appoint an individual, such as a solicitor or corporate officer, to sign a document in electronic form as its agent. If the document purports to be authenticated by the agent in that representative capacity and has his electronic signature, the agent will be regarded for the purposes of any enactment as having signed under the written authority of his principal. ( Endnote 95 )
| Q9. Do you agree with the proposals relating to the making of electronic conveyancing documents by corporations? |
• Rights of Purchaser as to Execution
42. Under section 75(1) of the Law of Property Act 1925, ( Endnote 96 ) a purchaser is "entitled to have, at his own cost, the execution of the conveyance [to him] attested by some person appointed by him, who may, if he thinks fit, be his solicitor". ( Endnote 97 ) Attestation is not appropriate to forms of electronic disposition and the right to such attestation (which we suspect is little used in practice) is therefore abrogated for such dispositions by section 144A(9).
| Q10. Do you agree that attestation is inappropriate for electronic conveyancing documents? |
• Supplementary Provisions
43. There are two supplementary provisions. The first relates to the meaning of "document" and the second confers additional rule-making powers.
• The Meaning of "Document"
44. A new section 3(iia) is to be inserted into the Land Registration Act 1925 to put it beyond doubt that, for the purposes of that Act, "document" includes a document in electronic form. As a consequence, paragraph 5 of the Order repeals two existing provisions of the Land Registration Act 1925, which make specific provision to similar effect in relation to specific sections of that Act. ( Endnote 98 )
• Rule-Making Powers
45. Additional powers are conferred on the Lord Chancellor to make land registration rules under section 144(1) of the Land Registration Act 1925. ( Endnote 99 ) These powers are a necessary concomitant of the new section 144A.
46. First, there is a power to make rules for regulating the submission of documents in electronic form. ( Endnote 100 )It is plainly necessary to have a power to make rules as to the detailed mechanics of how such submissions should be made.
47. Secondly, there is a power to make rules ( Endnote 101 ) to provide for the making in electronic form of applications to register a notice, ( Endnote 102 ) lodge a caution ( Endnote 103 ) or enter a restriction. ( Endnote 104 ) These types of entry are employed to protect third party rights over registered land and, in the case of a restriction, to make it apparent from the register that there are limits of some kind on the powers of disposition of a registered owner. ( Endnote 105 ) Applications for such entries are common and it is obviously desirable that it should be possible to submit them to HM Land Registry in electronic form.
48. Thirdly, there is a power to make rules providing for the storage of documents in electronic form. ( Endnote 106 ) At present there is provision in the Land Registration Rules 1925 as to the storage of paper documents by HM Land Registry. ( Endnote 107 ) The rules made under this power would fulfil a similar function in relation to documents in electronic form.
• Stamp Duty
49. At present stamp duty on land transactions depends upon the existence of documents in paper form. ( Endnote 108 ) On 8 November, 2000, the Government announced that it would introduce legislation to extend the stamp duty regime to cover transfers of land that are made in electronic form. The Inland Revenue has set up a technical advisory group to help with the design of the new legislation and discussions are continuing on a range of administrative issues. Draft regulations and guidance will be published at the same time as the primary legislation.
50. Stamp duty and land law developments will be taken forward in parallel and this will include looking for opportunities to streamline administrative processes.
• Electronic Contracts for Dispositions of Registered or Unregistered Land: How Electronic Contracts will be Made - an Example
51. Section 2 of the Law of Property (Miscellaneous Provisions) Act 1989, lays down the formal requirements that are required for a contract for the sale or other disposition of land. ( Endnote 109 ) As we have explained above, ( Endnote 110 ) it is proposed to insert a new section 2A into the 1989 Act to make provision for such contracts to be made in electronic form.
52. We set out below a detailed commentary on the proposed section 2A of the Law of Property (Miscellaneous Provisions) Act 1989. ( Endnote 111 ) Once again, we give a simple example at the outset. This is to show how a contract for the sale or other disposition of an interest in land is made at present, and how it is envisaged that it will be made in electronic form. The example is that of a straightforward contract by Mr Davis, the owner of a house with a registered title, to sell it to Mrs Ford. Mr Davis's solicitor is Mr Edwards and Mrs Ford's is Mrs Green.
53. Mr Davis's contract: present law and practice. At present, the terms of a contract for the sale of land will usually be agreed by exchanges of paper drafts between Mr Edwards and Mrs Green. Usually, an ordinary contract for the sale of a house will incorporate a standard set of general conditions of sale. ( Endnote 112 ) The way in which a contract is normally made is by an exchange of the written contracts. When the terms of the contract are finalised, Mr Edwards and Mrs Green will each obtain their respective client's signature to a copy of the contract. The contract will not be dated until the parties are ready to exchange. What normally happens is that Mr Edwards and Mrs Green undertake over the telephone to hold the parts of the contract signed by their respective clients to the order of the other. This is done in accordance with a protocol for the telephonic exchange of contracts published by The Law Society. ( Endnote 113 ) On exchange, Mrs Ford will usually pay a deposit to Mr Davis's solicitor, Mr Edwards, to be held by him as stakeholder, pending completion of the sale. ( Endnote 114 ) Mrs Green could protect Mrs Ford's estate contract by applying to the Land Registry either to enter a notice or to lodge a caution against dealings in relation to Mr Davis's title. However, this is not usually done. Mrs Green will instead make a priority search of Mr Davis's title. This will have the effect of freezing the register of title for 30 working days and so prevent any subsequent entries during that period. ( Endnote 115 ) Mr Edwards will send Mrs Green the part of the contract signed by Mr Davis and Mrs Green will, in turn, send the part of the contract signed by Mrs Ford to Mr Edwards.
54. Mr Davis's contract: what will happen under section 2A. This time, Mr Edwards and Mrs Green decide that the contract will be made in electronic form under section 2A of the Law of Property (Miscellaneous) Provisions Act 1989. Once again, at least in the early days of electronic conveyancing, it is likely that the parties' solicitors ( Endnote 116 ) will sign the contract on behalf of their respective clients. To do this, Mr Edwards and Mrs Green will require the express authority of Mr Davis and Mrs Ford respectively. This is because a solicitor has no implied authority to conclude a contract on behalf of his or her client. ( Endnote 117 ) Drafts of the proposed contracts are likely to be exchanged using the secure Intranet. The proposed contract may incorporate by reference terms such as the general conditions of sale contained in the Standard Conditions of Sale. The electronic document will by its terms be a contract for the sale or other disposition of an interest in land. When the terms of the contract are finalised, Mr Edwards and Mrs Green will agree the time and date at which the contract is to take effect. ( Endnote 118 ) There is no "exchange of contracts". What happens instead is that there is just one version of the contract on the secure Intranet and each solicitor signs the contract on behalf of his or her client by incorporating his or her own electronic signature into that contract. A certifying authority will certify each of those signatures. The contract will then be frozen on the secure Intranet so that no further changes can be made to it. It will take effect at the appointed moment, unless prior to that time, one party informs the other that he or she is withdrawing from the transaction. Mrs Ford will pay any deposit to Mr Edwards as stakeholder, pending completion of the sale. Any application to enter a notice on the register of Mr Davis's title will be sent in electronic form to HM Land Registry. ( Endnote 119 ) An electronic copy of the contract may be sent with it to be stored by the Registry for a specific period if the parties so wish. Although this will not initially occur, it is intended that, in due course, the application to register a notice will of itself trigger automatic priority protection and will be made simultaneously with the contract. ( Endnote 120 )
55. The main differences between the present practice and what is to happen under the draft Order, is that there will be no exchange of contracts. A contract will be made on the secure Intranet and each party (or their respective agents) will sign it electronically. The contract will be made at the time and date that has been agreed between the parties ¾ though that agreement may in fact occur shortly before the contract is concluded.
• Electronic Contracts: the Detailed Requirements
56. The format adopted by the new section 2A of the Law of Property (Miscellaneous Provisions) Act 1989 is similar to that of the new section 144A of the Land Registration Act 1925. Its objective is to ensure that, where a contract is required to be made in writing under section 2 of the 1989 Act, it can instead be made in electronic form.
• The Applicability of the Section
57. For section 2A to apply, the following requirements must be met.
58. First, there must be a document in electronic form and it must purport to be a contract to which section 2 of the Law of Property (Miscellaneous Provisions) Act 1989 applies, ( Endnote 121 ) that is, a contract for the sale or other disposition of an interest in land. It applies to such contracts whether the land is registered or unregistered and whether or not the contract when completed will trigger compulsory registration under section 123 of the Land Registration Act 1925. ( Endnote 122 )
59. Secondly, the document must meet the four conditions laid down in section 2A(2). ( Endnote 123 )
• The Four Conditions
60. First, all the terms which the parties have expressly agreed are incorporated in the document (whether by being set out in it or by reference to some other document). ( Endnote 124 ) This reflects the requirements applicable to contracts made in paper form under section 2(1) and (2) of the Law of Property (Miscellaneous Provisions) Act 1989. ( Endnote 125 )
61. Secondly, the document must make provision for the time and date when the contract is to take effect. ( Endnote 126 ) As we have explained in the example given above, ( Endnote 127 ) the fixing of this date and time will operate in a similar way to the exchanging of contracts under the present law. We anticipate that it will commonly be agreed shortly before the contract is actually made.
62. Thirdly, the document must have the electronic signature of each person by whom it purports to be authenticated. ( Endnote 128 ) Electronic signatures have been explained above. ( Endnote 129 )
63. Fourthly, each signature must be certified. The certification of electronic signatures has been explained above. ( Endnote 130 )
• Deemed Effect
64. Section 2A(3) follows the model of section 144A(4) of the Land Registration Act 1925, ( Endnote 131 ) and is a deeming provision. Where a document in electronic form meets the requirements of section 2A(1) and (2) of the Law of Property (Miscellaneous Provisions) Act 1989, it is to be regarded for the purposes of both section 2 of the 1989 Act and any other enactment ( Endnote 132 ) as a document which is (a) in writing and (b) is signed by each individual, and sealed by each corporation, who according to the terms of the document is a party to it.
| Q10. Do you consider that the procedure described for making electronic contracts is satisfactory? |
• What The Draft Order Does Not Do
65. The function of the draft Order is both specific and limited. It is intended to facilitate the making of dispositions of registered land and contracts for the sale or other disposition of land (whether registered or unregistered) in electronic form. It leaves open the possibility of future Orders under section 8 of the Electronic Communications Act 2000 which might (for example) make provision for electronic documents to have effect as deeds (other than for conveyancing purposes), dispositions of equitable interests ( Endnote 133 ) or wills. ( Endnote 134 ) It does not address other difficult questions that have been raised with those preparing the draft Order, such as the formal requirements for on-line auctions of land, ( Endnote 135 ) where it was not obvious that the problem could be solved under the powers conferred by section 8.
| Q11. Do you think that there are any other matters relating to electronic conveyancing which should be authorised or facilitated by a section 8 order or other legislation? |
The purpose of publishing this paper is to obtain your views on the proposals described. These are listed below. We have included certain specific questions in the narrative. Replies to these would be most welcome. Readers should not however feel constrained to answering only these questions. Comments on any aspects of the proposals will be welcome. Readers are also invited to answer the questions relating to the impact of the proposals in Appendix III.
Q1. Do you agree that electronic conveyancing documents should be a permissible alternative to paper documents? (part 1, para 7)
Q2. Do you agree that electronic signatures will be a satisfactory means of ensuring trust in electronic conveyancing documents? (part 1, para 8)
Q3. Do you agree with the assessment of the effect of electronic conveyancing documents set out in the regulatory impact assessment? (part 1, para 17)
Q4. Do you think that the voluntary system of electronic conveyancing will be used, and if so, how long will it take to become the accepted method of residential or commercial conveyancing? (part 1, para 17)
Q5. Do you agree that electronic conveyancing of unregistered land should be restricted to dispositions of unregistered land which trigger compulsory first registration of title and contracts to make a disposition of such land? (part 2, para 8)
Q6. Do you agree that the four conditions are appropriate? (part 2, para 29)
Q7. Do you consider that the degree of security envisaged is appropriate? Examples of practice from other fields where e-commerce is already used would be most welcome. (part 2, para 29)
Q8. Do you agree that agents should be given a deemed authority to authenticate electronic dispositions? We would welcome examples from other fields where e-commerce is already used. (part 2, para 33)
Q9.Do you agree with the proposals relating to the making of electronic conveyancing documents by corporations? (part 2, para 41)
Q10. Do you agree that attestation is inappropriate for electronic conveyancing documents? (part 2, para 42)
Q11. Do you consider that the procedure described for making electronic contracts is satisfactory? (part 2, para 64)
Q12. Do you think that there are any other matters relating to electronic conveyancing which should be authorised or facilitated by a section 8 order or other legislation? (part 2, para 65)
Order laid before Parliament under section 9(4) of the Electronic Communications Act 2000 for approval by resolution of each House of Parliament.
| Made - - Laid before Parliament Coming into force |
The Lord Chancellor, in exercise of the powers conferred on him by sections 8 and 9 of the Electronic Communications Act 2000 (a), makes the following Order, a draft of which has, in accordance with section 9(4), been laid before and approved by resolution of each House of Parliament:
Citation and commencement
This Order may be cited as the Law of Property (Electronic Communications) Order 2001 and shall come into force on
Dealings with the Land Registry in electronic form
In section 144(1) of the Land Registration Act 1925 (b), after
paragraph (xxx) insert-
"(xxxa) For regulating the submission to the registrar of documents
made in electronic form;
(xxxb) For providing for the making in electronic form of applications
to register a notice, lodge a caution or enter a restriction; and
(xxxc) For providing for the storage of documents made in electronic
form.".
(a) 2000 c.7.
(b) 1925 c.21.
Electronic dispositions
In the Land Registration Act 1925, after section 144 insert-
"Electronic conveyancing
144A.-(1) This section applies to a document in electronic form where-
(2) A disposition falls within this subsection if it is-
(3) The conditions referred to above are that-
(4) A document to which this section applies is to be regarded for the purposes of any enactment as-
(5) A document to which this section applies is to be regarded for the purposes of any enactment as a deed.
(6) If a document to which this section applies is authenticated by an individual as agent, it is to be regarded for the purposes of any enactment as authenticated by him under the written authority of his principal.
(7) If section 36A(4) of the Companies Act 1985 (a) applies to a document because of subsection (4) above, section 36A(6) of the Companies Act 1985 shall have effect in relation to the document with the substitution of "authenticated" for "signed".
(8) In this section-
(a) 1985 c.6. Section 36A of the Companies Act 1985 was inserted
by the Companies Act 1989 (c.40), section 130 (2).
(b) 1925 c.20.
(9) The right conferred by section 75 of the Law of Property Act 1925 (purchaser's right to have the execution of a conveyance attested) does not apply to a document to which this section applies.".
Electronic contracts for dispositions of registered or unregistered land
In the Law of Property (Miscellaneous Provisions) Act 1989(a), after section 2 insert-
"Electronic contracts
2A.-(1) This section applies to a document in electronic form where-
(2) Those conditions are that-
(3) A document to which this section applies is to be regarded for the purposes of section 2 above and any other enactment as-
(4) If section 36A(4) of the Companies Act 1985 applies to a document because of subsection (3) above, section 36A(6) of the Companies Act 1985 shall have effect in relation to the document with the substitution of "authenticated" for "signed".
(5) In this section, references to an electronic signature and to the certification of such a signature are to be read in accordance with section 7(2) and (3) of the Electronic Communications Act 2000.".
(a) 1989 c. 34.
Miscellaneous
In section 3 of the Land Registration Act 1925, after paragraph (ii) insert-
Sections 112(3) (a) and 113A(2) (b) of that Act are repealed.
(a) Section 112 of the Land Registration Act 1925 was substituted
for sections 112 to 112C by the Land Registration Act 1988 (c.3), section
1(1).
(b) Section 113A of the Land Registration Act 1925 was inserted by the
Administration of Justice Act 1982 (c.53), section 66(2).
Explanatory Note
(This note is not part of the Order)
This Order provides for certain dispositions of land to be carried out electronically instead of in writing or by deed. The main provisions of this Order are set out below.
Article 2 extends the Lord Chancellor's rule making powers under section 144 of the Land Registration Act 1925 to allow for the making of Rules to cover dealings with the Land Registry in electronic form.
Article 3 inserts a new section 144A into the Land Registration Act 1925 to provide for electronic conveyancing. The main effect of this provision is that where a document is covered by this section by virtue of subsection (1), subsections (4) and (5) will apply. Subsection (4) provides that the electronic document will be regarded for the purposes of any enactment as being in writing and signed by each individual and sealed by each corporation, whose electronic signature it has. Subsection (5) provides that the electronic document will be regarded for the purposes of any enactment as a deed.
Article 4 inserts a new section 2A into the Law of Property (Miscellaneous Provisions) Act 1989 to provide for electronic contracts for the creation or other disposition of interests in land. The main effect of this provision is that where a contract is covered by section 2A by virtue of subsection (1), subsection (3) will apply so that the electronic contract will be regarded for the purposes of any enactment as being in writing and signed by each individual, and sealed by each corporation, whose electronic signature it has.
Articles 5 and 6 make consequential amendments.
Electronic Communications
Act 2000 ss 7 and 8
Law of Property (Miscellaneous Provisions) Act 1989 ss1 and 2
Law of Property Act 1925 ss 52, 53 and 75
Land Registration Act 1925
s 144 (Part)
Powers of Attorney Act 1971 s 7
Companies Act 1985 s 36A
Electronic Communications Act 2000
SECTION 7 - ELECTRONIC SIGNATURES AND RELATED CERTIFICATES
(1) In any legal proceedings-
(b) the certification by any person of such a signature,
shall each be admissible in evidence in relation to any question as to the authenticity of the communication or data or as to the integrity of the communication or data.
(2) For the purposes of this section an electronic signature is so much of anything in electronic form as-
(b) purports to be so incorporated or associated for the purpose of being used in establishing the authenticity of the communication or data, the integrity of the communication or data, or both.
(3) For the purposes of this section an electronic signature incorporated into or associated with a particular electronic communication or particular electronic data is certified by any person if that person (whether before or after the making of the communication) has made a statement confirming that-
(b) a means of producing, communicating or verifying the signature, or
(c) a procedure applied to the signature,
is (either alone or in combination with other factors) a valid means of establishing the authenticity of the communication or data, the integrity of the communication or data, or both.
SECTION 8 - POWER TO MODIFY LEGISLATION
(1) Subject to subsection (3), the appropriate Minister may by order made by statutory instrument modify the provisions of-
(b) any scheme, licence, authorisation or approval issued, granted or given by or under any enactment or subordinate legislation,
in such manner as he may think fit for the purpose of authorising or facilitating the use of electronic communications or electronic storage (instead of other forms of communication or storage) for any purpose mentioned in subsection (2).
(2) Those purposes are-
(b) the doing of anything which under any such provisions is required to be or may be done by post or other specified means of delivery;
(c) the doing of anything which under any such provisions is required to be or may be authorised by a person's signature or seal, or is required to be delivered as a deed or witnessed;
(d) the making of any statement or declaration which under any such provisions is required to be made under oath or to be contained in a statutory declaration;
(e) the keeping, maintenance or preservation, for the purposes or in pursuance of any such provisions, of any account, record, notice, instrument or other document;
(f) the provision, production or publication under any such provisions of any information or other matter;
(g) the making of any payment that is required to be or may be made under any such provisions.
(3) The appropriate Minister shall not make an order under this section authorising the use of electronic communications or electronic storage for any purpose, unless he considers that the authorisation is such that the extent (if any) to which records of things done for that purpose will be available will be no less satisfactory in cases where use is made of electronic communications or electronic storage than in other cases.
(4) Without prejudice to the generality of subsection (1), the power to make an order under this section shall include power to make an order containing any of the following provisions-
(b) provision imposing conditions subject to which the use of electronic communications or electronic storage is so authorised;
(c) provision, in relation to cases in which any such conditions are not satisfied, for treating anything for the purposes of which the use of such communications or storage is so authorised as not having been done;
(d) provision, in connection with anything so authorised, for a person to be able to refuse to accept receipt of something in electronic form except in such circumstances as may be specified in or determined under the order;
(e) provision, in connection with any use of electronic communications so authorised, for intermediaries to be used, or to be capable of being used, for the transmission of any data or for establishing the authenticity or integrity of any data;
(f) provision, in connection with any use of electronic storage so authorised, for persons satisfying such conditions as may be specified in or determined under the regulations to carry out functions in relation to the storage;
(g) provision, in relation to cases in which the use of electronic communications or electronic storage is so authorised, for the determination of any of the matters mentioned in subsection (5), or as to the manner in which they may be proved in legal proceedings;
(h) provision, in relation to cases in which fees or charges are or may be imposed in connection with anything for the purposes of which the use of electronic communications or electronic storage is so authorised, for different fees or charges to apply where use is made of such communications or storage;
(i) provision, in relation to any criminal or other liabilities that may arise (in respect of the making of false or misleading statements or otherwise) in connection with anything for the purposes of which the use of electronic communications or electronic storage is so authorised, for corresponding liabilities to arise in corresponding circumstances where use is made of such communications or storage;
(j) provision requiring persons to prepare and keep records in connection with any use of electronic communications or electronic storage which is so authorised;
(k) provision requiring the production of the contents of any records kept in accordance with an order under this section;
(l) provision for a requirement imposed by virtue of paragraph (j) or (k) to be enforceable at the suit or instance of such person as may be specified in or determined in accordance with the order;
(m) any such provision, in relation to electronic communications or electronic storage the use of which is authorised otherwise than by an order under this section, as corresponds to any provision falling within any of the preceding paragraphs that may be made where it is such an order that authorises the use of the communications or storage.
(5) The matters referred to in subsection (4)(g) are-
(b) the time at which, or date on which, a thing done using any such communication or storage was done;
(c) the place where a thing done using such communication or storage was done;
(d) the person by whom such a thing was done; and
(e) the contents, authenticity or integrity of any electronic data.
(6) An order under this section-
(b) may make provision that a period of notice specified in the order must expire before effect is given to a variation or withdrawal of an election or other decision which-
(ii) is an election or decision to make use of electronic communications or electronic storage
(8) In this section references to doing anything under the provisions of any enactment include references to doing it under the provisions of any subordinate legislation the power to make which is conferred by that enactment.
Law Of Property (Miscellaneous Provisions) Act 1989
SECTION 1 - DEEDS AND THEIR EXECUTION
(1) Any rule of law which-
(b) requires a seal for the valid execution of an instrument as a deed by an individual; or
(c) requires authority by one person to another to deliver an instrument as a deed on his behalf to be given by deed,
is abolished.
(2) An instrument shall not be a deed unless-
(b) it is validly executed as a deed by that person or, as the case may be, one or more of those parties.
(3) An instrument is validiy executed as a deed by an individual if, and only if-
(ii) at his direction and in his presence and the presence of two witnesses who each attest the signature; and
(b) it is delivered as a deed by him or a person authorised to do so on his behalf.
(4) In subsections (2) and (3) above "sign", in relation to an instrument, includes making one's mark on the instrument and "signature" is to be construed accordingly.
(5) Where a solicitor, duly certificated notary public or licensed conveyancer, or an agent or employee of a solicitor, duly certificated notary public or licensed conveyancer, in the course of or in connection with a transaction involving the disposition or creation of an interest in land, purports to deliver an instrument as a deed on behalf of a party to the instrument, it shall be conclusively presumed in favour of a purchaser that he is authorised so to deliver the instrument.
(6) In subsection (5) above-
"duly certificated notary public" has the same meaning as it has in the Solicitors Act 1974 by virtue of section 87of that Act; and
"interest in land" means any estate, interest or charge in or over land.
(7) Where an instrument under seal that constitutes a deed is required for the purposes of an Act passed before this section comes into force, this section shall have effect as to signing, sealing or delivery of an instrument by an individual in place of any provision of that Act as to signing, sealing or delivery.
(8) The enactments mentioned in Schedule 1 to this Act (which in consequence of this section require amendments other than those provided by subsection (7) above) shall have effect with the amendments specified in that Schedule.
(9) Nothing in subsection (1)(b),(2),(3),(7) or (8) above applies in relation to deeds required or authorised to be made under-
(b) the seal of the Duchy of Lancaster; or
(c) the seal of the Duchy of Cornwall.
(10) The references in this section to the execution of a deed by an individual do not include execution by a corporation sole and the reference in subsection (7) above to signing, sealing or delivery by an individual does not include signing, sealing or delivery by such a corporation.
(11) Nothing in this section applies in relation to instruments delivered as deeds before this section comes into force.
SECTION 2 - CONTRACTS FOR SALE ETC OF LAND TO BE MADE BY SIGNED WRITING
(1) A contract for the sale or other disposition of an interest in land can only be made in writing and only by incorporating all the terms which the parties have expressly agreed in one document or, where contracts are exchanged, in each.
(2) The terms may be incorporated in a document either by being set out in it or by reference to some other document.
(3) The document incorporating the terms or, where contracts are exchanged, one of the documents incorporating them (but not necessarily the same one) must be signed by or on behalf of each party to the contract.
(4) Where a contract for the sale or other disposition of an interest in land satisfies the conditions of this section by reason only of the rectification of one or more documents in pursuance of an order of a court, the contract shall come into being, or be deemed to have come into being, at such time as may be specified in the order.
(5) This section does not apply in relation to-
(b) a contract made in the course of a public auction; or
(c) a contract regulated under the Financial Services Act 1986;
and nothing in this section affects the creation or operation of resulting, implied or constructive trusts.
(6) In this section-
"interest in land" means any estate, interest or charge in or over land or...
(7) Nothing in this section shall apply in relation to contracts made before this section comes into force.
(8) Section 40 of the Law of Property Act 1925 (which is superseded by this section) shall cease to have effect.
SECTION 52 - CONVEYANCES TO BE BY DEED
(1) All conveyances of land or of any interest therein are void for the purpose of conveying or creating a legal estate unless made by deed.
(2) This section does not apply to-
(b) disclaimers made in accordance with sections 178 to 180 or sections 315 to 319 of the Insolvency Act 1986 or not required to be evidenced in writing;
(c) surrenders by operation of law, including surrenders which may, by law, be effected without writing;
(d) leases or tenancies or other assurances not required by law to be made in writing;
(e) receipts other than those falling within section 115 below;
(f) vesting orders of the court or other competent authority;
(g) conveyances taking effect by operation of law.
SECTION 53 - INSTRUMENTS REQUIRED TO BE IN WRITING
(1) Subject to the provisions hereinafter contained with respect to the creation of interests in land by parol-
(b) a declaration of trust respecting any land or any interest therein must be manifested and proved by some writing signed by some person who is able to declare such trust or by his will;
(c) a disposition of an equitable interest or trust subsisting at the time of the disposition, must be in writing signed by the person disposing of the same, or by his agent thereunto lawfully authorised in writing or by will.
(2) This section does not affect the creation or operation of resulting, implied or constructive trusts.
SECTION 75 - RIGHTS OF PURCHASER AS TO EXECUTION
(1) On a sale, the purchaser shall not be entitled to require that the conveyance to him be executed in his presence, or in that of his solicitor, as such; but shall be entitled to have, at his own cost, the execution of the conveyance attested by some person appointed by him, who may, if he thinks fit, be his solicitor.
(2) This section applies to sales made after the thirty-first day of December, eighteen hundred and eighty-one.
EXTRACT FROM SECTION 144 - POWER TO MAKE GENERAL RULES
(1) Subject to the provisions of this Act, the Lord Chancellor may, with the advice and assistance of a judge of the Chancery Division of the High Court nominated by the Lord Chancellor, the Chief Land Registrar, and three other persons, one to be chosen by the General Council of the Bar, one by the Minister of Agriculture, Fisheries and Food, and one by the Council of the Law Society (which body of persons are in this Act referred to as the Rule Committee), make general rules for all or any of the following purposes:- ...
(2) Any rules made in pursuance of this section shall be of the same force as if enacted in this Act.
(3) Any rules made in pursuance of this section shall be laid before both Houses of Parliament within three weeks after they are made, if Parliament be then sitting, and if Parliament be not then sitting, within three weeks after the beginning of the then next session of Parliament.
SECTION 7 - EXECUTION OF INSTRUMENTS ETC BY DONEE OF POWER OF ATTORNEY
(1) If the donee of a power of attorney is an individual, he may, if he thinks fit-
(b) do any other thing in his own name,
by the authority of the donor of the power; and any document executed or thing done in that manner shall be as effective as if executed or done by the donee with the signature, or, as the case may be, in the name, of the donor of the power.
(2) For the avoidance of doubt it is hereby declared that an instrument to which subsection (3) of section 74 of the Law of Property Act 1925 applies may be executed either as provided in that subsection or as provided in this section.
(3) This section is without prejudice to any statutory direction requiring an instrument to be executed in the name of an estate owner within the meaning of the said Act of 1925.
(4) This section applies whenever the power of attorney was created.
SECTION 36A EXECUTION OF DOCUMENTS: ENGLAND AND WALES
(1) Under the law of England and Wales the following provisions have effect with respect to the execution of documents by a company.
(2) A document is executed by a company by the affixing of its common seal.
(3) A company need not have a common seal, however, and the following subsections apply whether it does or not.
(4) A document signed by a director and the secretary of a company, or by two directors of a company, and expressed (in whatever form of words) to be executed by the company has the same effect as if executed under the common seal of the company.
(5) A document executed by a company which makes it clear on its face that it is intended by the person or persons making it to be a deed has effect, upon delivery, as a deed; and it shall be presumed, unless a contrary intention is proved, to be delivered upon its being so executed.
(6) In favour of a purchaser a document shall be deemed to have been duly executed by a company if it purports to be signed by a director and the secretary of the company, or by two directors of the company,