Is an Englishman's castle getting a bit less secure?
Coalition reforms include a proposal to privatise the Land Registry which guarantees ownership of our homes.
Saturday 06 November 2010
The coalition plans to part or fully privatise the Land Registry to raise money. But not only could the move add to the costs when you buy or sell your home, it could leave you with a massive gap in protection if there is a mistake in the future.
The Land Registry is an official body that safeguards the ownership of billions of pounds worth of property. At present, if it makes any mistakes about ownership, the Government promises full compensation to anyone adversely affected. But experts are concerned that no private firm could offer the same "guarantee to title".
Last week, the Government published the Public Bodies (Reform) Bill, which deals with abolishing, merging and reforming public bodies and quangos. The Land Registry, a government department established in 1862, is specifically mentioned in the Bill. Meanwhile the Ministry of Justice is undertaking a feasibility study into future private-sector investment in the Land Registry and plans to report back in the New Year. Full privatisation is also an option.
However, there are doubts as to whether private ownership of the body, which holds more than 22 million records of title of land in England and Wales, would result in any benefit to the consumer. The current system allows the public and professionals to have access to a wide range of property-related information, either for free or for modest amounts (see the panel on the right). David Parton, a solicitor for Access Legal from Shoosmiths, is concerned by talk of privatisation.
"The Land Registry is a not-for-profit organisation," he says. "It is inconceivable to imagine that a private company would not seek to make a greater return on its investment, leading to an increase in product and service prices."
He is also worried by the creation of a private monopoly. "Unless the Government considered breaking up the Land Registry, enabling a number of competitors to hold regional control [similar to rail franchises], it is difficult to imagine how homeowners could benefit from what would be a monopoly supply," he believes. "If the service was broken up into regions, these would then have to come up for renewal by tender, creating less certainty among conveyancers and the public as to who they are ordering their services from, usage by the consumer being extremely infrequent."
Similarly, Paul Hunt, the managing director of Phoebus, whose software is used by many mortgage lenders throughout the house-purchasing process, opposes the privatisation of any of the Government's data-collection agencies such as the Land Registry. "I admire its ability to collect data," he says. "As a commercial enterprise, the agency would lose some of its commitment to keeping a national record of Britain's housing stock. If that commitment is forced on it by its articles of association, it will be less competitive than its commercial peers, meaning it would lose out to them. Savings might be made in the short term, but corners will soon be cut in an effort to keep up with rivals. That will not benefit homeowners."
Mr Hunt also argues that any asset sale carried out now would not realise the sort of value the Government and taxpayer might expect. "Don't be fooled by the promise of hard cash," he adds. "I'm not convinced privatisations generate good value for the taxpayer. I am reminded of the privatisation of DERA [the Defence Evaluation and Research Agency] – now QinetiQ – which made a lot of people involved in its purchase a great deal of money at the taxpayers' expense."
Over the past couple of years, the Land Registry has made a concerted effort to reduce costs. It has cut its number of regional offices from 17 to 14, sold its Lincoln's Inn Fields headquarters in the capital to the London School of Economics for £37.5m, while more than 1,800 staff have left in the past two years. It also plans to save nearly £500m during the next 10 years. Supporters of privatisation tend to claim it improves efficiency and drives down costs. However, many professional users of the Land Registry believe it already does a good job.
Julian Sampson, a partner at Wright & Wright solicitors, doubts that change would benefit homeowners. "Whatever the [Land Registry] consultation chooses, it will be concerning to see any form of control change," he says. "The Land Registry has been one of the few self-sustaining organisations in the UK, and in recent months has made a concerted drive to market some of its facilities for commercial use. Other countries have privately run registration systems but frequently this has been driven by the lack of government expertise in mapping or ancillary systems – this is simply not the case here."
David Parton, of Access Legal, agrees that the organisation performs well. "It could continue its journey to become more customer-centric [for] the businesses it supports but generally speaking, its fees and service are already very good," he says. Mr Parton cannot see how privatisation could improve the conveyancing process, adding: "At best, the change would be neutral; at worst, recalling other government outsourcing projects, it could lead to increases in cost and delay."
Last year, the television presenter Sarah Beeny set up the website Tepilo.com with the aim of improving the home-buying and selling experience by helping consumers to avoid using estate agents. She is extremely sceptical that Land Registry privatisation would speed up the process.
"I don't necessarily think the Land Registry holds things up; what does hold things up is the conveyancing process," she says. "Fundamentally, the privatisation of such incredibly important data is risky in itself. It's the sort of data everybody wants and I'm not convinced it should be handed over."
David Parton also believes other Land Registry initiatives which benefit the consumer, but don't necessarily make money, could suffer if it was sold off.
"The Land Registry continues to make strides to combat property fraud and as a single public entity [is] well placed to engage with other stakeholders such as the police and Law Society to drive this forward," he says. "We are concerned that private-sector interests would be less focused on these initiatives or find engagement more difficult. They would likely be more concerned with profit motives." However, advocates of privatisation are confident these concerns can be overcome.
Sir Bryan Carsberg, president of the E-Homebuying Forum, argues that a sensible regulatory framework is all that is necessary. His organisation comprises a number of firms involved in the process of property sales and purchases, and many of them could be interested in fulfilling some of the Land Registry's current functions.
"The first thing would be to make sure important basic services that the Land Registry provides would continue so there would have to be a requirement to do that," he says. "Because it would be a monopoly service, there would have to be some sort of price control. And you need some control on quality of service too, because if you privatise a company and control its prices and not its quality of service, it is sometimes tempted to sacrifice quality of service in order to increase its profits."
However, the greatest concern raised by conveyancers is whether a private firm would be in the position to offer the same guarantees to title that the Land Registry does. Julian Sampson from Wright & Wright doubts how feasible this would be if run on a commercial basis. And it could result in long, protracted disputes about property ownership.
"The fundamental benefit from having a government-run system is the tenet that the consumer has a guarantee to title," he says. "If a private organisation took this forward, such a guarantee – if offered – would surely have to be tempered by insurance. Would we feel secure in our homes as a result?"
All you need to know about your land
The Land Registry registers title to land in England and Wales, records dealings with registered land (for example, sales and mortgages), and, most importantly, guarantees title to registered estates and interests in land.
Members of the public can download a title register from the Land Registry website for £4. That will enable them to establish who owns a property, what price was paid for it, and other stated information for property transactions after April 2000. It also registers any rights of way or restrictions noted on the register.
For the same amount, anyone can download a title plan defining a property. For £6.50, anyone can download an instant Flood Risk Indicator result showing the probability of flood for any registered property. This is produced with data supplied by the Environment Agency.
The Land Registry says its house-price index is the most accurate and independent index of its kind: it is the only index based on repeat sales and includes figures at national, regional, county and London borough levels.
Users can also generate lists of average house prices in any area of England and Wales for any range of months since January 1995. A price index for the area can be created and any two areas can be compared. Homebuyers can also use the Land Registry to research whether houses in their local area have been, or are likely to be, affected by subsidence.
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