E-Dealing - Electronic Registration

Joanna Pidgeon, principal of Pidgeon Law, has championed the use of e-dealing in her firm and is a member of the New Zealand Law Society's Land Titles Committee.

Since 2009 all land title transactions and survey plans have been electronic.  This has been a long journey.  In March 2003, when Land Information New Zealand ("LINZ") started phasing out manual registration of real property dealings.  Since 1 May 2007 it has been mandatory for standard full/complete discharges of mortgage to be registered electronically and electronic registration of standard full/complete transfers and mortgages has been compulsory since 1 August 2007 . 

The process began when LINZ looked at how cumbersome the paper system was becoming, with more and more subdivisions creating more certificates of title, more statutes requiring memorialising on titles and the large amount of physical storage required to house all of these documents.  It was also easy for documents to be misfiled.  In 1996, the Land Registries and the Department of Lands and Survey were brought together, and in 1998 the Land Transfer (Automation) Amendment Act was passed to enable the computerisation of titles and plans. 

This conversion of the register was a five-year process during which LINZ converted over 7 million physical records (dating back over 150 years) into digital records which are held in the electronic system, which is known as Landonline.  Now 98% of documents can be searched from a lawyer's computer desktop, and only documents which are too large or fragile for conversion, or are accessed too infrequently, cannot be searched online.  A request can be made online for these documents to be searched manually and copies are delivered by email or fax as required.

The software for e-dealings was already in use for searching titles.  This was a good first step, as users could then more easily adapt to registering documents electronically.  This meant that most users already had an affinity with the system.

The next step was to register documents.  In 2002 the Land Transfer (Computer Registers and Electronic Lodgement) Amendment Act was passed.  A pilot was conducted in Christchurch from November 2002 until January 2003 to trial the system.  From that time the system has been rolled out nationally.  Registering documents electronically is called e-dealing.

WHAT DOES THIS MEAN FOR THE ORDINARY PERSON?

In the past people have signed paper documents when mortgaging a house or transferring their property in a sale.  Now, instead, an "Authority and Instruction" ("A & I") will be signed which sets out the parties to a transaction, verifies identity and instructs the conveyancing professional to undertake the transaction electronically.

The way registration works (currently) is that the solicitors on each side of a transaction transact registration by e-deal and arrange for their client to sign an A & I to authorise and instruct the lawyer to transact the registration of settlement documents by e-deal.

There are two roles on each side of an e-deal:

• first, the primary contact - which can be a staff solicitor, legal secretary or legal executive who drafts the documents in the electronic workspace;
• secondly, the conveyancing professional - the person authorised in the A & I to sign and certify the documents in the workspace on behalf of their client.  The conveyancing professional must be a solicitor or a licensed landbroker.  It is the conveyancing professional who takes overall responsibility for the transaction.

Each document and each dealing can be pre-validated before settlement to ensure that it will register, that is, the software will check and tell the parties that when they direct the system to register, it will in fact register, and that there has been no error that will prevent registration.  In the course of the electronic drafting, the e-dealing reads information off the register - for example, the system will tell you that if you have created a full discharge of mortgage with reference to only one title.  It will not register if that mortgage is over another title as well.  The discharge of mortgage will have to be redrafted correctly as a partial discharge of mortgage.

Once the primary contact has created the dealing, the conveyancing professional electronically signs and certifies documents on behalf of the client.  The vendor's conveyancing professional will sign and certify any discharge of mortgage and will sign the transfer on behalf of the transferor.  The purchaser's conveyancing professional will sign and certify on behalf of the transferee and mortgagor.  This requires you to pick several boxes certifying that you:

• have the authority to act for the party and that it has the legal capacity to authorise you to lodge the instrument;
• have taken reasonable steps to confirm the identity of the person who gave you authority to lodge the instrument;
• have complied with any statutory provisions specified by the registrar for that class of instrument;
• hold evidence showing the truth of the certifications that you have given and that you will retain evidence for the prescribed period (ie 10 years).

This process also requires a full review of the document and the entry of a password and an additional passphrase as well.  This certification process is deliberately similar to the procedure followed in signing documents correct under the paperbased system which entitled LINZ to deal with the documents on their face value.

Prior to settlement, undertakings are given to the other party that the documents have been signed and certified and that they will be electronically released for registration following legal settlement.  Once the settlement moneys have been received in the normal way, for example, by bank cheque or by electronic transfer of funds, the vendor's solicitor will electronically release the discharge and transfer, and the purchaser's solicitor will electronically release the balance of the documents and submit them for registration.  When doing this the purchaser's solicitor may also request  a title search.  Usually, before even a minute has passed, confirmation of registration is received together with a search copy of the title (showing the new owner), and any mortgage.

ALL TRANSACTIONS ELECTRONIC

Now all land title transactions, including subdivisions and all survey plans can be carried out electronically and has been compulsory since February 2009.  Paper lodgements of documents were withdrawn from that date.  Even if the documents are not created electronically in Landonline, they are scanned and submitted electronically.

LINZ public counters were closed during the 2008/09 financial year and the Processing Centres in Hamilton and Christchurch are now the primary centres for LINZ processing with the remaining centres closing down over time, after 100% electronic lodgement comes into effect.  The great majority of survey plan and land title searches are already conducted using e-search and e-search plus through land professionals including surveyors, lawyers, and conveyancers.  Other people wanting copies of titles or survey plans can:

• Purchase a licence to use e-search or e-search plus.
• Request copies through a third-party supplier.
• Order copies through LINZ's Land Record order form.

SECURITY

There are many technical layers of security for the system which I will not go into in detail.  In the past production of a duplicate title has been relied on as providing some level of protection against identity fraud (only the true owner should have the duplicate), but incidents of theft and forgery have shown that there are limitations with that method.  By contrast, Landonline has instead relied on verification of identity as the means of establishing the authenticity of a transaction, which is a similar obligation to that lawyers and banks deal with under the Financial Transactions reporting Act 1966 when receiving money or opening accounts. 

Identity fraud is one of the fastest-growing crimes.  There is an identification process that must be followed by the person signing the A & I.  The client must be identified by photographic ID by a witness satisfactory to the conveyancing professional.  The witness will usually be someone from a law firm, a solicitor, a Justice of the peace, or some other trusted person.  If they have no photographic ID there are other requirements that have to be met.  Do not be offended if your solicitor of many years asks for photographic ID - he/she is just doing his/her job, maintaining the integrity of the register.

In addition, the title and survey lodgement and registration can be registered only by authenticated, registered users.  Only people legally authorised to perform conveyancing services who hold current practicing certificates or are licensed landbrokers may sign and certify, which helps to ensure the integrity of the titles register.  The general public can carry out e-searches online at public counters but cannot e-deal.

LINZ carries out audits with an initial compliance review requesting copies of selected A & I's and supporting documents such as powers of attorney and certificates of non-revocation.  The LINZ audits commence within six months of a conveyancing professional starting to e-deal, and after that on an annual basis.

BENEFITS

There are many benefits including:

• searches of titles are faster, and converted records are easier to read than old handwritten or faded documents;
• there is a choice of searching each current certificate of title (which show only current legal interests) or historical title searches (which show all past entries on the title) which makes certificates of title simpler to read;
• all registries across the country can be searched, rather than searching regionally in physical offices;
• information received is real time information as survey and title lodgments are processed directly into Landonline. That means whenever users log on, they receive the most up-to-date information available;
• duplicate instruments such as for leases and mortgages and duplicate titles are no longer required;
• documents are processed faster than before;
• the revalidation process with the system's automated checks reduces the risk of delays caused by the need to resubmit registration if there are mistakes;
• registration filing fees for e-deals are cheaper and there is no need to pay agency fees to search and filing agents anymore.

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