Professor Stewart Brymer WS, Brymer Legal Limited, Dundee and Edinburgh and the University of Dundee
At long last we will soon have the long-awaited reform of the Land Registration (Scotland) Act 1979. The Registers of Scotland and the Scottish Law Commission are to be congratulated for undertaking such a much-needed and comprehensive review of our land registration system. The Land Registration (Scotland) Bill (“the Bill”) was introduced into the Scottish Parliament on 1 December 2011 and it is anticipated that it will be enacted by summer 2012 although it will not be brought fully into force until 2014. This is to allow time for the Keeper and her staff to carry out the extensive technical upgrades and other work necessary to ensure that the changes are fully supported. It is entirely appropriate that this be the case (a) for financial and staffing reasons; and (b) so that we do not experience the sort of false starts that we have had with Automated Registration of Title to Land (“ARTL”). ARTL was a major initiative which has been affected by IT and other challenges as well as the economic slow down and resulting drop in activity in the housing market. Nevertheless, the principles behind ARTL remain sound and the statistics remain impressive for something that represents such a radical change to traditional working methods. See www.ros.gov.uk/artl
There are many positive initiatives in the Bill, for example, powers given to the Keeper to accelerate the registration of title process with a view to bringing more titles on to the Land Register, a more efficient system for registering securities and improved mapping procedures. These and other such reforms will greatly improve efficiencies and, as a result, will decrease transaction times and legal costs. One reform that will have significant potential is the confirmation that the conclusion of missives by electronic means will be permitted subject to appropriate safeguards being introduced.
The E Commerce Directive (2000/31/EC) remains unimplemented in Scotland and, for that matter, the rest of the UK. It was supposed to be transposed into domestic law by Member States by 17 January 2002. Article 9 of the Directive provides that Member States must ensure that their legal systems allow contracts to be concluded by electronic means. There is, however, an exception with regard to contracts that create or transfer rights in real estate, except for rental rights. The view taken in the Professorial Opinion that preceded the introduction of ARTL was that the Directive used the word “contract” in a broad continental sense of a consensual juridical act. Accordingly, the exception covers only deeds such as dispositions rather than missives. If that view of matters is correct, then digital missives have been competent, as far as EU law goes, since 17 January 2002. In reality, domestic Scots law does not currently permit digital missives despite the fact that they are arguably more secure than written missives or papers sent by fax. This position is to be rectified by the Bill.
There is no doubt that it is in some ways inconsistent to have a conveyancing transaction which, where the title to be transferred is registered, allows transfer of title electronically by use of digital deeds and digital signatures but does not allow the earlier and contractual part of the transaction, namely the missives, to be concluded in this way.
Currently, formal missives do, of course, still have to be exchanged. A point reinforced by the case of Park, Petitioner 2009 SLT 871. The reform will greatly improve the efficiency of the sale and purchase transaction and bring it into line with other transactions that we all regularly complete on line these days.
What is a Digital Signature?
The term “digital signature” is in many ways a convenient tag for the authentication of a document by electronic means. Perhaps what we do not realise is that people already use digital authentication (probably unwittingly) when they rent a dvd, swipe into an entry system at a gym or use online banking etc. The only difference is that the level of security increases with the importance of the action – which is comforting to know. There are of course machines which allow one to trace a signature which appears on a screen. That is not what would be regarded as a digital signature in a technical sense however. The crucial element is not the signature itself but the digital certificate which provides the security for the adhibition of the signature. Put simply, the certificate is used to create the digital signature which is a product of the actual document and the digital certificate together. As a general rule, the longer the key length, the stronger the encryption. ARTL operates using a digital signature and conveyancers are already aware of how it is used as part of the ARTL process and, most importantly, how it must be kept secure. That digital certificate contains a key of significant length which is very secure compared to others which are currently in use. It currently is of a length of 1024 BITS and the root certificate for the whole ARTL public key infrastructure has keys which are 2048 BITS long. In the not so recent past a digital certificate with a key length over 56 BITS was classed as a military weapon for export purposes and special licences were required for export. What is important is the strength of the certificate, not the fact that someone has a digital signature. The point here is that there is a digital authentication process already in place with Registers of Scotland and it is argued that that certificate should be extended for use in verifying E Missives. Initially the Keeper was of the view that the use of the ARTL digital signature in this way was ultra vires. That problem has been removed by the Bill however.
Prior to the benefits of electronic transactions being able to be enjoyed however, it is essential that appropriate safeguards are put in place in order to protect consumers and to mitigate the opportunities for fraud. Consultation is, of course, required but that need not be a lengthy process. If it were to be, questions should rightly be asked as to why. The Law Society had to consider this very point prior to ARTL going on line. This involved a suite of Practice Rules and Regulations being promulgated. (See http://www.lawscot.co.uk/rules-and-guidance/section-b/rule-b8-miscellaneous-client-protection-requirements/advice-and-information/b82-artl-mandates). Work has started on the equivalent rules that will be required in order to facilitate E Missives. It is anticipated that this task can be completed quickly as there is no other reason why the relevant provisions in the Bill can not come into force sooner rather than later. It is suggested that that is exactly what a modern society requires. Scotland would be the first country in the UK to implement the EU Directive and this could have considerable economic benefits.
It will, of course, be necessary to issue solicitors with a Digital Signature facility – most likely for a modest fee. As mentioned above, Registers of Scotland have already gone through this process and have a perfectly acceptable and robust digital authentication process for use in ARTL. In the ARTL process, the digital signature is held by individuals. These individuals require to go through a security process with the Keeper’s staff before the smart cards are activated. What then is there to stop practitioners using the ARTL digital signature? The author can see no reason why this should not be possible. In the ideal world, The Law Society of Scotland would issue a digital signature as part of an electronic practising certificate. It is understood that plans are in hand to introduce an electronic practising certificate in October 2013 and that that certification will contain an authorised digital signature facility. Why wait until October 2013 however when a perfectly suitable facility within the ARTL process is available now? Has the consumer been considered in this or are we looking to introduce something that suits our plans? In the end of the day, the Law Society may well move to issue a digital certification process as part of an electronic practising certificate. That is entirely appropriate but that should not be a reason for delaying the introduction of E Missives to those involved in Scottish property transactions however. Why cannot there be two or more providers of digital signatures so long as each offering is robust and complies with all necessary safeguards to combat fraud etc.? In that respect, it is just like using one bank’s debit card to withdraw money from a cash machine operated by another bank.
From a policy and security point of view, the holding of a digital signature by a firm or a limited liability partnership as a whole would render the system less secure and for that reason such a practice is unacceptable. There are already developments which might result in the use of digital signatures being extended to any transaction concluded by solicitors over the internet. This involves the use of a biometric. (See Rennie & Brymer, Conveyancing in the Electronic Age Para 8.16.) A biometric solution is, perhaps, where we will end up as further technological advances are made. That provides a guaranteed way of linking the individual to the action.
Once available, E-Conveyancing (in its fullest extent) will make property transactions cheaper and quicker to complete. We have Standard Clauses. Why can’t we have the facility to conclude contracts without paper soon after the Bill is enacted? Such a facility may not speed up the negotiation of missives which, on many occasions, for many often oblique reasons can become very lengthy. It might just act as a catalyst however and we might get back to a situation last seen in the 1970s when missives were often concluded in a short period of time and often on a de plano basis. Might that not be the catalyst that the property market needs? To become reality however, there has to be a will on the part of residential property solicitors to embrace the change and make it happen. The fact of the matter is that their clients will expect change and for transactions to be processed in the best manner possible. Those solicitors who do embrace change once the necessary safeguards are in place should gain a competitive advantage over their rivals.
As Ian Burdon said in a publication in 1998: “The present millennium began with feudalism and reliance on the literacy of the clerical elite. The vision for the beginning of the next millennium is of an automated land registration system alongside a fully integrated digital information system, unencumbered by those administrative and bureaucratic structures which serve only to impede the public.” Now is the time to embrace that spirit of change and capitalise on the benefits provided by the legislative permission.