How digital property transactions are transforming the legal industry
With an estimated £260bn worth of property bought and sold every year, the UK has one of the biggest property markets in the world.
At the core of each of these transactions for the past 160 years lies the HM Land Registry (HMLR), who recently announced its ambitious plans to make the process of buying and selling property paperless by 2025 - but what does this mean for professionals in the sector?
The catalyst for digital transformation
Like many other industries, the property market was transformed during the Covid-19 pandemic, resulting in accelerated digital transformation.
With conveyancers not being able to meet clients face-to-face, property transactions slowed close to a halt. Until July 2020, when the HMLR began to accept electronic signatures.
As a result, the industry adapted its processes accordingly. ID checks were completed online, documents were sent electronically, and records were increasingly digitised via case management systems so that staff working from home could still access the documents they needed.
However, this significant change only highlighted the need for improvement across the conveyancing process. “The sector embraced technology because it had to,” Beth Rudolf, director of delivery at The Conveyancing Association, says.
“But there is still a long way to go. Average completion times are getting longer and longer – in some cases as long as 22 weeks – and the volatility of the mortgage market and falling customer confidence is leading to chains falling apart.“
HMLR’s vision for the future
After seeing the impact these changes had on the industry, the benefits of a fully digital process for firms and their clients became clear.
“What we need is transparency, certainty, and accessibility. And digital delivers all of those things,” Rudolf says.
This is echoed in HMLRs vision, for the body to be the most digitised land registration and land administration agency in the world, making secure paperless buying and selling of property the norm by 2024-25 via an open data protocol.
The change aims to bring with it significant and transformational benefits. Levelling up access to property data will make transactions as frictionless as possible, and reduce the amount of time they take to complete.
It will also create opportunities to grow the emerging PropTech sector, by supporting land-use planning, environmental policymaking and national efforts to reach net zero - but making this a reality will require buy-in from everyone within the property transaction chain, including conveyancers.
Will digital property transactions minimise the risk of fraud?
With property fraud experts seeing a rise in cases over the course of the pandemic (due to criminals taking advantage of not having to meet conveyancing solicitors, mortgage brokers and surveyors in person), an important question posed by the conveyancing community is what HMLR’s plans mean in regards to minimising the risk of fraud, and in particular - where liability lies if something goes wrong.
“Our objective is to help the conveyancing process become more secure, more efficient and thereby fully digital, but change isn’t going to happen unless you make it happen,” says Mike Harlow, deputy CEO of HM Land Registry.
There’s also evidence of how the use of digital ID has reduced the incidences of fraud by as much as 1,000% in Norway.
Beth Rudolf adds, “you’re not going to be liable if there isn’t an issue. With digital ID the reduction in fraud is huge.”
She also suggests that the current system isn’t really fit for purpose in terms of preventing fraud. “You’re relying on certified copies of documents when you don’t know who’s certified them, you don’t know if these documents are real, or who the witnesses are.”
How paperless property transactions can improve the industry
Aside from these benefits, embracing digital tools can reduce the pressure felt by conveyancers as a result of an increasingly complex regulatory landscape, by freeing up time to focus on more intricate cases and tasks.
“It's not just about identifying people and verifying their identity, it's also about assessing their source of funds, source of wealth, but also anything within the transaction that would indicate a fraudulent activity was occurring and continuously reviewing the transaction,” Rudolf says.
“The work involved in collecting anti-money laundering (AML) documents for conveyancers, estate agents, lenders, for brokers – because we’re all doing it multiple times – is a huge cost to our resources. Technology can replace a lot of that.”
This becomes an even bigger focal point as staffing has become one of the biggest challenges for the industry.
“It’s really hard to recruit and retain staff, and people feel they haven’t got enough time to do these things properly.”
“The amount of time and human resources we waste on trying to identify potential frauds and submitting unnecessary subject access requests (SARs) and waiting for responses. These can all be replaced by technology.”
Embracing the change
Such big changes are certainly not easy, however, Rudolf goes on to highlight that in comparison to the rest of the legal industry, the residential side of the sector is falling behind.
“Why don’t we have qualified electronic signatures now which enable dispositions to go ahead without witnesses? They already do that in commercial law.”
“We can absolutely do it in the residential sector so that people don’t have to wait and print out all of the pages from their property information firm – single-sided – and then sign it and post it back to their conveyancer”.
Overall, Rudolf is incredibly optimistic about the potential for change in the conveyancing world as a result of embracing new technology.
In particular, noting that digital property transactions are “absolutely brilliant for the consumer, and brilliant for the industry,” she adds.
“And let’s not forget how good it is for the economy. If we’re preventing fraud, then transactions are happening. VAT is payable, tax is payable, stamp duty is payable.”
Interested in this topic?
Mike Harlow, Beth Rudolf and Timothy Douglas recently took part in a webinar hosted by Thirdfort’s Head of Legal, Sam Ruback.
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