Registers of Scotland Digital Transformation: Next Steps

Part 1: New digital services in the Keeper's registers

Moving towards a digital conveyancing world

1.1 Conveyancing and the registration of deeds have, for centuries, been paper-based processes. However, that world is rapidly changing. Increasingly, the interactions between those in the conveyancing marketplace are through digital channels. Engagement with private search companies, accessing the Council of Mortgage Lenders Handbook, the submission of returns to Revenue Scotland and day to day engagement between professionals are routinely carried out digitally. Recognising the shift from paper, the Law Society has recently partnered with the ESPC (Edinburgh Solicitors Property Centre) and BDP Estate Agency Software to deliver a one-stop-shop digital platform, known as Altis, for property solicitors. In the words of the Law Society, the system " aims to speed up the Scottish conveyancing process as well as provide a secure and transparent environment to store all the information relating to clients and their properties." This follows on from the introduction of the new smartcard solicitor practice certificate that contains a secure digital signature. The move to a digital world is also true for the house buyer. The initial view of a property is often now virtual, via an online property schedule; interactions between solicitor and client are frequently by email and text; and borrowers routinely source and apply for mortgages on-line.

1.2 The use of digital channels will grow only if they have the trust of the businesses and citizens who want to use them. Digital channels can provide convenience, speed, security and control and they can lessen risk and reduce cost. In short, digital growth is as inevitable for the conveyancing sector as it is for society as a whole. The challenge is to ensure new digital channels work for all players in the marketplace.

Digital registration: the journey so far

1.3 We have already made considerable progress towards registration taking place in a digital world:

ARTL : our first foray into digital registration came through the launch in 2007-2008 of an online registration system, known as Automated Registration of Title to Land ( ARTL) ^[1] . Notwithstanding that some 115,000 applications had been registered through ARTL by 31 October 2016, ARTL, in both legal and practical terms, only allows for a limited range of transactions to be registered. This limitation was recognised when it was launched and it was never intended to be anything other than a stepping stone in the transition to more general digital registration.

Digital signatures: the next step came with the work of the Scottish Law Commission in its review of land registration. The SLC's proposals were enacted by the 2012 Act and the 'etc.' in its title references the fact that the Act goes beyond the mere mechanics of land registration and makes provision for enabling the wider development of electronic registration and conveyancing (see Annex A). The 2012 Act amended and restructured the Requirements of Writing (Scotland) Act 1995, retaining the principle that certain deeds and documents require to be in writing and signed but reconceptualising what is meant by writing and signing. The position now is that deeds and documents can meet the requirements of the 1995 Act by being 'traditional documents' (paper deeds with wet signatures) or 'digital documents' (digital deeds with digital signatures).

Notifications and Land Certificates some immediate digital changes to the registration process were introduced by the 2012 Act. Paper letters of acknowledgment and the, often bulky, paper Land and Charge Certificates, which had been in use since the inception of land registration in 1981, were abolished. In their place, a system of email notification for both acknowledging receipt and for confirming registration was introduced; the latter with a digital copy of the current entry for the property on the Land Register. As well as being more efficient and sustainable, it allows solicitors and lenders readily to store and share the information.

Advance Notices: the 2012 Act also introduced a new form of notice in the land registers relating to land, the advance notice. The advance notice protects a deed that is about to be registered in the land register for a period of 35 days against competing deeds and the risk that the granter may be inhibited. Such notices are normally created digitally through the keeper's advance notice system and those against a property registered in the land register are submitted digitally through that channel. Notices affecting part of a registered property (typically new build properties from a development site) or a property not yet on the land register or where the applicant has no computer facilities with access to the internet or is the granter of the deed are printed and submitted in paper form. As of 31 October 2016, some 233,000 advance notices had been submitted and processed digitally.

A case study of digital registration development: our digital discharge service

1.4 We process over 100,000 discharges each year in the land register. Re-mortgaging, house sales and borrowers coming to the end of their mortgage terms all combine to make this the most common conveyancing deed we deal with, amounting to some 30% of registrations. Over the course of 2016, working in collaboration with the Law Society, the Council of Mortgage Lenders ( CML) and individual firms and lenders, we have developed a new digital discharge service.

1.5 The new discharge service is not a like-for-like replacement of our ARTL system whereby discharges can be registered on-line (for ultimately ARTL simply replicates, in a digital fashion, the paper process). Rather, it is a digital solution based on a different set of interactions between the solicitor and lender. In essence, the new system sees the solicitor notify the lender of the need for a discharge, the lender controls the discharge process and submits the discharge to RoS and we in turn notify parties of the removal of the security deed from the land register.

1.6 There are several aspects of the new discharge service worth highlighting as the same approach will be applied, in whole or in part, to further digital solutions:

• the application form has been greatly streamlined. Gone are the standard yes/no questions;
• the application form requires no separate digital signature. The service is designed in such a way that the application of the signature authenticating the deed is sufficient;
• the form of the deed of discharge is standard. The system uses the template approved by the Law Society;
• key parts of the deed (such as the lender) are auto-populated from land register data, ensuring accuracy and speed; and
• the system will not permit an incomplete application containing a deed of discharge to be submitted, so the scope for rejection is very substantially reduced.

1.7 The new digital discharge system will be in live use with some customers by the end of 2016 and rolled out across Scotland during 2017.

Next steps towards digital registration: presumption in favour of digital

1.8 The objective of the 2012 Act is, ultimately, to open up the land register to digital deeds duly authenticated by way of a digital signature. In line with the Scottish Government Digital First agenda, our view is that the presumption should be in favour of a digital channel. For that reason, we propose that digital services, both current and future, should follow the precedent set by the advance notice system and build in a presumption that they will be used.

1.9 We favour this approach for the following reasons:

• Scotland is a digitally-enabled economy; the enablers of digital adoption - such as the availability of broadband, secure internet channels, supporting legal framework - are in place;
• the conveyancing marketplace is increasingly digital: digital channels are a natural extension to this;
• digital channels reduce cost, time and risk and support compliance and best practice within the legal community; and
• without a presumption in favour of digital, the pace of adoption is set by the party least willing to change. For the most common deed types - discharges, securities and dispositions - there will generally be three or four parties involved. For instance with a disposition, there will be the buyer and their solicitor and the seller and their solicitor. If the desire was to register that deed under ARTL then all four would have to agree to that. Generally speaking, the client will follow the advice of their solicitor but that still means that both sets of solicitors have to agree. The challenge with that is that the status quo (paper) prevails should one solicitor refuse without good reason to use a digital channel.

1.10 We recognise that some people have difficulty in accessing and using digital services, for example by reason of disability, lack of access to the internet or other exceptional circumstances. In such instances, we will aim to provide an assisted digital service where appropriate, with the contingency of paper. However the presumption will be that digital should be the first option and that paper be used only in very exceptional circumstances including, as is the case for advance notices, where the system is unavailable for a period of time.

1.11 We also recognise that the introduction of new digital services may require changes to the internal processes and indeed the computer systems of some of our customers. We propose a minimum notice period of six months before a new system is made compulsory. That is consistent with the notice period around the closure of the sasine register to standard securities and reflects the flexible approach we are proposing. Our intention is that at the date of intimation of the notice period, the new channel would go live on a voluntary basis; this allows parties to prepare for when they become a standard part of the registration process and also allows us to make any enhancements to the system based on feedback. We suggest that we work towards a commencement date of 1 April 2018 for this provision.

Next steps: fully digital advance notices

1.12 As explained previously, a new digital advance notice system was introduced under the 2012 Act. The entry of a notice in the land register application record protects a prospective purchaser or acquirer by making clear which competing deed is taken to be registered first against any prejudicial position of the seller for a period of 35 days. Whilst advance notices in respect of a transfer of the whole of a property already on the land register are wholly digital that is not the case for advance notices over part of a registered property.

1.13 Advance notices in relation to a future transfer of part are currently part digital, part paper; the textual part is completed as part of the advance notice system and is then printed off and joined up with the plan showing the extent of the property subjects protected by the advance notice. This means that the plan, which nowadays is routinely prepared using a GIS system, has itself to be printed off. (In practice, no plan is required for an advance notice following on from development plan approval.) The reason for this partial approach was simply that at the time the system was launched, RoS did not have the technology to accept digital plans. That has changed and we are now in a position to meet customer expectations and receive plans prepared in digital format. Accordingly, we propose a change to the land register Rules to that effect.

1. Do you agree that transition to a digital first service should be the next step?

2. Do you agree with the proposed timescale of 1 April 2018 for prescribing that advance notices over part be fully digital?

3. Do you agree with a notice period of six months?

Next steps: transfer of title and mortgage deeds

1.14 Our preference is to enable digital deeds in a phased manner, focusing initially on the three most common deed types - discharge, standard security and disposition. Initial discussions with customers have confirmed this and highlighted the efficiencies that digital registration offers for the creation of new securities and sale/transfer of land. Helpfully, the mechanics of digitally enabling these deeds - such as the use of digital signatures and the related use of client mandates to enable the solicitor to sign such deeds - have largely been explored and proved in conjunction with the ARTL system as with the digital discharge service outlined above (see para 1.6).

1.15 These three deed types (including grants and charges) constitute over 88% of all conveyancing-type deeds registered in the land register. Once these deed types have been enabled digitally, we will consider what deed types to focus on next. We would emphasise that our proposal to digitally enable these deeds would apply to deeds across transactional circumstances. So, in registration terms, it would apply, for instance, where the disposition relates to a property that will be registered in the land register for the first time (a 'first registration') or a property already on the land register (a 'dealing with whole') or indeed relates to a new property that forms part of an existing larger area that is already on the land register (a 'transfer of part').

1.16 Our reasons for this are:

• it provides certainty and clarity for solicitors at the outset of any transaction;
• it means that lenders do not so often have to run parallel processes to accommodate both paper and digital mortgage deeds; and
• it ensures that all transactions involving prescribed digital deeds can benefit from a digital approach.

1.17 Ultimately, digital conveyancing will replicate the current paper process where the keeper simply accepts digital documents in much the same way as she currently accepts paper documents. The drafting and execution of the deed would be left to the parties and the keeper's role would be to accept (or not) the application for registration. However, the current proposal is for the keeper to provide a service for the creation, execution and submission of digital deeds. The nature of the application process, both in terms of the submission channel and the digital application form, is considered in Part 2 of this consultation.

4. Do you agree the initial focus for digital registration, following launch of the digital discharge service, should be provision of channels aimed at standard securities and dispositions?

5. What deed types do you consider we should prioritise for new services subsequent to securities and dispositions?

Next steps: matters of detail relating to digital dispositions and standard securities

Dual recording in the sasine register

1.18 Currently, over 60% of property titles are on the land register. The remainder will move on to the land register by 2024, in line with the target Scottish Ministers have set for completing that register through a mix of transfers of title, voluntary registration and keeper-induced registration. Very occasionally, a transfer of title will result in the disposition being registered in the land register and also recorded in the sasine register. This is the case where the disposition creates title conditions which benefit or burden a property to which title is still held under title deeds recorded in the sasine register. In such an instance, dual recording is required. There are two ways in which we could deal with this. The first would be to make provision allowing such deeds (but only such deeds) to be recorded in the sasine register. This would preserve the distinction between paper documents and digital documents. In the second, provision could be made that a paper copy of the digital deed be given effect to in the sasine register. This more closely resembles the current process where a copy of the deed is taken to allow registration to progress in both registers simultaneously.

6. Do you consider that for the limited purpose of dual recording, it should be permissible to record an electronic deed in the sasine register or should be permissible to record a paper copy of the digital deed?

Dual recording in the Books of Council and Session ( BCS)

1.19 The BCS register a range of legal, testamentary, contractual and other documents. In the main, deeds are registered for preservation; in other words, when it is important that a document must always be available, it is customary to register it in the BCS. A common example is the registration of a will. The other reason for registration is to enable what is termed registration for execution. This is common with standard securities, where they are often registered both in the land register and also in the BCS for purposes of execution, or other documents of debt. This enables the lender or creditor to simplify the process in the event that the debtor defaults on the loan or other debt. As matters stand, such deeds have to be in paper form. Wills still have to be signed as traditional "wet ink" documents in the first place. ^[2] Generally, for digital documents to be registered in the keeper's registers, this must be provided for in regulations. ^[3] That has not yet been done for the BCS. Even securities registered through the ARTL system have to be on paper; provision ^[4] is made for a paper copy of an ARTL digital deed to be registered in the BCS.

1.20 We consider that with the growth of the digital economy, provision should be made to enable the BCS to accept digital deeds, duly authenticated, for registration. That seems only sensible and practical. There is of course a question of timing; our preference is to focus initially on those new digital channels that support the land register, specifically the registration of discharges, securities and dispositions. We also know that the 'workaround' for registration of ARTL deeds in the BCS is adequate. For those reasons, we do not see it as essential that a BCS capable of receiving digital deeds needs to be available to support the launch of new digital land register channels. Rather, we will continue with the current approach that a paper copy of the digital standard security is capable of being recorded for preservation in the BCS. However, we will begin to consider the digital enablement of the BCS and may bring forward proposals in due course.

Supporting paper deeds and documents

1.21 In around 90% of all applications to the land register relating to a disposition, no other documents require to be submitted. This is the situation for virtually all transfer of part and dealing with whole dispositions. The reason is straightforward. Under the 2012 Act and the 'tell me don't show me principle' that flows from the duty of care owed by applicants and their agent, there is no need for any supporting documents such as mid-couples or links in title. The 2012 Act also provided for a Form of Notice of Title. Very occasionally, such as where the applicant seeks to remove a restriction in warranty at the same time as a disposition, supplementary information is presented.

1.22 The situation is slightly different with applications to register a disposition relating to a property that is about to enter the land register for the first time. Here, the solicitor will routinely submit the split-off deed and any deeds that are additionally referenced for rights and burdens. Where the application relates to a property that falls within what we term a 'research area', that is to say where we have already examined much of the title information, the only supplementary information we need is the split-off deed, which typically contains the extent of the subjects and certain property rights and title conditions.

1.23 In developing our new system for submission of a disposition, we want to ensure that the benefits of digital registration are not lost because of a requirement for paper copies of prior deeds to be submitted. We will work closely with stakeholders and customers on the best way to achieve this but we currently envisage two solutions to the problem.

1.24 First, we want to get much better at informing solicitors of applications where we have already seen the prior deeds. That will include research areas but also other mature areas of the land register where we have entries for common historic deeds on our common deeds index. We could develop the digital submission channel for transfers of title in such a way that it will inform the applicant that, for instance, the property is in a research area or that the prior deeds are not required.

1.25 Second, for the minority of applications where we have not previously seen the prior deeds, we propose that the application for the disposition still be made digitally and the date of application (and, accordingly, of registration) will tie to the submission of the digital deed. The paper historic deeds would then be submitted to the keeper within a set period and tallied with the digital application. In order to achieve this, we propose making provision in the land register Rules to require the keeper to consent to relaxation of the right-first-time rule for such cases ^[5] . In order that registration is not delayed beyond the advance notice protection period, we propose that the applicant be permitted a period of ten days to provide any relevant prior deeds. Failure to meet that time-period would result in the application being rejected.

7. Do you agree that ten working days from the date of digital submission is an appropriate period to allow the prior deeds to be submitted?

8. Do you have a view on alternative ways you would like to present supporting documents accompanying a digital application?