Property title transfer system 'safer than paper'

By Anne Gibson

In New Zealand, a landowner's title is guaranteed by the Crown. Photo / Martin Sykes
In New Zealand, a landowner's title is guaranteed by the Crown. Photo / Martin Sykes

New Zealand's property title transfer system is secure and changes have improved it, a Government official says.

Robbie Muir, the Registrar-General of Land, said electronic title registration was introduced in 2003.

"The system has been operating very successfully since then and is widely supported by the legal profession and the banking industry," he said.

Muir was responding after the Law Society prosecuted a lawyer who had withdrawn a caveat on a farm. The lawyer had no authority to withdraw the caveat and did not hold a Landonline authority and instruction allowing him to pull it, the society found.

Rod Thomas, an Auckland barrister and AUT lecturer, said he was worried about the system and the case gave weight to his fears.

But Muir said the pre-2003 paper-based system was more vulnerable to fraud than the electronic system.

"There was the potential for forgery and the land registry did not have reliable means of verifying the authenticity of land owners' signatures or establishing that proper identity checks had been undertaken. The paper-based system was effective for its time, but cases of fraud and forgery did sometimes occur, albeit rarely," Muir said.

"The Landonline system has more effective checks and balances. Access to the system is restricted to lawyers and conveyancers who have established their credentials and obtained the necessary digital certificate from Land Information New Zealand (LINZ).

"There is a strict statutory regime which requires lawyers to establish the land owner's identity and obtain authority, and to certify they have done so when registering any land transaction. The transaction must be digitally signed and can therefore be conclusively traced back to the lawyer who submitted it. LINZ operates a statutory audit regime to ensure lawyers are meeting their obligations.

"Given the large volume of land transactions registered each year, there will inevitably be isolated cases where things go wrong. The same was true of the paper-based system. However, under the Landonline system it is possible to quickly establish what has occurred and who is responsible. There are mechanisms in place for disciplinary action to be taken where appropriate.

"The example you refer to where disciplinary action was taken against a lawyer who removed a caveat without proper authority - apparently through negligence or incompetence - is a case in point. The fact that there have been very few cases like this in the seven years the system has been in operation speaks for itself."

New Zealanders have extra protection because a landowner's title is guaranteed by the Crown. In the rare event that fraud does occur, the guarantee means an innocent landowner would retain their property or, as a last resort, be entitled to compensation under the Land Transfer Act 1952, he said.

"The other very positive aspect of the Landonline system is the speed and efficiency of electronic registration. Land transactions that would have taken weeks or even months to complete under the paper-based system can now be registered the same day. New Zealand also ranks very highly in international comparisons of property registration systems," Muir said.

Chris Moore, a Meredith Connell partner and the Law Society's property law section chairman, said he knew of only one case of fraud since the introduction of e-dealing.

More frauds involving forged duplicate titles were committed before the electronic system came in, Moore said.

"My understanding is that the one fraud which did occur resulted from a very credible forged passport and photo credit card which were provided as identification. The reality was that the effort to create a forged duplicate title would have been far less than the efforts which the fraudsters went to in creating a passport and credit card.

"The state guarantee covered that instance. Since that event, the Verification of Identity Standard introduced in 2008 refined the identity process and required corroborating evidence, such as a utility account, in certain circumstances.

"In my view, the propensity for fraud is lessened by the introduction of the new e-dealing system and the statistics appear to back this," Moore said.

The Law Society case over the caveat withdrawal showed the veracity of the electronic system, Moore said, because it made the ability to track and trace who did what and when. That was far easier than if the withdrawal had been done via the old paper environment.

"If a lawyer is prepared to make a false statutory certification then it is likely that he would have been prepared to sign a withdrawal of caveat in the paper environment. Further, the problem was quickly detected and there was no room to argue as to who it was who certified and signed," he said.

He also encouraged people to keep perspective, saying one case compared to millions of electronic transactions proved the system worked. The World Bank had twice voted the New Zealand title system the world's most efficient.

"I suspect that there will never be a fraud-proof system but if there is fraud, there is a better chance of early detection. The reality with e-dealing is the ability to more readily and quickly detect fraud or unusual trends. The Registrar-General receives automatically generated reports on transactions that may indicate improper use.

"LINZ undertakes audits of random and specific transactions of every firm that carries out property transactions in New Zealand. My understanding is that LINZ has conducted at least one review of every such firm in New Zealand.

"The Registrar-General has revoked signing rights on more than one occasion where the audit has revealed issues," Moore said.

"Reinstatement will only occur when the Registrar-General is satisfied that systems are in place to avoid recurrence and there is a close monitoring programme. This did not previously exist and no behind the scenes analysis was ever conducted."

* New Zealand's only authoritative titles register.
* Maintained by the state's Land Information NZ.
* Property titles are transferred electronically.
* Not designed for public access or use.
* Full electronic lodgement of land title, survey plans.
* Lawyers get special codes to enable use.
* One lawyer prosecuted this year by Law Society.

- NZ Herald

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