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Global experiences with public private partnerships for land registry services: A critical review
The purpose of this paper is to provide an overview of experiences globally with LRS PPPs and privatization proposals. Readers may recall that we published the first part of the three parts of the paper in the last issue where emphasis was on understanding privatization and Public Private Partnerships. Here we present the second part of the paper. In this section, author shares some of the global experiences from Canada, United Kingdom and Malaysia
PART B – Global experience
This report presents ten case studies on LRS ASD approaches – 6 where PPP has been fully adopted; two outright rejections (one of which also considered full privatization); and two which have adopted alternative approaches. Any review should be objective and hype-free. Apples should be compared with apples, and where it is a matter of comparing apples with oranges, there is a need for explicit clarifications. The respective case studies endeavor to consider the following:
▪ The political, economic and fiscal situations of jurisdictions at the time that ASD was first considered
▪ The capacity of the land registries to deliver services
▪ Requirements for investment in technology to modernize service delivery
▪ Due diligence undertaken
▪ The deal
▪ Consultation with stakeholders – professions, business and the public.
Notably, almost all of the cases reviewed in this report, are jurisdictions which use the Torrens title system.29 The exceptions being Ontario and UK. Most Canadian provinces use the Torrens system. The Australian and New Zealand cases are Torrens. Also, the two cases from Asia, viz. Malaysia and Philippines, are Torrens.
Ontario Province, Canada
Challenges faced by Ontario 1980s-90s
What drove Ontario went down the LRS PPP path is quite a compelling account of developing innovative solutions in troubled economic times. Ontario’s circumstances were anything but the scenarios of NSW, SA and now Victoria – strong economic performance, low interest rates, low inflation and wellcapacitated and resourced modern land registries. The initial Ontario decision wasn’t a political expedient to realize a quick cash windfall from a recycled asset. In sum, the Ontario Land Registries were struggling to deliver services and modernize (automate) and this came at a time when the country plunged into a severe recession.
Former Deputy Minister Daniels, responsible for establishing the Ontario LRS PPP, provides a bleak but sobering, first-hand assessment of land registry offices, back in the 1980s:
“Imagine having to queue in tents outside a government office to fill out documents. That is what used to occur at land registry offices across Ontario. Government had no space inside for them inside and did not have enough staff to cope with the volume This was happening during a real estate boom in mid-1980s, the land registry system was a very archaic and fragmented organization. It had 67 offices across the province containing. land records of some 3.8 million parcels of land and 200 million paper records.
Registration and search volumes were steadily rising and land values increasing at the time.
Customers were required to close their land deal in person and on paper in their own limited jurisdiction. On the operational front, the government had a number of pressing challenges. The sheer volume of the paper-based land registration system was becoming unmanageable while, at the same time, constructing a good chain of title in the registry system was difficult since land records were not parcelized.
In the late 1980s, after receiving reports from the Law Reform Commission and Law Society of Upper Canada plus completion of a successful pilot exercise, the Ontario Government passed legislation to automate the land registration system. The Land Registry Reform Act of  subsequently gave legal authority to an electronic registry record and work began on POLARIS – the Province of Ontario Land Registration Information System.
POLARIS is comprised two related databases – a real-time title database containing title information that replaces paper documentation; and, a map database that is a graphical index of individual properties which is updated after information is recorded in the title database.
In 1987 land registry officials realized the system was designed to modernize services behind the counter not with needs of the customer in mind. It was also designed without the awareness that the internet could change the customer interface. When the public service leaders realized they could have a system that would provide customers real time and online services. To upgrade to this new service would cost an additional 150 million dollars, would require 1200 additional staff and take 12 years complete. Given the state of the economy and the tight pressure on public spending, it was clear that this level of investment was untenable”30
Daniels’ comments on the Ontario economy are very important, as it was probably the major influence on the government’s decision to adopt the PPP. Ontario’s economic and fiscal circumstances were bleak, as indeed were other provinces at that time:
▪ By 1990, the persistent inflation of the 1970s and 1980s had pushed the consumer price index (CPI) to a level nearly four times as high as in 1970.
▪ During that whole inflationary period, many Canadians sought to protect themselves from the effects of inflation through indexed wage contracts and by investing in the housing market. Others saw an opportunity to benefit from high inflation by speculating in real estate or other assets. Since many of these transactions had been financed by borrowing, debt had risen to high levels.
▪ When the Bank of Canada’s antiinflationary policy actions in the late 1980s finally convinced Canadians that inflation would be brought under control, the inflationary excesses that had built up contributed to a severe recession in 1990–91.
▪ Canada’s other major economic problem in the early 1990s was large budget deficits—federal and provincial.
▪ By 1994, the Canadian dollar came under strong downward pressure, and interest rates rose sharply (in excess of 13 percent) across all maturities as investors demanded even larger risk premiums.
▪ Canadian governments (federal and provincial) responded “forcefully and effectively” in the mid-1990s to the need to cut fiscal deficits and slow down the accumulation of public sector debt. The overall government sector moved from a total deficit of close to C$45 billion or 6 per cent of gross domestic product (GDP) in 1995, to a balanced position in 1997 and 1998, and to surpluses thereafter. Moreover, net public debt as a ratio of GDP fell from close to 104 per cent in the fiscal year 1995-96 to an estimated 80 per cent in 1999-2000.31
In preparing this paper, the author communicated with the former NSW Registrar-General, Kevin Nettle, who specifically commented on how challenged Ontario was in the early 1990s, which he observed during his visit to advise on titles automation, drawing on the advanced status in NSW.32
Ontario’s decision for the PPP
The Ontario Cabinet decided to explore a partnership with the private sector after positively reviewing the approach taken by the Province of Quebec in the James Bay Hydro-electricity33 construction project, where as an alternative to direct contracting, a strategic alliance was established between the government and the private sector contributing equity and both providing staff resources.
Prior to engaging in negotiations with the private sector, Ontario established a committee of Assistant Deputy Ministers (one of who was Arthur Daniels) to review and assess what a land information system should look like. This group included a range of key ministries: Transportation, Natural Resources and Finance. The team developed a Request for Information to determine whether there was any interest from the private sector in collaborating to develop a land information system across Ontario. Seventy-five companies of varying sizes attended the first meeting. The government considered that there were too many companies so they were asked to form consortiums. They merged into two large partnerships that included banks, surveyors, lawyers, and investment firms, with two companies submitting competitive bids. What followed was almost two years of negotiations to determine which would be the most effective partner:
“Normally, things in the private sector move a little quicker so it was important to explain to the private sector partners the need for government to carry out its due diligence. It was a very thorough process of negotiating and trying to get the best deal.
Patience was needed because Teranet was not going to make an investment return within the first ten years. The investment was initially focused on building a new system: hundreds of millions of dollars into imaging, conversion and Research and Development. As the company automated the processes it received the profits from the electronic services; and this acted as a compelling incentive for sustaining progress.
Creating the partnership that established Teranet was a challenging proposition. Commitment and support had to be obtained from a number of powerful stakeholders including the Law Society of Upper Canada.
Following public tender and an arm’s length audited selection process, the partnership was struck. The result – the private sector’s spirit of innovation and entrepreneurship blended wonderfully with the public sector’s aura of stability and accountability.
In this newly formed partnership, Teranet was responsible for building automated LAS [Land Administration System] and providing electronic search, registration and certification capabilities for the Province’s land registry system. The new system has virtually replaced (99.9%) the outdated paper-based land registration system and converted from Registry lands to Land Titles using guaranteed ownership.”34
Thus, Teranet was established in 1991 as a partnership between the Province of Ontario and the private sector, with the specific goal to automate the province’s cumbersome, paper-based land administration system and run its operations.
Ontario sells it interest in Teranet
In 2003, the Ontario government sold its 50 per cent stake in Teranet, the province’s electronic land registry service, for C$370 million. The sale has created considerable controversy. The sale of government’s stake, effectively valued Teranet at C$740 million. The controversy arises because Teranet was operating with profit margin of 62 per cent – sales of C$190 million and a profit of C$118 million. Analysts have assessed that a more realistic estimate of Teranet’s total value would have been closer to C$2 billion, not C$740 million. This was subsequently raised by the enquiring media as being a fire-sale price to the detriment of the public purse. However, what drove the sale of the government’s stake in Teranet was Premier Eves, who after only 18 months as premier was facing an election and claimed that the province did not have a budget deficit, and it was the sale of its stake in Teranet that was filling the hole. Eves lost the election, in October 2003.35, 36 Furthermore, as raised later in this case study, the huge cost overruns required a very significant injection of extra funding, far in excess of the C$370 million received and the initial investments by government. That Teranet was also far behind schedule is further cause for concern.
Borealis acquires Teranet
In November 2008, Borealis Acquisition Corp. announced its takeover bid for Teranet. Borealis is infrastructure investment arm of the Ontario Municipal Employees Retirement System (OMERS). The total acquisition figure was around C$1.6 billion.37
Lease extended to 2067
In November 2010, Ontario signed a 50- year contract extension until 2067 with Teranet’s owner, Borealis Infrastructure, for an upfront payment of C$1 billion.38 This was ahead of schedule, as the original agreement ran to the end of 2017. From 2017, under the new agreement, Teranet will pay annual royalties of C$50 million a year. So, in addition ot the annual cash flow benefits to the province, the upfront payment also saves the province up to C$50 million a year in debt repayment charges. This would seem to be a sensible business decision taken by government, with the primary driver for the early extension being reduction in provincial debt. However, was it the best deal for the government? The period of the lease would make any recovery by the government all but impossible in the event of contract failure.
Fee setting and transparency concerns raised
In Ontario, the Electronic Land Registration Services Act, 2010 (ELRSA) received Royal Assent from the May 18, 2010. The law created the position of Electronic Land Registration Services Commissioner to oversee and regulate the financial and operating relationship among the government, Teranet and third party service providers. Under this law:
▪ The ELRS Commissioner’s records are exempt from public scrutiny under the Freedom of Information (FOI) and Protection of Privacy Act.
▪ The law gives the government a free hand to allow third parties to charge fees in addition to the prescribed government fees.
The exemption of the Commissioner’s records from FOI impacts transparency.39
It is widely reported that most fees have now increased by an average of 350 percent. At the time ELRSA received Royal Assent, Teranet surcharges for title searching started at C$10. This is now widely reported as now being C$28. In Ontario, Teranet imposes a C$10 service charge to register documents, in addition to the government fee of C$60. In comparison with other provinces such as British Columbia, the search fee starts at C$1.50.
There have been impacts on the land transfer tax in Ontario, and in particular Toronto, the provincial capital. Effective from April 1, 2016, Toronto imposed an administration fee of C$75 plus HST (harmonized sales tax) – total C$84.75 – to cover the cost of collecting the municipal land transfer tax on the registration of all titles transfers. Teranet itself charges the C$75 fee, so that is on top of this. As it has been described, it is a tax on a tax.40 In preparing this report, the results of complaints to the provincial Ombudsman concerning Teranet were not found.
Real estate and money laundering concerns
Fraud and corruption has emerged as a significant issue across Canada’s real estate sector. Buyers, sellers, realtors, developers, lawyers, mortgage brokers and banks have been implicated in various fraud and corruption cases. Money laundering, lying about income and occupation, fake bids, value falsification, title fraud and falsely claiming as owner-occupied are common real estate frauds in Canada. In 2012, Equifax41 uncovered C$400 million of mortgage fraud in Canada, which experts suspect represents only a fraction of the cheating taking place in the country’s real estate market. It has been reported some Canadian banks allow wealthy Asian investors to skirt Chinese law by helping them bring in large amounts of money, which is then often used to buy real estate. Canada is reported to be an attractive destination for Russian oligarchs. The Panama Papers leak of documents from the law offices of Mossack Fonseca42 brought to light a rather high level of referrals by Canadian banks to the Panamanian offshore specialist.43
As Canada is increasingly sought as a tax haven, and also for anonymity, the most attractive lure to foreigners is the Ontario limited partnership (LP), which is a unique tax structure is marketed globally by dozens of online firms promising quick and easy anonymity and shelter from taxation. Ontario’s corporate and land registries allow corporate concealment, where owners of companies and property can hide behind company names established by their lawyers and accountants. Vancouver in British Columbia and Toronto the capital of Ontario are the two key destinations. A recent study by Transparency International Canada found it impossible to determine the identity of nearly half the owners of the most expensive Vancouver homes bought or sold over the last few years. Their names are hidden by numbered companies, private trusts, figurehead directors and impenetrable corporate structures.44
This paper has specifically raised this growing concern in Canada for consideration in the Australian context were access to land registry information by Federal and State police may be compromised by private sector operation of land registries, as has been reported in Canada.
The Ontario LRS PPP experience with Teranet continues to be cited as a successful example of using private finance to modernize an archaic government service at a time when the government lacked funds in a tight fiscal environment. Teranet modernized the Ontario LRS and has continued developments with digital mapping, electronic search and secure collaboration, e-signature and e- registration and certification.
The Ontario government’s own reform commission cites the success of the PPP:
“Teranet’s agreement with the Ontario government is an example of a publicprivate partnership in public service delivery that modernized the way customers conduct electronic transactions in real property, title and writ searches, and registrations. Since the introduction of electronic registration in 1999, over 15.3 million documents have been registered electronically. Additional private-sector partnerships that improve public service delivery and quality need to be sought and attained.45
Princeton University also published a very positive report on the Ontario LRS PPP experience.46
On the other hand, the early failures of the Teranet IT automation and Ontario having to invest further funding, gets little attention. Given the PPP commenced in 1992, and it was not until 1999 that automation commenced, there would appear to be issues that have not been reported. Nonetheless, over the longterm the automation can be judged to be a technical success. However, the “technical success” of Teranet, came at a huge cost overrun, and ran well past its anticipated completion date. The Ontario Legislative Assembly’s Standing Committee on Public Accounts reported the findings of the Provincial Auditor:
“In 1991, the Polaris project had an original cost estimate of $275 million and an anticipated 1999 completion date. Then, in April 1999, Teranet provided the ministry with an estimate of over $700 million to complete the project and a project completion date of 2010. Then, according to a consultant hired by the ministry, due to significant uncertainties in the assumptions used by Teranet, the project could cost over $1 billion. Consequently, the ministry’s risk, costs and benefits with respect to the project have changed considerably.”47
Thus, reporting of the Teranet experience in Ontario is a mixed bag.
In 2012, the provincial government of Manitoba government announced that it would be “selling” The Property Registry (Manitoba Land Titles and Personal Property Registry) to Ontario-based Teranet, a private firm.48 The Property Registry then generated around C$11 million per annum in each of 2010 and 2011. It was a time when there was significant fiscal restraint in government and Manitoba was ranked as having the worst performance in governance of all provinces. The Property Registry required investment in technical systems development for automation, which it was unable to finance out of public funds. So, there was legitimate rationale for engaging a private sector partner. It is noteworthy that the 2013 Manitoba provincial budget committed to “sell off” C$83 million in government assets. The asset sales were a key part of the fiscal plan to keep the province’s deficit to C$460 million for the fiscal year. In addition, the government was to cut program spending by C$128 million.49
The government advised of the following key benefits of the deal with Teranet:
▪ An upfront lease payment of C$75 million would be paid to the government;
▪ Teranet would invest C$35.5 million in systems development;
▪ There would be estimated annual royalty payments of C$11 million in 2013, increasing to C$24 million at the end of the 30-year licensing agreement;
▪ Employees of the existing Property Registry would be transferred reducing the size of government by more than 100;
▪ Teranet would not lay-off employees and will protect employee benefits.
Did the government get a good deal? There doesn’t seem to be available any analysis of the real return over the lease period compared with the retaining the operation under government. Furthermore, there seems to be no economic assessment of the net social benefits.
In terms of risk mitigation, the government advised of the following:
▪ The Government would maintain the authority to set rates charged by Teranet for services;
▪ All existing Property Registry offices would remain open;
▪ Data such as land survey and property titles, would always be owned by the Province and protected by privacy legislation.
These are similar for most LRS PPPs.
The Canadian Center for Policy Alternatives (CCPA) subsequently raised some serious concerns about the lease to Teranet, which have gone unanswered by the government:
“When tax payers build a valuable data base and a private corporation reaps the benefits by controlling access to that asset so it can expand its product base into non-controlled, proprietary products, we see why a private corporation would find this deal attractive. But why would an NDP [New Democratic Party] government, committed to a strong public sector, hand this asset over?
Will the amount paid in royalties (which to start at least, are no more that the revenues already transferred to the province) adequately compensate Manitobans for their loss of control over this public asset?
When all is said and done, what will the impact be on quality of service?
Details of the Property Registry sale notwithstanding, privatization of this asset in itself may not make a big difference in our day-to-day lives. But it does beg bigger questions: why, if protection of Manitoba Hydro [the government-owned provincial electric power and natural gas utility] was paramount in the NDP’s re-election platform, is this government willing to let our Property Registry go so easily, without even consulting the public? [Presumably, Manitoba Hydro had a strong and influential union base that had powerful political influence.]
Is the concept of public assets for public good not the same with this smaller agency?
Given the potential profit-making capacity this public resource has, is Teranet paying enough?
Could the public sector not develop this resource, rather than handing it over to the private sector?”
Nova Scotia, up until 2015, had operated highly-decentralized land registries down to county level. Following a government decision to reduce costs, the province decided to close thirteen Land Registry offices, cut some staff and re-deploy other staff and consolidate to five registries in more central locations. The decision was expected to save the province around C$1.8 million per annum. The rationale for cost cutting and reduction in staff was also a reflection of the way doing land registry business had changed. Seventy per cent of transactions were being conducted online, while twenty-five percent were mailed or couriered. Thus, only five per cent of the land transactions were completed in person at the county Land Registry offices. There used to be an office in every county. Closures began the end of June 2016 and are expected to be completed by the end of 2017. Thus, it was inevitable to restructure registry offices in Nova Scotia.50
Nova Scotia also looked at the overall organizational, technical and financial aspects of its registry operations and in doing so looked at both privatization and a PPP. The government’s review extended beyond the land registry and also covered two other registries, viz. motor vehicles and joint stocks. The province invested C$825,000 to undertake its review. In April 2016, after it had completed the seventeen-month long review was completed, the government reached the decision to not pursue privatization or PPP for its registries. As such, this represented a major diversion from the huge PPP investor sector of Canada with decades of experience, and much of it quite successful.
The review which especially looked at overall revenue expected to be generated, initial payment and annual returns – represented only a marginal gain for the provinces. Up until 2016, the land registries collectively generated around C$105 million net revenue per annum. It is significant to note that this is net revenue, after all operating accounting for all costs.
“We have decided an alternate service delivery approach with a private sector partner is not the right approach. It is not the best option … a government led approach offers certainty.”51
But there were other factors that may have influenced the decision, which included:
▪ Very active opposition and lobbying by the private sectors, including land surveyors.52
▪ Protests by the 320 staff of the registries
▪ Strong public sector union lobbying, especially in the media.
Furthermore, the provincial government is Liberal, which is at the center of the political party spectrum in Canada, tends to be more public sector oriented.
Nova Scotia land surveyors’ opposition was especially vocal, and drew attention to the Ontario and Manitoba experiences with Teranet, especially the tripling of land registry fees and reduced information access.53
The provincial government also was well aware of the magnitude of the investments required, especially in IT to upgrade the registries:
▪ The joint stocks registry, with around 175,000 transactions per year, required C$4 to 5 million in upgrades.
▪ The land registry, with around 200,000 transactions a year, required C$3 to 4 million to in upgrades; it does 200,000 transactions annually.
▪ The registry of motor vehicles, with around two million transactions per year, required s C$25 million in upgrades.
There was reported to have been very strong private investor interest expressed to take on the leasing of the registries under a PPP. Five joint ventures consortiums, all considered to be highly competent were interested. Notably, these included Teranet, which has decades long contracts to run registries for the provinces of Ontario and Manitoba as well as Jamaica in the Caribbean.
The private sector, also lobbied hard in favor of leasing. The media reported that the Premier’s 2013 campaign manager, Chris MacInnes, was hired by Teranet to lobby the Nova Scotia government on “government procurement” and “privatization and outsourcing.” 54
In sum, the Nova Scotia government considered the representations of both opponents and proponents. It undertook the necessary due diligence, which included an independent assessment of the business case, and reached the decision to reject moving to either privatize or a PPP.
The UK has twice looked at either full privatization or partnering with the private sector for the operation of HM Land Registry, in 2014-15 and again 2015-16.
There are three separate Land Registry organizations in the UK:
▪ HM Land Registry covering England and Wales under the national UK Government
▪ The Land Registry Service of Scotland – Registers of Scotland (RoS) is the nonministerial department of the Scottish Government responsible for compiling and maintaining records relating to property and other legal documents.
▪ The Land and Property Services (LPS), is an agency of the Department of Finance of the Northern Ireland Executive. The agency, created in 2008, includes the Ordnance Survey of Northern Ireland (the OSNI).
However, it is only HM Land Registry that directly comes under authority of the national government, and it was only this land registry that was the subject of an alternative service delivery model.
First attempt: 2014-15
In January 2014, the Government issued a public consultation on its proposal to create a service delivery company to carry out the day-to-day process of land registration. The government saw the opportunity to realize a £1bnplus upfront payment with an expected on-going revenue stream. It is very clear that the government was looking alternatives including: (i) wholly Government-owned company; (ii) privately; or (iii) PPP approach. The adoption of any option would have been to regulatory control from the Office of the Chief Land Registrar, which would remain part of the UK government.
This proposal generated considerable controversy in the media and was opposed by Land Registry staff. There was also opposition to the plans from legal professionals and other users of Land Registry services. In July 2014, the Government announced that, having considered the results of the consultation, whilst it continued to consider that there were considerable benefits to a service delivery company, it felt that further consideration was necessary and therefore would not be proceeding with any changes. It is also notable that the State Secretary for Business, Vince Cable, vetoed the privatization during the coalition because he believed that would:
“…it would not have raised much money. The only rationale behind the proposed sell-off was dogma. I am glad the minister has seen sense.”55 It is important to note that as there was a general election to be faced in 2015, the decision to drop, was driven by the looming election and fear of a public backlash. In 2015, the Conservatives won outright victory, enabling the Cameron government to govern alone, but with a slim working majority of just 12 seats.
Notably under the first Cameron term, it was the Chancellor of the Exchequer, George Osborne that pursued austerity policies aimed at reducing the national debt, including privatization and PPPs. Arguably the inclusion of the Land Registry in such considerations was sensible government fiscal policy management and working through a process of extensive consultations with all stakeholders all very reasonable and good governance.
Second attempt: 2015-16
After the Conservatives won the 2015 general election, Prime Minister Cameron reappointed Osborne as Chancellor in his second government and gave Osborne the additional title of First Secretary of State. Within months of being returned to government, in November 2015, Chancellor Osborne reopened consideration of “privatizing” the Land Registry. The government looked at further proposals for operation of the Land Registry and conducted extensive public consultations over a two-month period, March 24 to May 26, 2016.
The governments public consultations were led by the Department for Business Innovation & Skills (BIS) – “Consultation on Moving Land Registry Operations to The Private Sector “. The public-sector union (FDA) was especially critical of the proposals and its published response is most explicit, especially in terms of risks:
▪ Risk of creating a structure which contains fundamental flaws and is not fit for purpose
▪ Risk inherent in using a contractual model to achieve stated ends
▪ Risk of indemnity liability falling on the state and the indemnity scheme not being properly administered
▪ Risk to data held, and its availability, and risk of fraud
▪ Risk to the government’s immediate and wider economic objectives.56
The FDA raised concern that the government was not looking at alternative approaches, but was more concerned about fast-tracking: “It is clear that a decision has already been taken about a preferred model and so the whole notion of ‘consultation’ appears somewhat illusory.”57
FDA was incorrect regarding its claim that the BIS did not present alternatives, when indeed it presented three:
▪ Option 1 variant – operating concession
▪ Option 1 variant – mutual Joint Venture
▪ Option 2 – Full privatization with independent economic regulation.
However, the government was certainly limiting options and the BIS document most definitely proposes fast-tracking.58
Comment by the highly regarded “The Economist” magazine, in November 2015, advised of the need to look at the big picture and the real return, not just the upfront payment received:
“Privatization is no panacea for profligate governments. Selling assets is a one-off that provides only brief respite for those addicted to overspending (though, once sold, assets – from ports to companies – tend to generate far more business). It also must be weighed against the lost revenue from well-managed state companies. Selling when markets are depressed is generally a bad idea.”59
Following the 2016 Brexit referendum of June 23, 2016, and the subsequent resignation of PM Cameron in July 2016, Osborne was sacked by newly appointed Prime Minister Theresa May and replaced by Phillip Hammond. May had a mutually adversarial relationship with Osborne. In the 2016 Autumn Statement60, Chancellor Philip Hammond put an end to speculation about the future of the Land Registry:
“Following consultation the government has decided that HM Land Registry should focus on becoming a more digital data-driven registration business, and to do this will remain in the public sector. Modernization will maximize the value of HM Land Registry to the economy, and should be completed without a need for significant Exchequer investment.”
Former Chancellor Osborne had such strong ownership of the government’s privatization agendas, that his removal was an opportunity to remove his brand from everything he had pursued. Notably the actual future model for the Land Registry operation – privatization or PPP – had never been decided, before his sacking.
The UK media widely reported the decision by the government as the “shelving of privatization” for the second time. A Land Registry deal was part of an overall package of “government sell-offs to raise £5bn. Notably the Land Registry “sale” was to be included in the Neighborhood Planning and Infrastructure Bill, which was enacted in April 2017. 61 It was also described as “quietly postponing”.62
It is fair to speculate, that we have not seen the end to the UK Land Registry saga, given the media labelling it is “shelved for now”. The election outcome of June 2017 for the May Government, which saw it lose its absolute majority and establish a coalition, has certainly put an end to any Land Registry changes for at least the short term.
Opposition to changing the status of HM Land Registry
The UK government’s own watchdog, the Competition & Markets Authority (CMA) advised that the privatization would give a private organization monopoly over commercially valuable data and would reduce access especially to conveyancers. The private partner would inhibit private search companies and other private users access to ordering platforms and other systems to check on property locations and other parcel information important for sellers and buyers. CMA warned that it could make it harder and costlier to access information, leading to a lack of transparency over property ownership.63, 64
Public consultations were undertaken by the government for each of the two attempts. The first attempt’s consultations in 2014, through BIS, resulted with an overwhelmingly by 91 percent rejection by respondents who didn’t agree that privatizing the organization would result in a more efficient Land Registry. On top of that, 89 percent said they would not be comfortable with the private sector processing land registration information.65 The second attempt’s consultation in 2016, again through BIS, drew similar high levels of rejection.
Public Petition – There is reported to have been two public petitions, one for each of the government’s attempts. The government’s first attempt attracted a petition signed by more than 250,000 people.66 For the second attempt around 318,000 people signed. Given the combined populations of England and Wales are around 56 million, it could be argued that these petitions were not significant evidence of public opposition.
“We Own It” Campaign – We Own It is a civil society organization which campaigns for public services, which are publicly owned, accountable and “run for people, not profit”. The organization secured strong support from the Labour party. It was highly successfully in combatting Chancellor Osborne. Every form of privatization he raised they battled over publicly, using both the media and social media to great effect.67 The defeat of privatization of the UK Land Registry was celebrated as a major victory by We Own It. The organization’s website provides an excellent summary of its efforts which include a detailed report68 jointly prepared with the New Economics Foundation (NEF) covering a number of agencies that the government planned to either privatize or seek private partners to finance.69 It is significant that NEF‘s research determined that the UK government would expect to receive negative financial returns after twenty-five years of private sector operation. The analysis seems the recommended methodology from the UK Treasury’s “Green Book” which uses the Social Time Preference Rate (STPR) to determine present values.
Government Consultation – The government’s own consultations for the first attempt on transferring the operations of the Land Registry to a private company in 2014, resulted with an overwhelmingly by 91% rejection by respondents who didn’t agree that privatizing the organization would result in a more efficient Land Registry. On top of that, 89% said they would not be comfortable with the private sector processing land registration information.70 The second ate
John Manthorpe – The highly respected former Chief Land Registrar (1990- 96), has been a very public expert figure, opposing changes to the registry, especially raising the risks:
“The registry’s independence from commercial or specialized interests is essential to the trust and reliance placed on its activities. It would not be possible for actual or perceived impartiality to be maintained, or public confidence sustained, if a private company were to assume responsibility for the maintenance of a public register.” 71
Conclusions on UK experiences
In sum, the UK bowed to public pressure to not pursue privatization or PPP for the Land Registry on two occasions, and if it not been for Brexit leading to the resignation of PM Cameron, the Chancellor Osborne agenda for asset sales, full privatization or PPP, would almost certainly have come to fruition. Osborne’s motivation was entirely fiscally driven, given the impact of the 2008 economic crisis, that the UK sought to recover from through major economic restructuring. The government certainly heard the noise of public opposition to “privatization” of the Land Registry, the first time around. However, the second time around it was well placed to ignore, as a Cameron government didn’t have to go to the polls until 2019. Brexit brought a change to all of that, and Cameron departed, Osborne was replaced and PM May’s call for an early election pushed her into a minority government. The government’s own consultative processes through BIS, left much to be desired and the concerns raised by the major union, the government’s own CMA and ICO are compelling. Arguably the merits of any of the proposed approaches were lost in the processes followed.
Malaysia uses the Torrens land registration system. It has long experience in PPP across many sectors and services, commencing with establishing the legal basis for private participation in infrastructure (PPI) in 1981. PPP commenced around 2005. Malaysia has a special PPP unit under the PM’s office and the current guidelines came out in 2009. Overall, the guidelines are quite robust.72
Malaysian PPP experience has been mixed, with the water sector being especially problematic. The LRS PPP, called e-Tanah73 (Electronic Land), was established in 2006. The government’s rationale for this PPP was that IT could solve both corruption and incompetence of government service delivery. However, e-Tanah failed and this was well-reported in the Malaysian media and also by the Malaysian Bar Association.74 The primary reason for inclusion of the Malaysian e-Tanah PPP in this report is that it failed. e-Tanah land administration system, costed at around RM66 million (A$20 million) was meant to be fully operational by 2007. The system was implemented in Penang as a pilot project and the computerized system was supposed to replace all manual documentation and paperwork in relations to the work processes of the state Lands and Mines Department. The Auditor-General’s Report for 2011 reported on the faults in the system, in which out of nine modules in the system, only four were fully operational while the other five were not operational and does not cater to the needs of the department. Despite the implementation of the computerized system, key processes were required to be done manually because five key modules were not operational in the system. The five modules covered the processes for land development, enforcement and auction, land disposal and land acquisition.
The initial probe was undertaken by the Penang Public Accounts Committee (PAC) has kicked off the official enquiry.75 Ironically, the government continued to promote the success of the failed e-Tanah system in professional fora, despite the PPP being cancelled and work mainly reverting to manual.76 What is significant in this case is the PPP was to provide the IT infrastructure to support the land registry system rather than undertake full land registration operations. Furthermore, the system was still at its Penang pilot site and had not rolled out nationally. For those reasons, Malaysia controlled the failure of this PPP. However, solving the problem became a ten-year ordeal. Although the e-Tanah system was reported as failed back in 2007, 77 the Auditor-General’s report was only delivered in 2011, as mentioned above.
In June 2017, Malaysia announced it was back into a new e-Tanah, and it launched “e-Tanah Go-Live” system. The new system is again under a PPP concession. The government has maintained its objective to conduct land administration digitally. This is considered by the government as being a key requirement to increase the country’s capacity to attract international business investment. E-Tanah is the land administration and management system operated electronically using the concept of ‘Single Point of Contact’. The PPP follows the Build, Operate and Maintain (BOM) mode and the private concessionaire, Puncak Tegap, was appointed by the Ministry of Natural Resources and Environment to build and maintain the system for 14 years (two years to build the system, 12 years of maintenance), depending on the date the system started operating in each state. The system is intended to integrate the operations across government land administration agencies, such as the Malaysian Survey and Mapping Department, the Malaysian Centre for Geospatial Data Infrastructure and the Director-General of Federal Department of Land and Mines.
Malaysia’s motivation for the e-Tanah PPP would seem to be sound. It has had a troubled implementation history and government has rightfully stepped back in and made extensive enquiries into the causes of failure, with the Auditor-General also engaged. The recently re-launched new e-Tanah PPP, has again sought private sector investment to develop and operate the system. It is clear that government was not scared off by the initial failure, and was determined to follow the same PPP path, to enable private sector financing to invest in new technology and deliver services. Only time will tell as to whether the decision to pursue the PPP for a second time was the right one.
29 Torrens was first adopted in 1861 for the then colony of Vancouver Island which is now part of British Columbia. British Columbia continues to use a modified version of Torrens. Since 1885, Ontario uses a system based on the English Transfer of Land Act (1875) which has many similarities with Torrens. New Brunswick and Nova Scotia converted from a Deeds registration system to a Torrens title system in the 2000s. Torrens was implemented from 1886 in what was then the Northwest Territories and has continued to be used by the three Prairie provinces (Alberta, Saskatchewan and Manitoba) into which the southern part of the Northwest Territories was divided. The only provinces in Canada which do not have Torrens titles include Newfoundland and Labrador, Prince Edward Island, and Quebec, which is a civil rather than common law jurisdiction. https:// en.wikipedia.org/wiki/Torrens_title
30. Daniels, A., (2017). pp. 32-33.
31 Remarks by Gordon Thiessen, Former Governor of the Bank of Canada (1994-2001), January 22, 2001. 32 Private email from Kevin Nettle to the author, June 28, 2017.
33 The James Bay Project is the construction by state-owned utility Hydro-Québec of a series of hydroelectric power stations on the La Grande River in northwestern Quebec, and the diversion of neighboring rivers into the La Grande watershed.
34 Daniels, A., (2017). pp. 32-33.
35 https://beta.theglobeandmail.com/ technology/reclusive-investor-getslast- laugh-as-queens-park-bunglesteranet/ article1117805/?ref=http:// www.theglobeandmail.com&
36 Premier Eves has moved into a new line of business in 2015 as chairman of Timeless Herbal Care, a Jamaican medical marijuana company with ties in Canada and Israel. [Every serious study needs something light-hearted!]
37 https://www.theglobeandmail. com/report-on-business/borealiswins- teranet-with-discountedbid/ article1065829/
38 http://www.torontosun.com/news/ canada/2010/11/18/16210171.html https://news.ontario.ca/mof/ en/2010/11/modernizing-ontarios-electronic-landregistration- system.html
39 http://www.canadalandshow.com/ how-fees-public-records-blockjournalism- and-hide-corruption/
40 http://www.canadalandshow.com/ how-fees-public-records-blockjournalism- and-hide-corruption/
41 Equifax is a North American consumer credit reporting, considered one of the three largest American credit agencies along with Experian and TransUnion.
42 Mossack Fonseca & Co. is a Panamanian law firm and corporate service provider, which is the world’s fourth biggest provider of offshore financial services.
43 http://projects.thestar.com/panamapapers/ lessons-for-canada/
45 Commission on the Reform of Ontario’s Public Services, (2012), p.389 http://www.msdsb.net/images/ ADMIN/correspondence/2012/ Commission%20on%20the%20 Reform%20of%20Ontarios%20 Public%20Services.pdf
46 Gainer, M., (2017), January 2017, Princeton. https:// successfulsocieties.princeton.edu/sites/ successfulsocieties/files/Canada%20 Case%20Study%20With%20 Logo%20JRG_1_30_2017.pdf
47 Standing Committee on Public Accounts, (2001) Special Report of the Provincial Auditor.
48 CCPA, February 28, 2013. https:// www.policyalternatives.ca/ publications/commentary/fastfacts- first-ripple-then-wave
49 http://www.cbc.ca/news/canada/ manitoba/manitoba-sells-propertyregistry- to-private-firm-1.1147970
50 http://www.cbc.ca/news/canada/ nova-scotia/13-land-registry-officesclosing- across-nova-scotia-1.3027275
51 Statement by Nova Scotia Service Minister Mark Furey. http://www.cbc. ca/news/canada/nova-scotia/registriesprivatize- government-private-sectorservice- nova-scotia-1.3540782.
52 http://www.cbc.ca/news/canada/novascotia/ ns-land-registry-1.3223444
53 http://legalblogs.findlaw.ca/legal-life/ how-will-move-to-privatize-landregistry- affect-ns-homebuyers-467/
54 http://www.cbc.ca/news/canada/novascotia/ ns-land-registry-1.3223444
55 https://www.ft.com/content/e2ec0140- 74dd-11e6-bf48-b372cdb1043a
56 FDA, May 2016.
57 Ibid, para 111, p.42.
58 Options p.33-34; fastrack p.36.
59 The Economist, “The $9 Trillion Sale”, Jan 11, 2015. https://www.economist. com/news/leaders/21593453- governments-should-launch-new-waveprivatisations- time-centred-property-9
60 2016 Autumn Statement, November 23 2016. https://www.gov.uk/ government/publications/autumnstatement- 2016-documents
61 Financial Times, UK shelves privatization of Land Registry, Sep 7, 2016 https://www. ft.com/content/e2ec0140-74dd- 11e6-bf48-b372cdb1043a
62 https://www.ft.com/content/e2ec0140- 74dd-11e6-bf48-b372cdb1043a
63 https://www.gov.uk/government/ uploads/system/uploads/attachment_ data/file/524817/cma-response-to- BIS-land-registry-consultation.pdf
64 https://www.theguardian.com/ business/2016/may/23/cma-objectsland- registry-privatisation
65 https://www.theguardian.com/housingnetwork/ 2016/apr/04/privatisingland- registry-misguided-wrong
66 https://www.theguardian.com/ business/2016/may/25/land-registryprivatisation- petition https://www. theguardian.com/money/2016/sep/07/ land-registery-sell-off-plan-put-on-hold
68 McCann and Macfarlane, (2016), “Future profits vs short term cash: what’s at stake in the great British Sell-off”. https://weownit.org.uk/sites/ default/files/attachments/Future%20 profits%20vs%20short%20term%20 cash%20-%20What%27s%20at%20 stake%20in%20the%20Great%20 British%20sell%20off.pdf
69 Ibid. p.18 and STRP is explained in footnote #44 on p.42.
70 https://www.theguardian.com/housingnetwork/ 2016/apr/04/privatisingland- registry-misguided-wrong
72 Malaysian Guidelines for PPP. http:// www.ukas.gov.my/c/document_library/ get_file?uuid=02f1ea81-8075-4387- 8b69-ebb2120292f1&groupId=15223
73 “tanah” is the Bahasa word for land
74 http://www.themalaymailonline. com/malaysia/article/penang-pacinvestigates- faulty-e-tanah-system
75 http://www.themalaymailonline. com/malaysia/article/penangpac- investigates-faulty-e-tanahsystem# Cdmry20tPuy8jgsT.97
76 https://geospatialworldforum. org/2012/gwf_PDF/Haji%20 Abdul%20Kader.pdf
77 http://www.malaysianbar.org.my/ bar_news/berita_badan_peguam/e_ tanah_system_lets_many_down.html
To be concluded in next issue.