Common Conveyancing Reference Framework

Transcription

1 Common Conveyancing Reference Framework Version th September, 2011 TABLE OF CONTENTS 1. Definitions Introduction Acknowledgments Leading principles Improving public confidence in cross border conveyancing Respect for existing legal systems Choice of Law The roles of conveyancer and registrar Contract of transfer or contract of sale Authority of conveyancers Dissolving clauses Protection against contradictory titles Information from the Land Registry to the foreign conveyancer Reliable information by resellers or intermediaries Non Land Registry information Preceding conditions Mortgages Computerized support for the processing of cross border documents Simultaneously Electronic only Involvement of the Registrar of the home country Start and finish of electronic transmission between conveyancer and registrar Integrity of conveyancing documents Registration Date and time of registration Cross border knowledge of conveyancing legislation and procedures The logbook Processing Use of existing system Computerized processing Multiple usability of data files Page 1 of 59

2 8.4. Feedbacks Archiving Generic principles of good IT governance Confidentiality Non repudiation Authorization Identification/Authentication Future platforms for cross border e conveyancing Characteristics Use Case EC Regulations EC Regulation Rome 1 No 593/ EC Regulation Rome II No 864/ Working processes of conveyancer and Registrars Netherlands and Spain Netherlands and Portugal Page 2 of 59

3 1. Definitions 1. Logbook: book in Land Register, where all received applications are registered. The main function is to keep a record of date and time of receiving. 2. Application: documents sent to LR. Deeds, documents, application, etc. 3. E-Lodgement: online lodgement of digital duplicates of documents that are sent on paper to the Land Registry. 4. E-Registration: lodgement of documents in electronic format only. 5. E-Conveyancing: paperless transactions through most or all stages of the conveyancing process from pre-sale to post-completion of the transaction. 6. Receiving country: country where the real estate is located. 7. Sending country: where agreement of foreign real estate was concluded (usually the home country of the buyer). 8. Plot: part of land in a conveyancing agreement. 9. Registrar, official, who is responsible for: - the recording of deeds (only in deeds systems); - the registration of titles and titleholders (in registered systems). 10. Conveyancer, official, who processes conveyancing documents (in countries with a notarial system, notary public). 11. ELRN (European Land Registry Network) a network of Contact Points of Land Registry associations that answers questions and publishes legal explanations of the Land Registry information provided by the national systems. Page 3 of 59

4 2. Introduction This Common Conveyancing Reference Framework (hereafter CCRF) is meant to improve confidence of foreign buyers in reliable cross border conveyancing and to support the cooperation between registrars and conveyancers for this purpose. In the long term the CCRF could be developed to a basis for optional generic European conveyancing rules. For the short term the CCRF focuses on bilateral agreements with respect for existing legislation. This means that, although the existence of different systems will lead to different demands, the CCRF should be applicable in Member States (MSs) with a title, or deeds system. In each of these MSs the law of the country where the plot is located (Lex Rei Sitae) determines the acquisition of property. To improve confidence of foreign buyers, the agreement should be laid down in a bilingual contract in the home language of this buyer. For the same reason the agreement should be concluded by a conveyancer from the home country of the foreign buyer and by means of a specific statement, the legislation of that home country should be made applicable to contractual and non-contractual obligations. As a consequence, the legal binding force of such an agreement will be determined by the law of that country and that will put specific demands on the governance of conveyancing processes. This CCRF aims to provide and explain generic rules for such governance no matter what MS is in focus. It includes five stages that in some MSs are joined with other stages, but even then the process remains the same. Page 4 of 59

5 1.Preparation 2.Transport 3.Registration 5.Feedback 4.Processing Drawing 1. Common e-conveyancing procedure. Basic rules for each of these stages are described in chapters 5 to 9. Before that in chapter 4 the leading principles for cross border conveyancing are described and explained. These principles concern respect for existing legislation and confidence by prospective buyers in sufficient legal protection. Also in the IT field specific principles have to be respected. As an old saying goes: A chain is only as strong as its weakest link. This means that every stage has to be in accordance with generic principles of good IT governance. These principles are described and explained in chapter 11, with a reference to European guidelines and projects and the names of MSs that have developed best practices for a specific principle. Information on these practices can be collected from members of the ELRN. The rules in chapters 5 to 9 are not mandatory. However, authors think that these rules will improve confidence of foreign buyers and make MSs e- conveyancing systems increasingly interoperable. Therefore, it is recommended that these rules be followed. Together with best practices, they should supply a kind of tool box for Registrars and conveyancers, who strive to introduce a more reliable and easier process for cross border conveyancing. After discussing with other stakeholders, the CCRF will be concluded in the General Assembly of ELRA but is never going to be finished or closed. It will be a tool which matures in time, but will be constantly revisited. Page 5 of 59

6 With changes and developments of Information Technology, one can expect that also legal services will change. Page 6 of 59

7 3. Acknowledgments This CCRF would not be possible without the great commitment of the following individual country experts from Netherlands, Estonia, Spain, Belgium, Portugal, Ireland, Northern Ireland, Finland, Lithuania and Cyprus who participated in the e-conveyancing working group and the excellent legal knowledge which was added by the following legal advisors from the Universities of Maastricht, Valencia and Coimbra. We acknowledge also with thanks the advice on conveyancing processes by the following Dutch notaries public. Legal advisors: University of Maastricht (European Law Institute) Professor Mr. Sjef van Erp Drs. Bram Akkermans University of Valencia Prof Dr José Luis Iglesias Prof. Dr. Guillermo Palao Moreno Dr. Carlos Esplugues Mota University of Coimbra Prof. Mónica Vanderleia Alves Sousa Jardim. Prof. Alfonso Nunes Fiqueiredo Patrão Notaries public: Mrs. Rosemary Appel Mr. Frits von Seydlitz Page 7 of 59

8 4. Leading principles 4.1 Improving public confidence in cross border conveyancing. At the moment buyers of foreign real estate have to accept the involvement of foreign conveyancers, to sign documents in a foreign language and to accept the legal consequences of legislation which is unknown. This makes prospective buyers of foreign real estate reluctant. Sometimes, a lack of confidence in sufficient legal protection even causes them to abandon negotiations about buying foreign property. Such reluctance could be diminished by the involvement of a conveyancer from their home country, who acts according to the conveyancing process which is usual in their home country and processes a contract in their home language with standard clauses that were previously approved by legal specialists and consumer organizations from their home country. With such clauses buyer and seller could declare the legislation of the home country of the foreign buyer applicable to contractual and non contractual obligations as is described in Regulations (EC) 593/2008 (Rome I) and 864/2007 (Rome II). An example of the clause that makes the home country applicable is added as annex 1. According to article 3 the parties to a contract by their choice can select the law applicable to the whole or to a part of the contract. According to article 4, in the absence of such choice a contract relating to a right in rem in immovable property is governed by the law where the property is located. The acquiring of the plot and the preference of charges is always governed by the law where the property is located (the Lex Rei Sitae). As protection against such unknown consequences, acquisition with third party effect or, if this is not possible, a personal right of indemnification or compensation, could be added. However, new questions will occur with this, which we call the CROBECO approach. There will be basic general questions about the consequences of different legislations and conveyancing systems as well as questions about the interoperability of computer systems. In the long term questions about interoperability will be solved with the use of generic functionalities which are admissible through the E-justice portal but for an intermediate period bilateral agreed proceedings between Page 8 of 59

9 registrars of ELRA Member States seems inevitable. Because of the aim to generate confidence the proceedings should be secure and easy to understand for anyone. 4.2 Respect for existing legal systems Cross border conveyancing will only be possible if the plot is registered in the Land Registry and existing legislation allows the acceptance of documents from foreign conveyancers. The answers to the ELRA questionnaire show that documents from foreign conveyancers are accepted in more than 50% of the ELRA Member States. Some of these States have a title system and other States a deeds system. Because of the fact that in a title system the registrar grants a title, cross border conveyancing seems easier when the plot is located in a receiving country with a title system. In Member States with a deeds system (Belgium, France, Luxemburg, Netherlands, Italy) listed names of supposed titleholders and identifications of properties serve as an index to recorded documents. Registrars in these countries have a decision function concerning the recording of documents but do not grant a title by listing the buyer as the new owner, as Registrars in countries with a title system do. Although in some countries (such as Netherlands) presumed defective titles are marked and notifications of such remarks are sent to the seller, buyer and conveyancer, the registration is not legally decisive. This means that foreign conveyancers have to examine underlying documents in the Land Register to draw conclusions on the existing rights and names of titleholders. Because of the fact that they are not familiar with the legislation and the language, such an examination could be difficult for foreign conveyancers. A solution could be the introduction of a statement by the Registrar, who after legal examination of recorded documents concludes who is entitled. There would be something like a title system "on demand" of cross border conveyancing. A complete change of the system is not necessary. Often there are good historic and cultural reasons for the existing system. CROBECO wants to respect that. Page 9 of 59

10 The conveyancing system in the country of the foreign buyer is irrelevant. A foreign conveyancer from a country with a deeds system can just as easily rely on a Land Register with a title system as a foreign conveyancer from a country with a title system. Page 10 of 59

11 5. Preparation of the contract It is advisable to introduce the CROBECO approach step by step. In countries with a risk of hidden restrictions such as permits to construct new buildings, it is advisable to start cross border conveyancing with plots without such risks (for example with buildings which have already been constructed) Choice of Law Concerning contractual obligations According to Article 4 of Regulation Rome 1 (EC 593/2008), the law of the country where the property is located is applicable to the transfer (this is governed by the law of the plot, the so called lex rei sitae ). However with an explicit choice the parties can agree that the law of the country of the foreign buyer is applicable to contractual obligations. This choice of the law of the law of his home country could have an important psychological effect on a prospective foreign buyer. Also because of the fact that the (bilingual) deed is executed in his own language by a conveyancer from his home country, he gets the feeling of being legally protected in a way that is familiar to him. A consequence of the choice of law is that a buyer who discovers that the seller has violated the contract (for example because of a hidden defect) can claim compensation in his home country s court. Another consequence of the choice of foreign law is that the registrar in the receiving country has to judge whether the contract is valid according to foreign law. The Registrar from the sending country could assist his colleague in the receiving country by adding an advice to the deed. The registrar from the receiving country could also use ELRN information for this purpose. Concerning non contractual obligations By declaring Regulation Rome II (EC 864/2007) applicable to non contractual obligations, foreign buyers could acquire protection against unknown (local) public limitations that are not admissible through the land register. Page 11 of 59

12 Protection could be based on culpa in contrahendo (art 12 of Rome II). Culpa in contrahendo is an autonomous concept that does not necessarily have to be interpreted within the meaning of national law. It includes the violation of the duty of disclosure. When for example a foreign buyer of Spanish real estate afterwards finds out that unknown public limitation exists, he could ask a court in his home country to decide on compensation by the seller. The grounds for liability could be nonperformance, mistake or violation of pre-contractual information duties. Even when in the country of the plot specific case law exists for such events, the applicable foreign law will be decisive (see article 12 (1) Rome II on culpa in contrahendo). However culpa in contrahendo can never limit the applicability of public restrictions itself. Art 9.2 of Regulation Rome I includes an overriding mandatory provision of the law of the forum. The choice of law has to be made by the buyer and seller and should be part of the contract of sale. For example with the following clauses: 1. Despite the fact that the plot is located in a foreign country the buyer and the seller choose...(insert name of the country) law to be applicable to this contract, in order to prevent the applicability of article 4.1.c of EC-regulation number 593/2008 (Rome I) as far as the contractual agreement and the accomplishment of the agreement are concerned. 2. Buyer and seller agree to that non-contractual obligations within the meaning of European Regulation Rome II of 11 July 2007, are subject to the law of xxxx The fact that the agreement is based on the legislation of the sending country, could provide uncertainty for the registrar of the receiving country, who is not familiar with the foreign legislation. To provide him with sufficient evidence about the validity of the agreement, an advice note on the validity of the agreement could be added by the Registrar of the sending country. However this will bring no change in the liability and responsibility of both Registrars. This document can not diminish the responsibilities of the receiving Registrar in his scrutiny of the agreement. Page 12 of 59

13 RULE: In the case of a foreign conveyancing contract, that is governed by the law of the foreign buyer s home country, the registrar from the home country of the buyer should advise his colleague from the country of the real estate about the legal binding force of the agreement. If there is a reference in the contract to other legislation according Rome 1 art 3, then it would be necessary to make use of ELRN. This statement can never be considered as removing the responsibility of the recipient. 5.2 The roles of conveyancer and registrar The most significant consequence of the CROBECO approach involves the buyer, who will be able to conclude an agreement under his home legislation with a conveyancer whose language he understands and with provisions that protect against undesirable consequences of a foreign legal system. This boosting of confidence in foreign buyers by the CROBECO approach implies that a conveyancer from the sending country and a Registrar from the receiving country will need more information. The conveyancer needs information concerning the responsible Registrars and the applicable law in the receiving country. The Registrar in the receiving country needs to have a sufficient understanding of the law from the sending country which is made applicable to the agreement under Rome 1. Although responsibilities never can change, assistance in this field could be provided to Registrars from other Registrars. For example on a web site that is run by ELRN, Registrars with advice and information that is under their own responsibility. In the pilot exercise, Registrars from Netherlands and Spain have agreed that the Dutch notary could send the bilingual deed to the Dutch Registrar. This Registrar will assess the agreement set out in the deed using the same criteria as he would use to assess a deed regarding Dutch immovable property. If the Registrar has no objections based on the Dutch criteria, he draws up a statement to this effect and sends it along with the deed to the Registrar in Spain. The scrutiny by the Dutch Registrars would also involve the validity of the electronic signature by comparing it with the Certification Revocation List of the Dutch Page 13 of 59

14 Certification Authority. Because this is the same procedure used regarding Dutch real estate, his role and responsibility remains essentially the same. Apart from the fact that they will need more information on other legislation, the same situation applies to the Registrar in the receiving country and the conveyancer. RULE: Under the CROBECO approach, roles and responsibilities of Registrars should remain unchanged. 5.3 Contract of transfer or contract of sale In some Member States, for example Belgium and France, the signing of a contract of sale directly leads to the transfer of property rights between buyer and seller. Recording of the contract of sale in the Land Register gives the transfer legal effect against third persons. In other Member States, such as the Netherlands and Cyprus, a contract of sale always has to be followed by a contract of transfer. Only the recording of such a contract of transfer leads to the transfer of property rights. In other Member States, such as Spain, a contract of sale always has to be followed by the transmission of the possession of the property, and this transmission is legally presumed to be done by taking the contract in the form of a deed. In the case of cross border conveyancing between Member States with different systems, the legislation of the State where the plot is located (the Lex Rei Sitae) will always be decisive. For example when a person from Netherlands (where a separate contract of transfer is demanded) buys a plot in Spain, the Lex Rei Sitae of Spain dictates that a contract of sale with a clause concerning the transfer of the possession is sufficient. Country/ BE CY EE FI IE LT NL NIE PT ES Used systems Deed system Yes No Yes* No Yes Yes* No No Title system Yes Yes Yes Yes Yes No Yes Yes Yes Contract of sale Yes Yes Yes Yes Yes Yes Yes Page 14 of 59

15 Contract of transfer Yes Yes No Yes Yes No Table 1: used system per country. BE= Belgium, CY = Cyprus, EE = Estonia, FI = Finland, IE = Ireland, LT = Lithuania, NL = Netherlands, NIE = Northern Ireland, PT = Portugal, ES = Spain. * Concerns the remaining unregistered titles of land. RULE: In the case of cross border conveyancing, the Lex Rei Sitae should be decisive for the acquisition of the property. 5.4 Authority of conveyancers In countries with a common law system any person lodging an application is liable to be sued in any claim for compensation where that party contributed to any error, fraud or forgery. Home country conveyancers are familiar with this potential liability in lodging an application. Before introducing cross border conveyancing in receiving countries with common law systems some kind of certification procedure for foreign conveyancers should be developed. In countries with a notarial system, involvement of a notary public is sometimes mandatory. Often, but not always, this should be a notary from the MS where the plot is located. In countries with a notarial system without mandatory involvement of a national notary (such as Spain), the involvement of a foreign notary is deemed necessary for other reasons. As mentioned before the Registrar from the receiving country will need a statement by his colleague from the sending country (or make use of the ELRN information system). The Registrar from this country can only issue such a statement when he can rely on statements by the buyer and seller that are deemed to be true because of the fact that they are laid down in an authentic deed. This means for example that in the case of a transfer from Netherlands to Spain, sufficient proof of an authentic contract of sale has to be presented to the Dutch Registrar, who issues a statement concerning the validity of the agreement and sends this to the Spanish registrar. Before doing this, the Dutch Registrar has to verify the authenticity of the received electronic signature Page 15 of 59

16 that should belong to the conveyancer who executed the deed and to establish whether the conveyancer has the authority to process authentic deeds (in other words, is the conveyancer a notary public). If national legislation demands so, the same checking on authenticity of the electronic signature will be done by the receiving Registrar. Such checkingshould be done in the legal way stablished by the electronic signature directive, as long as standard requirements demanded in the receiving country for legal use of an electronic signature have been previously accepted. In order to avoid the risk of possible suspension or dismissal of the conveyancer, as topical information on such decisions is often not available for the foreign Registrar, the home-country Registrar will sometimes have better means to do the necessary investigations. RULE: The authority of the conveyancer must be checked by the Home Registrar, who must include his approval in the statement about the legal binding force of the deed. In some cases, according to national legislation, electronic signature validity must be also verified by plot country registrars. In the future, once e-justice utilities have been implemented, this will be done according the e- justice portal instructions. Country/ BE CY EE FI IE LT NL NIE PT ES Legislation systems Common law system Yes Yes No Yes No No Notarial system Yes No Yes Yes Yes Yes Yes Public notary demanded Yes No Yes Yes Yes No Yes Public notary from country Yes No Yes Yes Yes No No Of real estate demanded Authorized conveyancer No Yes Yes No (no notary public demanded Authorized conveyancer (no notary public) optional No No No No Table 2: legislation systems per country. BE= Belgium, CY = Cyprus, EE = Estonia, Page 16 of 59

17 FI = Finland, IE = Ireland, LT = Lithuania, NL = Netherlands, NIE = Northern Ireland, PT = Portugal, ES = Spain. 5.5 Dissolving clauses Awareness of the risk of a breach or lack of licenses as well as of hidden charges makes potential foreign buyers reluctant to buy foreign property. This restraint could be neutralized in some countries by choosing clauses from some kind of contract clauses toolbox. As part of the contract, such clauses could regulate legal indemnification or compensation between contracting parties. A toolbox with such clauses will be based on EC regulation Rome I and Rome II, see paragraph 5.1, 12.3 and Next to this toolbox, there should be something like guidelines (as good practice recommendations for the professionals). RULE: Faith of prospective foreign buyers in sufficient legal protection could be improved by a clauses toolbox for cross border conveyancing to a specific country. Also the confidence of the professionals in the e-conveyancing process could be boosted by guidelines about how to act. 5.6 Protection against contradictory titles The intended legal effects of conveyancing documents could be frustrated by last minute contradictory titles. Measures to prevent such adverse effects depend on the existing legal system. Member States, with a common law system, but also some countries with a notarial system such as Germany and the Netherlands allow a priority notice after which, during a fixed period, the priority or registration of contradictory titles is blocked. Also, in the Netherlands adverse effects of contradictory titles are limited by the fact that the conveyancer (the public notary) has a "clearing house function". He keeps the purchase money on a client s savings account and will only transfer the money to the seller when a Registrars report confirms that there are no contradictory titles. Member States Page 17 of 59

18 without the possibility of a priority notice have developed systems to provide topical information about contradictory titles to a foreign conveyancer. For example in Spain, the priority principle means that the first deed on arrival gains priority from other possible deeds that could arrive later, and also FLOTI ( provides foreign conveyancers consistently with opportunities to view any new entries. In that case FLOTI automatically creates a request for information that will be run directly by the Register affected. A comparable "event driven" information system is developed in the Netherlands under the name Watchdog. RULE: A working process for cross border e-conveyancing needs a system of priority notices or a tool for prompt and topical information about contradictory titles. Country/ Protection systems Priority notice / protection Period in months Blockade on recording / Registration during Protection period Third party effect during Protection period Clearing house function Conveyancer BE CY EE FI IE LT NL NIE PT ES No Yes No Yes No Yes Yes Yes No - 3 wks 6 mts 1 mt 6 mts No No No Yes No Yes No No No Yes No Yes Yes Yes Yes Yes No Yes No No Yes No No No Table 3: Protection system per country. BE= Belgium, CY = Cyprus, EE = Estonia, FI = Finland, IE = Ireland, LT = Lithuania, NL = Netherlands, NIE = Northern Ireland, PT = Portugal, ES = Spain. 5.7 Information from the Land Registry to the foreign conveyancer Page 18 of 59

19 Backward procedures will consist of two phases. The first phase, prior to the deed, concerns information about the titles to a plot. In some countries this information is only provided to persons with a supposed interest. A foreign conveyancer, who states that he is acting in the purchase of a plot, should be accredited to have such interest. The second phase concerns the registration procedure and its incidents. Because information prior to the deed has to be topical, countries without one central contact point, should create a facility which gives the foreign conveyancer an easy way to trace the Land Register where the plot is located. Spain for example issues access codes and digital certificates which permit foreign conveyancers on line access to information from the Land Register through the internet. Country/ BE CY EE FI IE LT NL NIE PT ES Providing information Information is Yes No Yes Yes Yes Yes Yes Yes Yes No Completely public Information for persons Yes Yes Yes No No Yes With specific interest Central contact point Yes Yes Yes Yes Yes Yes Yes Yes On line acces No Yes Yes Yes Yes Yes Yes Yes Yes Medium of infor- Yes No Yes Yes Yes No No Yes mation: Medium of information: web services No Yes Yes Yes Yes Yes Yes Yes Table 4: Providing information per country. BE= Belgium, CY = Cyprus, EE = Estonia, FI = Finland, IE = Ireland, LT = Lithuania, NL = Netherlands, NIE = Northern Ireland, PT = Portugal, ES = Spain. RULE: Foreign conveyancers, who prepare cross border electronic conveyancing, should have an easy entrance to land registry information in the country of the real estate. Page 19 of 59

20 5.8 Reliable information by resellers or intermediaries In some Member States information can be collected from organizations of resellers. Foreign conveyancers should bear in mind that missing or erroneous information can not be enforced against third parties, whose rights are protected by conclusive title. Damages caused by shortcomings in information can only be compensated as a personal obligation of the reseller. Organizations claiming that mistakes are not possible, in any case by its own liability, should have that confirmed by reports of auditors. As long as no report by auditors is presented, foreign conveyancers should ask Intermediaries to accept liability for their mistakes for a sufficient amount of money that is covered by insurance. RULE: When foreign conveyancers use information other than from Land Registries, they should be clear that the risk of mistakes may be only covered by intermediaries with sufficient insurance. 5.9 Non Land Registry information Some Land Registries disclose supplementary data from other territorial sources or other organizations. This is done on the basis of a copy of files or with a link to such files on the basis of georeferencing information. Often Land Registries do not accept liability for the correctness of this information. In Spain for example information on the basis of urban plans is not supported by Land Registries, due to its normative character. RULE: Registrars should warn in specific guides lines and on the CROBECO website of possible mistakes in non land registry information, that operate as property legal restrictions. Foreign conveyancers, who use this information, should add insurances or obligations to compensate for damages as a consequence of misinformation Preceding conditions Page 20 of 59

21 In some countries before the entry of documents, certain specific conditions have to be fulfilled. For example in Cyprus at the day of transfer an instant market value valuation has to be done at the public counter of the land registry to determine the level of transfer fees. In Spain for example, the tax payment should be done before the registration of the contract of sale. Foreign conveyancers who are not familiar with such conditions should be assisted by the Registrar from the receiving country. For that reason, the Spanish Registrars Association has asked Tax authorities for the authorization to request a personal tax identification number on behalf of parties, according to the correlative contract clause to obtain it, and also to submit a copy of the electronic document and the taxes declaration form received to the competent taxes office. In any case, the conveyancer should fill in the electronic tax declaration form and forward it along with the deed or during the period of the next 30 days. The payment of taxes can be handled directly by the foreign conveyancer through international transfer to the special Taxes Office Bank account. All questions related to incidents arising from a taxation procedure will be notified to the conveyancer or other specific representative designated by parties. RULE: Where conditions have to be fulfilled before registration. Registrars from the country of the real estate should support or help fulfill the specific requirements with easy work processes. These processes should be published on the CROBECO website, and be known by foreign conveyancers 5.11 Mortgages The confidence of prospective buyers could be improved if, as well as the sale, the mortgage is processed by a home country conveyancer. Such a development could be hampered by the fact that different mortgage models are in force. Most wide spread is the accessory mortgage. It is present in almost every Member State and has an access in relation to the secured loan. Some Scandinavian and East-European Member States have an independent mortgage. Something similar Page 21 of 59

22 exists in Germany as Grundschuld 1. The common law mortgage differs from both, because it contains a lease as well as a right in rem. When sending and receiving countries accept the same kind of mortgages, the CROBECO approach should be considered. This would mean that again a bilingual deed has to be processed with a clause which makes the legislation of the foreign buyer s home country applicable to the contract in those aspects related to credit and loan, while specific requirements for register entry and enforcement erga omnes will be subject to lex rei sitae. Because different foreclosure procedures cannot be changed by such an agreement, cross border mortgaging remains complex and deserves further study. or the support of foreign registrars in this field, guidelines with information on the existing legislation should be developed and laid down in some kind of repository. RULE: To improve confidence, the CROBECO approach should also be considered in cases of cross border mortgaging Computerized support for the processing of cross border documents For the processing of CROBECO documents, existing systems should be used as much as possible. Through the E-justice portal a central organization like ELRA could make the systems accessible with functions which guide the user to an existing system in the home country of the foreign buyer. Such a central system should contain a repository with protective clauses for cross border conveyancing which could vary for each country. The clauses should be developed and approved by legal experts and consumer organizations in the home country of the foreign buyer. To assure sufficient protection, home country Registrars should 1 The Verband Deutscher pfandbriefbanken : makes the following distiction Accessoriness (should this read Accessibility?) of origin (the security is effective even if there is not yet a secured claim); Accessoriness of scope (the amount of the security can be higher then the secured claim); Accessoriness of competence (the creditor is always also the mortgagee); Accessoriness of enforcement (the secured right can only be enforced if the secure claim can be enforced); Accessoriness of extinguishment. Page 22 of 59

23 only add their statement if comparison with standard clauses leads to the conclusion that the advised protection is provided. Comparison becomes easy, if the deed is split into a first standardized part and a second part with free text. By making all the necessary clauses part of a structured form in the first part, the so called style sheet, comparison could be computerized. In the distant future, probably some kind of semantics could be used for these agreements, but in the beginning the documents will have to be in words in two languages: The language of the sending country and the language of the receiving country. RULE: Cross border conveyancing should be supported by a repository with standardized clauses which vary by Member State and are approved by the registrar from the receiving country. Page 23 of 59

24 6. Transfer from conveyancer to foreign Registrar Because of the loss of time involved in paper proceedings, it is hardly possible to realize a reliable cross border conveyancing process without electronic transmission. This could take place according to two processes: 1. Simultaneous transmission of digital files and sending paper; documents by post; 2. electronically only. 6.1 Simultaneously Simultaneous offering can be used when national legislation still demands that applications are made on paper. This is the case in Ireland, Northern Ireland, Cyprus, Belgium, Lithuania and Romania. In some countries the application can also be made by fax, with sending of the original paper usually required later on. However, in Portugal the original paper application is not required, because the FAX is presumed legally compliant with the original, if it is sent by an authorized professional such as a lawyer or a notary. In Portugal also the receiving time of the FAX guarantees the ranking. Simultaneous transmission is advisable because of the gain of time and the advantages of computerized filing and updating. This system of so called "electronic lodgement is in use in Ireland. It is a suitable first step to future electronic registration and finally electronic conveyancing. For example Ireland has recently extended electronic lodgement to electronic registration of specific legal facts (cancelation of mortgages). Electronic lodgement seems also very suitable for an early start of cross border conveyancing. Depending on the legislation of the receiving MS, the foreign conveyancer could send the documents on paper or fax to the land register of the real estate and simultaneously send a duplicate by mail. The ranking time (arrival of the electronic duplicate or of the paper document) depends on the legislation in the receiving country. Page 24 of 59

25 Drawing 2. Application electronic lodgement Rule: In case of legal demand for paper documents, simultaneous offering of applications on paper and in electronic form is an advisable first step to cross border conveyancing. 6.2 Electronic only Depending on the legal possibilities, electronic applications concern: 1. Unstructured files; 2. Unstructured files with separate files or metadata; 3. A (partly) structured file with metadata that is linked to the style sheet that is previous evaluated by the Registrar. In this case also the file number of the deposited style sheet has to be added. 4. Only metadata that are linked to a previously deposited style sheet with a deposit identification number. In Estonia and Germany the system that is described under 2 is in use. In the Netherlands and France the system as described under 3 is in use. In system 2 and 3 the metadata are used for computerized updating. The difference between 2 and 3 concerns the computerized support for the Registrar. Under system 2, the registrar has to evaluate each deed and compare his conclusions with the received Page 25 of 59

26 metadata. Under system 3 comparison can be computerized and the metadata can be used for computerized updating of the registration. In the case of cross border electronic conveyancing, system 3 can be used for computerized comparison of a standardized first part of the deed with the previously evaluated style sheet that contains all the necessary information for the issuing of the CROBECO statement. Drawing 3. Delivery via electronic channel RULE: In case of electronic registration with linked metadata, cross border conveyancing could be supported by a standardized first part of the deed. Page 26 of 59

27 Country/ Electronic registration Electronic lodging: Paper/fax Electronic lodging: Paper/fax/ Electronic registration Without separate data file Electronic registration With a linked data file BE CY EE FI IE LT NL NIE PT ES No No Yes No Yes Yes No Yes No No Yes No N/A Yes No No Yes Yes Yes No Yes No No Yes Yes Yes No Yes Yes Table 5: Protection system per country. BE= Belgium, CY = Cyprus, EE = Estonia, FI = Finland, IE = Ireland, LT = Lithuania, NL = Netherlands, NIE = Northern Ireland, PT = Portugal, ES = Spain. 6.3 Involvement of the Registrar of the home country To prevent any loss of time, it seems best to send the foreign conveyancing document directly from the foreign conveyancer to the responsible Registrar in the country where the property is located. However, the CROBECO statement from the home Registrar of the foreign buyer, (when according to Rome 1 the law of this country governs the agreement), should be sent separately to the Registrar of the real estate, who will need evidence that the CROBECO statement concerns the same deed. To keep it simple and because of the fact that software used by foreign conveyancers may not be compatible with that of the Registrar of the real estate or because of the fact that in some countries conveyancers are not legally allowed or for other reasons can not electronically send their deed to a foreign Land Registry, a temporary solution could be very useful. This solution, (if it is not possible to send the document directly), would involve indirect submission through the Registrar of the home country of the foreign buyer. The foreign conveyancer sends the deed to his home country Registrar through the usual channel (for example secure ) but with the format and according to the technical standards that are demanded in the country of the real estate. The Page 27 of 59

28 Registrar in the sending country of the foreign buyer supports his colleague from the receiving country of the real estate in judging the validity of the agreement, by providing information about the existing legal system in his country. He sends all the necessary documents and annexes through the usual channel of the country of the real estate to his colleague Registrar in that country. In the case of such a temporary solution, Registrars from the home country of the buyer, (who have to forward the document) are advised to ensure that they are not liable for the consequences of delay in transmission. This could be laid down in a user contract with the conveyancer. RULE: If is not possible or advisable to send electronic documents directly, then Registrars from the home country of the foreign buyer could support cross border e-conveyancing by forwarding documents and statements on the legal binding force of the agreement to their colleague in the receiving country. 6.4 Start and finish of electronic transmission between conveyancer and registrar In the case of electronic transmission the date and time of arrival in the electronic system of the receiving Registrar are decisive for the ranking. In the case of transmissions by an intrinsic risk of disturbances during transmission exists. This could influence the ranking but the initial transmission is a risk of the sender. On arrival at the server of the Registrar, the Registrar becomes responsible. Because the ranking time is decided by receipt in the electronic system of the Registrar, in case of disturbances between server and mailbox, the Registrars could be liable for any negative effects on the ranking. Registrars using transmission could exclude liability in an agreement with conveyancers. In the long term it is advisable to replace by an on line registration communication system. RULE: To guarantee document delivery and reliable ranking transmission through an online e-registration communication system is advised. As long as Page 28 of 59

29 is used for submission of deeds to the Land Register, receiving Registrars should regulate negative consequences of disturbances in transmissions in an agreement with cross border conveyancers 6.5 Integrity of conveyancing documents In case of electronic submission the integrity of cross border transmission could be protected by encryption techniques and verification of feed back. Without encryption documents could be altered without the recipient being aware of this. Apart from this, in case of , information about the sender and forwarding data or even the sender s address itself could be altered. To prevent all of this in the Netherlands conveyancers compare feedback with earlier transmissions and the digital signature consists of an encrypted hash value of the sent documents. After receipt, the computer system of the registrar compares the decrypted signature with the hash value of the received document. The received document is recorded only if they are the same. RULE: In all cases of electronic submission, the integrity of cross border conveyancing documents should be safeguarded by encryption techniques. Page 29 of 59

30 7. Registration In the case of electronic lodging, the received document on paper has to be compared with the electronic file received earlier. This could be a duplicate from the paper document, but may also be a file of data that belong to the style sheet that was used for processing the document on paper. Only if the two belong together can the digital file be further processed. On receipt of the complete document, it is also important to know what time is decisive for the ranking: the receipt of the paper document or the receipt of the digital document. This chapter deals with the different possibilities for the time of registration and the process to follow in case of refusal of registration. 7.1 Date and time of registration Under the German legislation for electronic lodging, the time of receipt of the digital file is decisive. In the case of electronic submission opening hours are also of relevance. In some countries, such as Spain, electronic submission is possible 24 hours a day and 365 days per year. In other countries, such as the Netherlands, the stamping time of receipt always falls between 9.00 and 15:00 hours. Deeds that are electronically received after 15:00 and before 9:00 get a time stamp of 9:00 the next working day. This allows the staff of the Registrar to update the signaling of received deeds before 9:00 the next working day. From that moment on the topicality of information is that of 15:00 the last working day. A foreign conveyancer should take account of the consequence of such different systems. When for example the deed is sent to the Dutch Land Register at 16:00 hour, the time of receipt will be 09:00 hours the next working day. Another document that was sent 23:00 the same day, will have the same time of receipt. According to the Dutch Civil code, the time of signing will then be decisive for the ranking of the document. RULE: Cross border conveyancers should account on national differences concerning opening hours for registration. Page 30 of 59

31 7.2 Cross border knowledge of conveyancing legislation and procedures It is (almost) impossible to know the different conveyancing procedures and legislation in all Member States. For that reason a ring of trusted e- conveyancing Registrars could give support. Member of such a Ring could inform each other about validity of agreements and, as long as for that purpose no system for automated consulting of the Certification Services Provider exists, methods to prove authenticity of signatures and authorizations. Also they could inform each other about the CSP s that were previously accepted. Furthermore in consultation between those Registrars, standardized clauses in conveyancing documents could be developed and published on a CROBECO website. RULE: Cross border submission should be supported by a website with information that is provided by trusted Registrars and published on a CROBECO website. 7.3 The logbook All Land Registries in MSs have a logbook function. This can be a separate official journal, the logbook or day list (such as Estonia, Spain, Portugal) or an integrated function in the registers of recorded deeds (Netherlands, Northern Ireland). On receipt of an application, its content will be evaluated by the Registrar and his staff. After the decision to register, in many MSs the ranking is based on the original time of receipt. However in Cyprus, the time of updating the registration of limitations could be decisive. Most MSs keep diaries in electronic form, which enables more efficient and secure centralized solutions. The process of keeping a Logbook may vary a little, but the main concept is the same: to keep record of all received applications and thereby support decisions about the ranking. Page 31 of 59

32 RULE: Cross border conveyancing should not bring any change in the existing system for establishing the ranking of documents. Page 32 of 59

33 8. Processing 8.1 Use of existing system Registrars from Netherlands and Spain, together with conveyancers from Netherlands have thoroughly studied the conveyancing processes in both countries (results are laid down in Chapter 12. Although there are differences, many steps seem the same. For example the already existing Spanish system FLOTI can be used for providing information to foreign conveyancers. The existing system for Dutch conveyancers to process deeds of transfer can be updated to the processing of contracts of sale that will be sent to Spain. The existing system that gives support to Dutch Registrars in their assessing of the validity of deeds of transfer can be easily updated to the assessing of the legal binding force of contracts of sale of real estate in Spain. The existing system for electronic registration of deeds in Spain can be used for the registration of bilingual documents from foreign conveyancers. Because all these systems use functionality for electronic signing and verifying authenticity and authority, the interoperability of digital files is important. Until -Justice portal provides such interoperability features, CROBECO-partners should assure the necessary functionalities on a bilateral basis. RULE: For the start of Cross border conveyancing, minimal updating of existing systems should be used. 8.2 Computerized processing In the case of the use of (partly) structured documents, computerized support for the processing of documents becomes possible. For that purpose: the structured document has to be evaluated once by the Registrar and on the basis of this evaluation, software for computerized processing should be developed. The computerized support, in the case of cross border conveyancing could imply that: 1. In the receiving country automatically Page 33 of 59