Arrunada Seminar: Rod Thomas – Developing a Credible Automated System for Agency Registration under a “Registration of Rights” Model

21 January 2013 at 4:04 am 2 comments

| Rod Thomas |

Developing a Credible Automated System for Agency Registration under a “Registration of Rights” Model

In his book, Arruñada rehearses the debate between mere recordation of deeds versus registration of rights. Under the “registration of rights” model, the registration event may be backed by a State guarantee of ownership, as is the case under a Torrens system. Under such a system, the need for a credible automated system is paramount. This is because the registration event is normally conclusive as to title rights, even in the face of third party ineptness or fraud in undertaking the registration.  By way of example, in Torrens systems, the transaction, once completed, can conventionally only be overturned where the transferee is found to have been fraudulent in obtaining the registered title interest even if the dealing is void at law.

Under a registration of rights model there is a heightened sense of vulnerability where the registration even is undertaken by an agent.  This is because the agent and not the transferee may have been either fraudulent or inept in undertaking the transaction. An example of such a system in operation is the Landonline System, as it presently exists in New Zealand, where only agency registration is possible.

Arruñada also argues that for a registration system to be successful, it needs to be both cost effective and accessible. Consequently a tension arises under a registration of rights model, operated by agency registration. On the one hand effective measures need to be put in place to protect consumers from inept or fraudulent transactions. On the other hand, a system which is overly complex, or expensive to operate, is unlikely to be successful.

Such concerns may be less pressing in countries where digitalised signatures already play a key role in authorising transactions. In those jurisdictions it appears to be a relatively straightforward procedure to incorporate the need for the existing interest holder’s digitalised signature before a transaction can occur. What however of jurisdictions such as the United Kingdom, Australia or New Zealand where digitalised signatures are not in ready use and agency registration is common?

Various possibilities come to mind for these other jurisdictions.  One may be imposing a system where each dealing must first be authorised by a private PIN number known only to the existing land interest holder.   This however may be cumbersome to operate and regulate.  Also, PIN number may not be securely kept, so abuses could still occur.  Another possibility may be to incorporate “flags” into the automated system, so the interest holder is notified of any proposed dealing with his or her interest, and can therefore block the proposed registration before it occurs.

The question therefore needs to be asked; “what possibilities exist under a registration of rights model  (in the absence of electronic signatures) for setting up a safe and cost effective automated system, operated by agency registration?”

Rod Thomas. Senior Lecturer in Law, Auckland University of Technology, New Zealand

Entry filed under: - Lien -, Institutions, Law and Economics, New Institutional Economics, Theory of the Firm. Tags: .

Handbook of Organizational Economics Hard and Soft Obscurantism

2 Comments Add your own

  • 1. Benito Arruñada  |  22 January 2013 at 2:05 pm

    Thank you for sharing this case, which is very interesting. Notification of changes in the content of the register to affected rightholders seems a sensible solution not only for solving the temporal lack of digital signatures but also as a backup system for the future. Empirical signs abound on their effectiveness: their use in all sort of online registrations and electronic banking; and, for real property, the commercial initiatives launched in countries as different as England and Costa Rica.

    I also agree with Professor Thomas that there is a tradeoff between, on the one hand, the cost and time of registration procedures and, on the other, the value of the registration services. Given that this value hinges on the degree of legal certainty, when managing the tradeoff, reformers should be careful about possible discontinuities and cumulative effects. Discontinuities may arise from sudden losses in the level of trust: if judges observe an increase in registration failures they will be reluctant to enforce the conclusiveness of the register, and the system may revert to recordation, which was not the intended result. Cumulative effects may also result from the slow entry into the register of claims that have not been fully purged and whose existence may pass unnoticed for years until the average legal quality of the registered titles is substantially worse.

  • 2. Rod Thomas  |  23 January 2013 at 6:06 pm

    Txs Benito for your thoughts. I would also be interested in contributors thoughts/experiances about setting up cost effective alternaltives for safe, agency registration, in the absence of digitalised signatures. We already have, as an example, New Zealand’s Landonline. I query whether that system is safe, given it is controlled by the agents who operate the system. No digitalised signature or other client authorisation is required under Landonline. It relies on the agents’ certification they have authority to deal.

    Rod

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