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GUEST OPINION: The End Of Land Registry As We Know It?

Lisa Bevan

Taylor Wessing

1 May 2014

While the subject of the Land Registry, a state-run organisation keeping track of who owns what in England and Wales, is not likely to immediately set pulses racing in wealth management, the author of the following article argues that its future ownership matters. Possession, after all, is nine-tenths of the law, and establishing clear property rights, and avoiding fraud, is vital. The article is by Lisa Bevan, senior associate in the private client team at , the law firm. While this publication does not necessarily share all the views expressed here, it is very pleased to share these insights and invites readers to respond.

The Land Registry is perhaps unlikely to figure too prominently on the list of preoccupations of the average ultra-high net worth individual. It tends to be viewed, if at all, as something which is simply "there", to record, as it has since 1862, the ownership of land in England and Wales.

However the recent consultation by the Department for Business, Innovation and Skills, which proposed the semi-privatisation of The Land Registry, has caused ripples in certain quarters. So what, if any, are the potential implications of these proposals for UHNW individuals and their advisors?

The proposed changes

The consultation document proposes the creation of a new privately-owned "service company" which will be responsible for the "service delivery" functions of The Land Registry, including processes relating to land registration itself. For the moment, the plan is to have a separate Office of the Chief Land Registrar, which will be retained in government and will have a regulatory and fee-setting function only.

The government believes that these measures will enable the business of land registration to become more "delivery-focused", allow greater operational flexibility, and will assist The Land Registry to achieve its ambition of becoming a world leader in digitising land and property services. On the face of it, this all sounds very laudable. An eight-week consultation closed last month and the formal response to the consultation is awaited

The main issue raised by those opposing the plans is that The Land Registry already enjoys an exceptionally high level of customer satisfaction (98 per cent) and is generally considered to be accessible, efficient and innovative. Last year it achieved a surplus of £98.8 million, so any suggestion that The Land Registry needs private sector financial rigour injected into it is somewhat far off the mark. There seems no obvious reason why the government's central focus (as articulated in the consultation document) of digitising land registration services could not be achieved under the current arrangements.

Questions are also being asked as to the future of the State Backed Guarantee. With fraud becoming an ever-increasing problem in the world of buying and selling property, it is vital that The Land Registry offers this guarantee in relation to the accuracy of the register, and compensation for loss suffered as a result of errors in the register or loss arising from fraudulent transactions. The State Backed Guarantee has always been considered a cornerstone of our land registration system. The consultation document states clearly that the indemnity arrangements will continue to be state-backed under the new regime. However concern has been expressed that, in the long term, the current guarantee arrangements could become eroded where claims are in the hands of a private company with a vested interest in keeping successful claims to a minimum.

The perception of commercial interests impacting on the guarantee would surely undermine public confidence in the integrity of The Land Registry. However, the current promise that the State Backed Guarantee will be kept, should ease these concerns somewhat. .

Another concern is how, if the register becomes privately owned, will the data of individuals be handled? The register has been public for some time. A title register can be downloaded from The Land Registry's website for £4, and will enable the user to, among other things, establish who owns the property and what price was paid for it. However, not all Land Registry data is published.

Access to the Land Registry's database specifying who owns every piece of land in England and Wales is likely to be fairly sought after.. One of the consultation questions asks whether those providing feedback would feel comfortable with non-civil servants processing this information. Whereas in the past, UHNW individuals may have acquired their property through corporate vehicles, thereby ensuring anonymity, changes to the tax treatment of these holding structures for residential property has meant that more individuals are now buying in their personal names. Is the introduction of a private company going to make it more likely that ownership details of high profile individuals might be leaked?

The consultation document states that the data protection procedures that currently apply would apply to any new service company, to ensure that personal information is not mishandled, but it does not elaborate on how this will be achieved in practice. It also refers to customers being given "greater access to a richer data set" but again does not elaborate on what this might look like.

Much is likely to depend on the nature of the company which takes on the register. It seems likely that this will be a large, data-focused company, possibly with its own commercial interests in the property market; so there are a few unknowns in this area for the moment.

At present the BIS proposals are just that, but the consultation itself does raise the question as to whether a private company can administer the land registration system securely, free from conflict of interest and with the integrity which the public expects.

There appears to be no reason why a privately-owned entity should be less able to guard against fraudulent activity than a non-privatised entity. Whether it can retain public confidence in its neutrality is a different question but those who process The Land Registry information will still be individuals, who can conduct themselves as they wish.

It is probably fair to say that the reluctance for many to move away from the status quo is driven by the fact that the current system is so successful, and so the risks of replacing it with something else seem too great, particularly where this is perceived as a first step towards full privatisation.