04 October 2016
by Richard Ackland
Now we're flogging off the land registry. This is not good news for homeowners‘The sale of the state land registry to a private operator has not been on the public radar, which is odd because what is at stake is the high level of title security that is currently guaranteed.’
The land registry is crucial to the protection of people’s most precious possession. Its privatisation could make expensive title insurance a necessity
The lengths and depths to which governments will go to flog off precious public silverware knows no bounds. The extraordinary sale of the country’s largest land titles registry is the latest piece of critical infrastructure to be thrown open to private control.
The New South Wales parliament has just passed the land and property information NSW (authorised transaction) bill and the process of selecting new operators for the registry is now under way. The last vote needed to get it across the line came from Christian Democratic MLC Reverend Fred Nile.
The Land and Property Information unit, which runs the registry, already had been carved off from the Finance, Services and Innovation departmental “cluster”, and for months the place has had the slide rule run over it by KPMG and Boston Consulting, with instructions from the NSW government to plump the registry for sale.
The land registry is crucial for the security of property ownership. It guarantees the title to everyone’s land, looks after the integrity of land data across the state, supports the mapping and valuation arms of the Land and Property Information service and returns an annual profit to the government of around $50m. However, it is expected that the sale price could be $700m-plus, which would consist of a one-off payment and an agreed return to Treasury subject to contract which would run for 35 years.
The plan is contagious because South Australia, in its 2016-17 budget, announced it would invite private operators to run its land titles registry. Privately operated registries of public information is bound to catch on in other cash-hungry jurisdictions, as we’ve also seen with the commonwealth putting Asic’s company database into contention.
The state land registry is crucial to the protection of peoples’ most precious possession. Its sale to a private operator has not been on the public radar, which is odd because what is at stake is the high level of title security that is currently guaranteed.
The new operator is likely to be a consortium, comprising a bank, an insurance company, a foreign sovereign fund and an international superannuation fund. Certainly these institutions themselves would own and invest in significant amounts of real property. For large land investors to be operating the titles registry could be seen as an inherent conflict.
Title insurance is rarely purchased in NSW because the integrity of the system of registration is sound and there’s almost negligible land fraud. At present it is believed there would be no more than five claims a year against the Torrens Assurance Fund.
Margaret Hole, a former president of the NSW Law Society, says there has been no independent assessment of the sale. Her concern is that once it is private hands title insurance will be necessary, as is the case in the United States.
Title insurance on the purchase of a $1.4m property is currently about $990. Last year 213,000 land transfers were lodged in NSW, which means that conservatively $210m in insurance premiums can be raised by the operators holding the concession.
Over the 35-year term of the arrangement, that would be $744bn from land title insurance, which until now has been quite unnecessary. Already, insurance companies have been knocking on the registry’s door trying to get their paw into the lolly jar.
Here’s Margaret’s Hole’s submission outlining the issues at stake, and questioning the lack of public debate on the sale. The union movement, too, has been out on the battlements opposing the sale.
Current NSW Law Society president Gary Ulman says that the justification for the privatisation of public assets usually lies in the need for a large scale injection of capital into an industry, or to address underperformance by a government utility – and that neither rationale applies in this case.
“This raises important issues around adequate protection of sensitive data, the continued implementation of best practice anti-fraud measures, and the potential loss of expertise of LPI personnel,” he said.
Needless to say, state treasurer Gladys Berejiklian paints a rosy picture, saying the legislation “provides a range of legislative and regulatory safeguards to protect the integrity of the property titling system while also protecting staff”.
At the moment redundancies are not available and LPI employees will have to take up positions with the private operator if a position is available. After four years they can be terminated.
Berejiklian says that the government will retain “full ownership of all land title data and the data must be stored in Australia” and price rises will be confined to CPI increases.
The legislation also provides for “step-in” powers and a new regulator will monitor the operator’s performance. She thinks that the private sector is best placed to invest in new technology, “which will have major benefits for consumers”.
These assurances carefully miss the point. The operation of the register, not the ownership of the data, is the key to the large potential profits from title insurance.
And it’s one thing for the registry to invest in new technology for electronic lodgement, and entirely something else for users to invest in the technology that gets them through the gate.
The British government has run several consultations on its proposal to change the ownership of its land registry. In November last year the chancellor of the exchequer played with the idea of privatising the registry but that was abandoned once it was revealed that all the potential bidders were linked to tax havens.
There was a further consultation between March and May 2016 and to date the government has not announced whether there will be a next step.
Those brilliant economic managers, Tony Abbott and his treasurer Joe Hockey, provided an alluring incentive to NSW and other states to become parties to what is known as the “asset recycling initiative”.
NSW premier, Mike Baird, signed onto this scheme in March 2015, whereby the commonwealth pledges to pay states and territories 15% in addition to the funds raised from selling public assets.
The proviso is that the liberated funds are to be spent on infrastructure projects. Meanwhile, the Turnbull government is pressing ahead with privatising Asic’s company database.
GetUp has been running a campaign against it with a video from independent investigative business reporter Michael West explaining why the company database should be retained as a public resource.
As was the case in Britain with the bidders for the land title registry, West suggests that the Asic company database could fall into the hands of tax dodgers, which could potentially comprise the ability of investigators and reporters to search the data and make company linkages.
These transactions are proceeding in the face of warnings issued by Rod Sims, chairman of the Australian Competition and Consumer Commission. In July he said that the privatisation of public monopolies should cease because governments are mishandling them.
I’ve been a very strong advocate of privatisation for probably 30 years. I believe it enhances economic efficiency [but] I’m now almost at the point of opposing privatisation because it’s been done to boost proceeds, it’s been done to boost asset sales, and I think it’s severely damaging our economy.
Sims said the problem is the hefty price increases that accompany the privatisation of these assets. “Let’s call it out.”
“If we want support for privatisation then we’ve got to do them in ways that deliver what’s expected to be delivered, which is lower prices for consumers, not higher.”