Land Registry: Government proposals for privatisation

The Land Registry may be privatised under proposals put forward for consultation by the Department for Business Innovation & Skills. Although recognising that a well-functioning Land Registry underpins housing supply, home ownership and general economic growth, the consultation makes clear the Government’s view that a privatised Land Registry would provide a more efficient, effective and modern service than that currently provided by the public sector.

The Land Register currently holds over 24 million titles of land, which evidences ownership of that land. The Land Registry records any changes in ownership, mortgages, leases and rights that affect each property. It is the responsibility of the Land Registry to provide a reliable record of information about the ownership of an interest affecting land.

Model Options

The consultation details two broad approaches to privatisation: the first being privatisation by way of a contract between the Government and the private operator, the second being privatisation with the oversight of an independent economic regulator.

Under the first, and preferred, model, all the core statutory functions of the Land Registry would be transferred out of Government. The existing employees and assets of the Land Registry would be transferred to a private sector operator (NewCo) in which the investor would buy shares, leading to a receipt for Government. NewCo would enter into a contract with Government for the delivery functions that are currently the responsibility of the Land Registry. The contract would govern the scope and service standards that NewCo would deliver in respect of the register and specify the amount it would receive from Government for doing so, the quality of service to the customer it must provide and the penalties for failing to do so.

Under the second model, a new independent economic regulator would either need to be established, or additional regulatory powers would need to be vested in an existing regulator to provide regulatory oversight and review. NewCo would provide the land registration statutory services on behalf of Government pursuant to a licence that would be granted by the regulator. The regulator would set the prices and standards for NewCo in accordance with its statutory duties.

The Government is strongly in favour of the first model, which is seen as being the cheaper option and one which has already been implemented successfully elsewhere, for example in Canada.

Customer Protections: service quality and state title guarantee

The consultation recognises that although the Government believes there are benefits to a change in ownership, any such change must retain the right level of protection for customers and the wider economy.

The Land Registers are currently owned by the Crown. Under the proposals, Crown ownership of the Registers would not change and they would continue to be managed by Government.

In relation to service quality, at present the Government sets standards for Land Registration through a combination of statute, orders of the Chief Land Registrar and by setting Key Performance Indicators. Given how critical these services are to the conveyancing process, it is important that customers can continue to expect and rely on a specified level of service. Under the proposed changes, Government would continue to set the required service quality and audit and monitor performance, incentivising the investor to improve service quality and speed.

Currently, if someone suffers a loss as a result of a mistake in the Land Register, for example if the Land Registry registers a fraudulent mortgage, that party can claim compensation for any loss from the Land Registry. This is a no-fault indemnity system: compensation is payable irrespective of whether or not the Land Registry was responsible for the mistake which caused the financial loss. This state-backed guarantee of ownership is seen as critical to the smooth functioning of the property market in England and Wales and would continue unaffected by the privatisation.

Responding to the Consultation

The BIS consultation is open for responses until 26th May 2016: https://www.gov.uk/government/consultations/land-registry-moving-operations-to-the-private-sector

The Government aims to publish a response to the consultation within three months of the closing date.