Her Majesty’s Land Registry recently celebrated its 150th birthday – a milestone showing that the registration of land by the state is a system which has stood the test of time. Land registration is one of the oldest functions of our legal system and is an essential element of the property market. It is, of course, of vital importance to building societies who rely on the Land Registry to register their mortgage against the property as security when they lend someone the money to buy a home.
However, with the reduction of the national debt at the top of the Government’s list of priorities, the Department for Business Innovation and Skills (BIS) is proposing to transfer the operations of the Land Registry to a private company (nicknamed ‘NewCo’) in order to make some money. While not a new idea – as recently as 2014 the government considered a similar move but eventually decided against– this has rebounded up the political agenda.
In the consultation paper
issued in March, BIS– supported by the HM Treasury-owned company UK Government Investments – makes the case for privatisation, arguing that “a new owner could bring new knowledge and investment into the organisation and could ensure Land Registry accelerates its transformation into a more efficient and effective service delivery organisation”.
The paper also argues that private capital could drive innovation – particularly in the Land Registry’s quest to become a truly digital organisation. Government’s preferred option therefore would be to sell the Land Registry to NewCo under a long-delivery contract. Their position is that if appropriate safeguards are in place then there is no reason for the organisation to remain in public hands.
Indeed, strong safeguards would be a vital element of any move to sell the organisation. BIS proposes to keep the Registers in public ownership, retain the state-backed guarantee and for government to have the power to audit and monitor service performance. It is certainly welcome that serious thought has been given to how the privatisation process could be managed safely. Unfortunately, we have concerns that these may fall short.
The whole idea of Land Registry as a private commercial organisation with a profit maximising motive is fraught with risk. As the Land Registry’s core land registration service is of a statutory nature, government is currently not allowed to seek to maximise profit. Under NewCo we feel this approach would likely change – and either lead to NewCo eventually wanting to increase fees or cut costs. This could in reality lead to under-investment. We also have concerns about potential conflicts of interest arising with NewCo operating the Land Registry but also having a commercial interest in the data.
There is also the question of timing. With the Government’s laudable ambition of building a million homes by 2020 we would question the wisdom of potentially putting the service through a period of upheaval at such a critical time. Even more so because the Government’s flagship Starter Homes scheme could foreseeably involve the registration of a significant number of relatively complex charges in the next few years.
Other organisations have concerns about different parts of the proposal. The City of London Law Society
is concerned that the Land Registry’s quasi-judicial functions could be susceptible to conflicts of interest in private hands. Both the Open Data Institute
and the Competition and Markets Authority have concerns that NewCo could put barriers in the way of entrepreneurs looking to use the Land Registry’s data to develop apps, websites and other property services. The former has also said that privatisation could increase the risk of fraud.
Land Registry has certainly faced challenges. However, it continues to drive efficiencies – the paper notes how staffing levels have reduced from 12,000 to 4,115 full-time equivalents over 20 years. That is over a period where – for most of that time – there has been a burgeoning property market in England and Wales. It has also been remarkably successful in its digital drive, winning awards for MapSearch and Property Alerts, as well as implementing an electronic discharges service and with a digital mortgage service due to enter Beta testing.
As property businesses search for efficiency and drive to become more digital themselves we feel that Land Registry is in safe hands in its current form, and it would be a shame to end that 150-year tradition.