Online Purchasing - A Click Too Far?
The dotcom revolution is firmly underway and we are seeing advances in virtually every area of our lives. Online conveyancing is potentially set to disrupt the current relationship between housebuilder and consumer, and to consider the implications property lawyer Phil MacLean has been discussing the topic with Sam Moore - a Legal Technologist in the firm.
Phil: “Sam, I’ll start with a tough one. The concept of online conveyancing is not particularly new. Registers of Scotland have tried this before with Automated Registration of Title to Land 1 and 2 (ARTL). I think it would be being kind to describe the uptake as limited. What makes you believe that private enterprise could enable this concept to find traction where a government backed scheme failed?”
Sam: “I believe there are two main reasons why a modern online conveyancing platform can succeed. Firstly, efforts such as ARTL were largely about replicating an existing process digitally, but didn’t offer anything new. For them, being online was the innovation. Clicktopurchase (which has already been used to conclude over £200m worth of transactions) offers various enhancements such as integration with digital signature technology, AI-powered online auctions and using the blockchain to create a record of all transactions. Secondly, there has been a market shift in consumer perception around online transacting with much more consumer confidence in digital solutions. A decade ago I remember debating about whether mobile banking apps would ever be trusted enough to get off the ground – last year over 22 million people in the UK managed their current account with such an app.”
Phil: “Interesting. Blockchain seems to be a bit of a buzzword though, and most people have little knowledge of the concept. So far as I understand it, blockchain will allow the record of your property ownership to be stored on a private blockchain which is verified by others within the same ecosystem. Is it possible that your bank balance, anti money laundering ID, mortgage details etc could all end up in blockchain, and allow an instantaneous deal to occur?”
Sam: “I suspect probably not. What blockchain does best is take a ‘snapshot’ of a current state of affairs and record it for posterity, in a way which is extremely difficult to manipulate or tamper with after the fact. Whilst ownership of a fixed asset like property is an excellent fit for blockchain technology, associated information such as your mortgage details or ID documents would quickly be outdated (at least too quickly for blockchain to be effective). What could be very valuable however is some sort of check or accreditation status – for example, while recording your Anti Money Laundering or Know Your Client documents themselves on a blockchain is unlikely to be helpful, there is a strong argument in favour of having some kind of approval status based on those documents being digitally signed and that signature being stored on the blockchain.”
Phil: “What about the contract side? Is there a risk an unrepresented party clicks through a contract offer (much as we all do when we buy anything online) and is contractually bound to buy a property? No developer wants to litigate with a defaulting purchaser, particularly one who could hide behind a lack of consensus/understanding. Will adoption of the platform not simply give rise to defaulting purchasers and, ultimately, additional litigation costs for the developers?”
Sam: “I think that’s certainly possible. The way clicktopurchase works is a little like eBay, in that when a potential buyer makes an offer the contract is not yet concluded until the seller considers the offer and clicks ‘accept’. However, if a user made an offer in error and didn’t withdraw it immediately, then conceivably you could have a scenario where a contract is formed, and the ‘buyer’ immediately seeks to withdraw. That’s one of the benefits of using solicitors in such an important transaction – you always have an experienced professional helping you to navigate the process. Developers may also need to complete comprehensive purchaser due diligence to ensure they are issuing offers to bona fide parties.”
Phil: “Storing data online in datarooms is a well established offering which we provide to our clients, but maintenance is labour intensive. Can online conveyancing platforms reduce the need for human input into these data repositories? For example on completion, all of the transaction documents are immediately uploaded into the developer’s dataroom, with relevant parts being more widely available to other purchasers who would get access to the dataroom to purchase their plot.”
Sam: “To an extent this is already happening. In a typical transaction via clicktopurchase some of the documents will be standardised and automatically uploaded to the buyer and seller’s own sections of a dataroom, while others need to go to each side’s lawyers for amendments and/or completion. On the conclusion of the deal full packages of title are exchanged automatically, having been compiled from supplied information. Online document execution platforms like DocuSign can also offer a great deal of flexibility in this area. One of the great strengths of these systems is role-based security, in that documents can be tagged as a buyer document, a seller document or both and only the correct parties can obtain them from the central platform. Combined with digital identity verification, this kind of system could significantly reduce the admin associated with running a dataroom.”
So in summary, online conveyancing is already here and working. Whether it is exploited fully remains to be seen. You will have seen in our guest blog that Miller Homes are already paving the way with their online reservation system. This appears only one step removed from offering the entire conveyancing process through an electronic portal, which would undoubtedly satisfy some buyers. However, there is no escaping the fact that for major purchases such as houses a degree of professional human diligence is still required, and that means solicitors will not become entirely obsolete within the process even as conveyancing technology continues to develop.
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