The recent announcement of a new Chief Executive for the Land Registry has brought into question whether the government intends to privatise this service. If this comes about, what might be the implications for the millions of homeowners whose property titles are registered?
At present the registry, which dates back to 1862, is a government agency. It keeps and maintains the Land Register, where more than 23 million titles - the evidence of property ownership - are documented.
It is thought the government would like to see this service sold to the private sector, as part of its ongoing privatisation programme. Although this would be unlikely to provoke the same level of debate and protest as privatisation of the NHS, homeowners should still be concerned at the implications this might have for them.
It is unlikely that many homeowners will know anything much about this agency as most people do not deal with it directly.
Title registration makes Conveyancing easier
The main purpose of the registry is to register property titles, which involves checking the ownership and extent of a property, as well as recording any legal matters affecting it, such as rights of way. This makes subsequent Conveyancing easier and safer as a seller's title can be easily checked.
Once title is registered any changes of ownership have to be notified to the registry and recorded by them, as well as dealings with the property such as mortgages or new leases. Registration applications are generally handled by buyers' Conveyancing Solicitors as part of their service.
People may sometimes contact the registry to find out details of their property's title, or to enquire about ownership of other land. Otherwise the general public will have little contact with them, and may therefore not be concerned about who owns and runs the registry. But perhaps they should be.
Registration fees from home buyers help make an £81 million profit.
Although it is at present a government agency, the registry is now run very much as a business. Its day-to-day operations are managed by an Executive Board, headed by a Chief Executive. In the financial year to March 2012 it made a handsome surplus of over £81 million, much of which will have come from the pockets of ordinary home buyers.
Most of its income comes from registration fees, which are a significant cost when buying a property. For the average-priced home the fee is £190 but this rises steeply for higher-priced homes. Traditionally the registry was only required to break even, so it is arguable that it can now afford to reduce these fees.
How a privatised Registry might make money from homeowners
But if it were to be sold off, would a buyer be able to hike up the fees to make an even larger profit? The registry has a monopoly, so all property buyers have to use its services. This could make it an attractive cash cow for a commercial buyer.
The registry also sits on a vast pile of information about property ownership. The information on each of the 23 million registered titles includes details of ownership, the price paid, and details of mortgages and other loans or debts secured on the property.
Some of this property information is already made available to commercial organisations, such as estate agents, debt recovery firms, property-price websites and app developers. What other ways might a commercial organisation find to profit from selling this information? Will homeowners be happy to know that information about their property is available in this way?
Will the state-backed title guarantee continue?
One important element of land registration is the government-backed title guarantee. Anyone who suffers loss because of an error or omission in the register, or because the register needs to be corrected, will normally be compensated.
In the last year the cost of meeting compensation claims was about £9 million. Such claims are paid out of an indemnity fund which currently stands at £26.8 million.
If the registry was privatised, would the buyer continue to be able to give any such guarantee? While homeowners are reassured to know that their property title comes with the benefit of a government-backed guarantee, would they be so happy if the guarantee was only given by a private company?
There is little doubt that the registry has vastly improved its services in the last few years. Once a hidebound organisation operated for the benefit of its civil-service employees, it has now become very service-oriented. Computerisation of the register has brought huge benefits to users, with many services now being available on-line.
New Chief Executive Ed Lester was previously Chief Executive of the Student Loans Company (June 2010 to January 2013), and Chief Executive at NHS Direct (January 2004 to October 2008.)
Business and Energy Minister Michael Fallon said: “Ed Lester has the right skills, experience and ambition to meet the new challenges that face Land Registry. His previous experience of running the Student Loans Company will help to ensure that Land Registry can become a more nimble, digitally driven organisation.”
A pointer towards privatisation
This statement has been interpreted as a pointer that the registry is being prepared for privatisation. It is perhaps indicative of the way the registry is developing that Ed has clearly been chosen for his business skills rather than any legal knowledge. Although the whole registration system is very much concerned with English land law, there is apparently now only one Solicitor on the Executive Board.
So it looks as if the future trend will be to develop the registry as a commercial entity. But while that may look desirable, there are some questions that must be considered. For example, its core business is entirely dependent upon the property market, and the number of properties being bought and sold. So this business cannot be expanded by any action by the registry - advertising campaigns or ‘two-for-one' offers are not going to bring in any more business.
A scheme is currently being trialled which would enable Conveyancing Solicitors to get local searches via the registry. This will involve co-operation from local councils. But apart from the searches currently provided by councils themselves, there are several commercial companies who already provide search services, including several water and utility companies. So there is already considerable competition in this sector.
The existence of the current state-backed registry providing ready access to up-to-date and guaranteed land information should give buyers confidence in property Conveyancing. Whether buyers would continue to have confidence in a privately-run system must be open to question. At any rate, the public as well as Conveyancing Solicitors and other property professionals should be consulted before any change is made.