Land registration and fraud

Property law lies at the heart of capitalist legal systems.  Where a system is based on facilitating commerce property law provides a mechanism whereby prospective purchasers can determine that the seller of an asset owns the property, and to allow prospective creditors to determine, first, that an individual borrower owns an asset (and can therefore grant a security or charge over it), and second, what securities or charges affect property owned by the debtor because this determines the available equity in an asset, and whether lending should take place.  Property law (and consequently commerce) therefore depends on a system whereby property rights are publicised.  For land this publicity is achieved through a system of property registration – where land ownership and rights over land are listed in a register.  And to have any value in facilitating commerce this register must be publicly searchable.  If it is not publicly searchable in a manner which allows identification of owners and securities (and for other purposes other rights affecting property) then prospective purchasers have to rely on personal undertakings by sellers that they own the property and prospective creditors on personal undertakings that there are no other securities (and we know from the past experience of former trade ministers that such undertakings are not always worth much).

In Scotland a system of property registration was set up in 1617.  The relevant statute is sttill in force and is in old Scots

“Oure Souerane Lord Considdering the gryit hurt sustened by his Maiesties Liegis by the fraudulent dealing of pairties who haveing annaliet thair Landis and ressauit gryit soumes of money thairfore Yit be thair vniust concealing of sum privat Right formarlie made by thame rendereth subsequent alienatioun done for gryit soumes of money altogidder vnproffitable whiche can not be avoyded vnles the saidis privat rightis be maid publict and patent to his hienes liegis FOR remedie whereoff and of the manye Inconvenientis whiche may ensew thairupoun HIS Maiestie with aduyis and consent of the estaittis of Parliament statutes and ordanis That thair salbe ane publick Register In the whiche all Reuersiounes regresses bandis and writtis for making of reuersiounes or regresses assignatiounes thairto dischargis
of the same renunciatiounes of wodsettis and grantis off redemptioun and siclyik all instrumentis of seasing salbe registrat . . .”

which means that without a system of property registration there is an opportunity for fraud because individuals can claim they own property when they do not, they can sell property twice or more, and purchasers have no protection.  Property registration then gives certainty to the system and reduces the risk of fraud.

Now in England property registration is relatively new.  For years in England you had to rely on the word of the seller, pay your money, and cross your fingers that no person with a better entitlement would come along and chuck you out of the property.  I once asked an English lawyer how they dealt with land purchases for unregistered land.  “How do you know you’re getting ownership?” I asked.  “How do you know your client’s investment is safe?”  He smiled, “I don’t.”

Property registration then is a good thing.  Publicity is a good thing.  It makes lending safer.  It makes purchasing more secure.  

However, there have been complaints that a public register leads to identity theft and (irony or ironies) fraud.  In response the Land Registry in England and Wales has stopped providing on-line copies of deeds.  IN response to this Dizzy wrote that,

“From an Identity Theft point of view such documents would be invaluable and should not be freely available to all and sundry.

“However, it’s worth noting that for £3 you can still do a search and find out the full names of the people in a given address, how much they paid for their house and who their mortgage provider is. “

IN reply I made some of the points above and noted that 

“The alternative [to a freely searchable public register] is to provide that the register is not searchable – which can have implications for the provision of finance to individuals … – or that it is freely searchable only by designated individuals, which would require state intervention in deciding who had an interest to look.

“What there was no excuse for was the reprinting of account details on the deeds, although the problem there lies with the lenders who required the details on the security deed for their own administrative purposes. This is not an inherent problem in the Land Register, but in the practice of those that use it.”

IN my view the response – in removing information from public availability on the Register, defeats the purpose of land registration.  A register must be fully searchable to have value.  How we then deal with fraud which may or may not arise involves different policy considerations.  For the systems of land registration in both Scotland and England and Wales currently prioritise the purchaser from a fraudster, not the original owner who loses out.  That is where the policy problem lies, not in the public register.  The Land Registry decision undermines the register and consequently undermines sound commerce.

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About loveandgarbage

I watch the telly and read when not doing law stuff and plugging my decade and a half old unwatched Edinburgh fringe show.
This entry was posted in land registration, law, Uncategorized. Bookmark the permalink.

One Response to Land registration and fraud

  1. surliminal says:

    Interesting.
    many jurisdictions have already looked at the problem of taking a de iure public register on lien so it becomes de facto accessible/searchable so there is plenty of practice to draw on on this – one example that comes to mind is that in Mexico (more for privacy reasons) when case law went on line names of parties etc were redacted.

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