Electronic Deeds Registration Systems Bill: response to submissions; with Deputy Minister

NCOP Land and Mineral Resources

12 March 2019
Chairperson: Mr O Sefako (ANC, Gauteng)
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Meeting Summary

The Deputy Minister and DRDLR delegation presented responses to the written submissions received on the Electronic Deeds Registration Systems Bill [B35B-2017].
 
Clause 3 of the Bill was a bone of contention for Banking Association of South Africa and Law Society of South Africa. It provides that a deed or document that has been generated, submitted and registered electronically, as well as already registered deeds that are submitted and incorporated into the electronic system will be regarded as the only valid and original copy of deed. Their concern was that consumers require the original deed as this constitutes their proof of ownership in a court of law and credit providers require an original deed for security purposes.

DRDLR responded that developing this system is to ensure there will be security of title. It will be clearly indicated what will be used in court and regarded as valid. In the development of this system these stakeholders will continue to be engaged and consulted to ensure that DRDLR covers their concerns. The DRDLR also responded to comments about the definition of ‘signature’; advanced electronic signatures; and inserting a clause 4A in the public access clause to protect the public access to the electronic deeds.

Members asked about usage of the words “must and may”, if automation will mean job losses when the Department moves from manual to the electronic deeds registration, the definition of “statutory officer” in the Bill, subscription fee and accreditation authority.

The Committee could not adopt the two international instruments agreements because of lack of quorum: the SADC Protocol on Environmental Management for Sustainable Development and the Kigali Amendment to the Montreal Protocol on Substances that deplete the Ozone Layer. The Chairperson gave assurance that the Committee would finalise these in its next meeting.

Meeting report

The Chairperson welcomed the Deputy Minister and delegations from the Department of Rural Development and Land Reform (DRDLR) and the Department of Environment Affairs (DEA).

Mr M Rayi (ANC, Eastern Cape) asked if there a point to continue with this meeting since they cannot form a quorum because most of the Members are not present, which was the case also in last week’s meeting.

Mr J Nyambi (ANC, Mpumalanga) said they should continue with the meeting as the Deputy Minister and the department are here, let them present to the Committee and they will engage with the presentation. The adoption of reports should be postponed until the Committee has a quorum.

The Chairperson apologised to the two departments. The meeting will continue although the Committee lacks quorum.

Mr Rayi agreed that DRDLR must present the Bill and when time and quorum permits the Committee will adopt the reports. But it will be unfair to keep the DEA. They should rather not invite DEA again but instead in the next meeting ratify those two protocols because DEA had already given a briefing on them.

The Chairperson asked if the DEA wants to submit or add anything as the Committee would excuse them.

Mr Obed Baloyi, DEA Chief Director: Chemicals Management, replied that there is nothing else to add to the presentation they had made the previous week.

Opening remarks by Deputy Minister
Mr Mcebisi Skwatsha, Deputy Minister of Rural Development and Land Reform, said there is nothing much to say but appreciate the institution that does oversight over what they do. And their own experience is that the oversight on them whether robust or otherwise, is meant to sharpen and make their democracy better and to serve people. So, they are here now to respond.

Electric Deeds Registration System Bill [B35B-2017]: Department response to submissions
Ms Antoinette Reynolds, Deputy Register of Deeds: DRDLR, said that the Department appeared before the Committee on the 29 January 2019 to give a briefing on the Bill. The Bill was published for comment and they are here to respond to the comments received:

▪ Banking Association of South Africa (BASA) commented on Clause 3, and also raised their concerns about that clause from previous submissions. Clause 3 of the Bill deals with the validity of deeds and documents, which provides that a deed or document that has been generated, submitted and registered electronically, as well as already registered deeds that are submitted and incorporated into the electronic system will be regarded as the only valid and original copy of deed.

BASA’s concern is that credit providers and/or property owners presently retain the original deed registered in the Deeds Registry. The deed held by the Deeds Registry is a copy of all such deeds. Credit providers require an original deed for security purposes as the legal process necessitates that original security documents need to accompany legal pleadings in the realisation process. Similarly, for properties which are free of such a lien, consumers require the original deed/document, as this constitutes their proof of ownership and is also required in litigation matters. If the only process available would be to apply for copies for judicial purposes, BASA highlights that this will incur additional legal costs for already financially distressed borrowers.

The DRDLR response is that financial institutions will always have access to original registered records through the bi-directional interfacing of the systems. An application for a copy of a deed for judicial purposes will not be the only process available. A certificate of confirmation of registration\ownership will be issued after the transaction has been registered and financial institutions/property owners may use such certificate for litigation purposes. The legal status of the certificate will be confirmed in the Regulations to the Bill.

BASA’s second concern is that for the Deeds Registry to retain original deeds/documents, raises concerns about potential cybercrime. If the deeds registry holds the original deed/document, one can expect lenders and consumers alike to summons deeds registry officials to participate in pleadings in the realisation process and/or other litigation matters.

The DRDLR response is that the Electronic Deeds Registration System (EDRS) must comply with all the requirements as stipulated in Clause 2 of the Bill, read with the provisions of the Electronic Communications and Transactions Act, 2002. Further engagement with relevant stakeholders will take place during the development of the EDRS such as with. SARS and BASA.
 
BASA had recommended that Section 3 be changed to reflect that:
- The client’s copy is deemed to be the original deeds/document and the deeds/document held by the deed’s registry is deemed to be the certified copy of the original deed/document. If this is not possible due to some legality, the clients’ copy of all deeds/documents should contain text to the effect that for:
- Mortgagee security purposes and/or litigation matters, the copy held outside of the deed’s registry is deemed to be a certified copy of the original deed/document”.

The Department explained that a summary of the title deed would be given to the property owner /mortgagee when a property is registered. Having sought legal opinion on this matter, BASA is of the opinion that the explanation does not address its concerns for two reasons:
- A summary of a title deed does not detail the restrictions on the property.
- Mortgagees hold a real right over a mortgaged property and thus any changes to the title deed will require the mortgagee’s permission to proposed changes. The process of issuing a summary may increase the risk of a change being made to the title deed without the approval of the mortgagee, as there is no mechanism that alerts the mortgagee if changes are made in the register without their knowledge.

The DRDLR response is that the summary of the transaction including details of rights/restrictions will be contained in a certificate to be issued. Rights of all interested persons will remain protected as currently provided for in the Deeds Registries Act as well as the Sectional Titles Act and other relevant legislation.

▪ DV Du Plessis Viviers Incorporated commented:
- Clause 3 indicates that the deed or document so registered and incorporated into the EDRS by electronic means is for all purposes deemed to be the only and valid record. Will the client and the banks receive some or other ‘copy’ of the deed or document for their purpose and will they be satisfied with that?
- With reference to Clause 5(1)(f), how will possible fraud be avoided as the conveyancer does not physically appear before the Registrar of Deeds?

The DRDLR response is that a certificate of confirmation of registration\ownership will be issued, after the transaction has been registered, to property owners and financial institutions. This certificate will serve as proof of ownership and its legal status will be confirmed in the Regulations to the Bill. Fraud will be avoided through the compulsory usage of Advanced Electronic Signatures by conveyancers and Registrars of Deeds.

▪ The Law Society of South Africa (LSSA) commented:
The LSSA confirms its support for an electronic deeds registration system in South Africa and has previously commented on some sections in the Bill that require revision.

Clause 1 – definition of ‘signature’:
- A signature pursuant to the Bill means an ‘advanced electronic signature’ as defined in Clause 1 of the Electronic Communications and Transactions Act (ECTA), which cannot be implemented in isolation. As required by ECTA, the Accreditation Authority may accredit authentication products and services in support of advanced electronic signatures.

Advance Electronic Signatures:
- ECTA expressly requires that if a signature is required ‘by law’ an electronic record may only be signed using an advanced electronic signature. While an advanced electronic signature must be used where required by law, it may also be used in signing any electronic record. The implementation of the EDRS must therefore incorporate advanced electronic signatures. It is envisaged that the newly-established Legal Practice Council would be the authentication service provider for the legal profession, working in concert with the Law Society of South Africa.
- Therefore, the use and implementation of advanced electronic signatures will require intimate engagement with the Legal Practice Council, as well as LSSA before this pivotal aspect of an EDRS can be implemented in a viable and secure manner.

The DRDLR response is that the ECTA provides that the Department of Telecommunications and Postal Services is the accreditation authority for Advanced Electronic Signatures across all Government Information and Communications Technology (ICT) systems.

▪ University of Johannesburg commented as follows:
- At present, the Deeds Office sells its data to private parties who then create various products and services using data and sell those onwards. The UJ is trying to research social and economic aspects of South African property markets. UJ believes that the research is of both academic, policy and public interest. To obtain deeds data, UJ has to obtain university funding to buy a subset of data from a private provider for hundreds of thousands of rand. Despite the cost, the private provider still placed a number of limitations on the data – limiting the topics UJ can investigate.

The DRDLR response is that the deeds registries are not state funded. It is a trading entity which generates its own income for all its operations and functions, including salaries. Section 7 of the Deeds Registries Act, read with Regulation 84, provides that the prescribed fees must be paid for the provision of information. No person, including the state, is exempt from payment of these fees.

▪ Amabhungane proposed:

Public Access Clause:
Insert a clause 4A: Any member of the public is eligible to become an authorised user of the electronic deeds registration system and access records contained therein. Regulations, issued by the Minister, may stipulate the manner and procedure for such access.

The DRDLR response is that the Regulations to the Bill will provide for different categories of Authorised Users. The Public is included and Public Users will be described as ‘public users using the e-DRS for purposes of obtaining information.
 
▪ Nomaroma Bam-Tshangana commented:
It is high time the Deeds Registry goes online. This can also assist in curbing property transfers from unregistered property practitioners. I support this system if the property practitioner agency will participate in the process by having an online tab on the system to release own registrations.
 
Pamella Faas commented: 
- This will be in line with the 4th Industrialisation goals. Corruption will be minimized as there will be an audit trail of who transferred property at what date.

Discussion
Ms E Prins (ANC, Western Cape) asked about the usage of the words “must and may” in the Amabhungane proposed clause. This is always an issue when it came to Bills because “must” is stronger than “may”. She asked for an explanation.

Mr Rayi asked if there would be job losses when the Department moves from manual to the electronic deeds registration. He noted that both the Law Society and BASA are raising the same concerns as they had raised in the Portfolio Committee. Why does the Department think they are insisting about raising these same concerns while those were responded to then in the same manner DRDLR is responding to now?

He noted the Department agreeing about the proposed amendment to the definition of “statutory officer”. It should be aware that if it accepts the amendment and the Select Committee adopts it, it means that it has to go back to the National Assembly and therefore the Bill will have to wait for the Sixth Parliament. This is just a caution to the Department.

Mr Rayi asked if DRDLR has international comparisons of how other countries are dealing with confirmation of certificates. This has been a particular focus of the submissions by BASA and the Law Society. Would the fact that this will be addressed in the Regulations suffice to make them legal if one has to appear in court? Would that confirmation of the certificate addressed in the Regulations make it legal?

Mr Rayi asked about the subscription fee of R10 for access to information by institutions like universities, would that be the charge for the entire university or for each individual in the university.

Mr Nyambi welcomed the presentation and asked for clarity on the accreditation authority. The only comment by stakeholders that the Department has agreed on is the definition of “statutory officer”. He asked for the Parliamentary Legal Office to comment on whether they agree with the Department as the Select Committee has to come to its own determination on might be the appropriate way of dealing with these issues. The Parliamentary Legal Office should take Members through the implications because all the people that have commented agree that this will improve the turnaround strategy and it will bring effectiveness and efficiency in law making. They should be mindful that they are dealing with a Section 75 Bill and they come from different provinces. He asked when DRDLR is going to have a system that will assist a person coming from a rural area to have a Permission To Occupy (PTO) recorded in a way that will bring efficiency to it. However, overall he is happy with what has been presented so far.

Ms Carlize Knoesen, Chief Registrar of Deeds: DRDLR, replied that about “must” versus “may”. When it is “must” it means “should”. But “may” gives discretion to the Minister.

Deputy Minister Skwatsha said that there is a definite difference between the two words. “Must” does not give an option; it is very emphatic, which meant that all one needs to do is as indicated. Normally, in matters of law or legal governance the ultimate authority being government and the Minister, it is often indicated as such. The word “may” is preferred when delegated powers are used.

Ms Knoesen replied that BASA and the Law Society are raising the same concerns because on both their sides there is equal concern that security of title might be affected, and that is why they keep on asking about the original title and how the Department will ensure that. And the Department’s intention in developing this system is to ensure there will be security of title. It will be clearly indicated what will be used in court and regarded as valid. In the development of this system these stakeholders will still be engaged and consulted to ensure that DRDLR does cover their concerns.

Ms Knoesen replied about the “statutory officer” definition that she is quite sure it is also defined in other legislation such as that of the Land Bank. There is other legislation that has the “statutory officer” definition.

Ms Knoesen replied about the international comparisons for the electronic certificate that the Netherlands does have such an electronic certificate. It is almost like in the form of an email indicating that the deed has been registered. Then there is a link that can be opened to view the whole title deed. DRDLR will not have the link to the full title deed as prescribed by the Act, but also there will be a certificate that indicates it is registered, what the conditions are and bonds and servitudes affecting it without going to the original in the system.

Ms Knoesen replied the R10 subscription fee will be individually charged for usage of the system. Currently they also do it especially to prevent misuse. In their current fees, for example, if it is used by DRDLR for land reform purposes, they get to use it at a zero fee.

Ms Knoesen replied about job losses that they have been to SARS and other government institutions where they specifically asked this question on how the automation affected jobs. Of course many officials are reskilled specially to be able to support the new IT environment. Therefore, as a department they do not foresee any job losses. Definitely there will be a change in job description because certain processes will no longer be required. On the other hand they have indicated that in the meantime they will have a dual system, manual and electronic, and as time goes on the manual system will be phased out.

Ms Knoesen replied about PTOs and other title holders, that the system that is now basically developed to accommodate the process in the Deeds Act and the Sectional Titles Act, which is not for PTOs. But going forward they are also looking, as part of the Integrated Land Administration System process, to have some recording of those rights, and have a portal for that. But this is not legislated as yet and, there might be a need for legislation in this regard.

Mr Nathi Mjenxane, Parliamentary Legal Adviser, replied about changing the definition that first and foremost, this Bill is a section 75 Bill, which is processed in terms of section 75 of the Constitution. In terms of section 75 of the Constitution, the Select Committee does not make any changes to the Bill. After it adopts the Bill without amendments, it goes to the President for signature. However, where the Committee suggests amendments or rejects the Bill, it must go back to the National Assembly for it to be relooked at to confirm or reject those amendments proposed by the NCOP Committee.

The second option is recommended if there are matters of principle emanating from the Bill that would lead to challenges in the implementation of the legislation. For instance, the definition of “statutory officer” does not, in his view, amount to a clause that will give practical challenges to the implementation of the Bill. However, the purpose of definitions in legislation is to clarify where there is confusion. It has been identified through public comment that there might be an issue of clarity. The Committee could include in its Report on the Bill a recommendation to DRDLR that after this Bill is passed without the Committee making any amendments, that a technical amendment be brought by DRDLR to clarify the definition of “statutory officer”. This will take care of the concern about that definition.

Mr Mjenxane pointed out that it is correct that the difference between “must” and “may” is quite huge in law. “Must” is compulsory and “may” is a discretion to do or not to do something depending on issue. It should be stated that this is a drafting convention which is a delegated power in terms of section 44 of the Constitution, which provides that the power to make legislation rests with Parliament. However, Parliament can delegate that power to the Executive or to the Minister to exercise that power as and when it becomes necessary. That power is merely an exercise to operationalise the principle matters that have been agreed to by Parliament. In this instance, the Committee has agreed on all the provisions that need to be in this legislation, and in clause 5 it delegates the power to the Minister to exercise the delegated power as and when it becomes necessary to operationalise the provisions of the principal act. When the Minister has finally decided to exercise that delegated power it must be published for public comment. So, there is nothing untoward in the use of “may” in that instance.

Ms Tshepo Mahlaela, DRDLR Legislation Specialist, replied that accreditation authority is referring to the authority of ensuring that the digital certificate of the service provider has been properly assessed in terms of its capability of issuing out an advanced electronic signature. There are various types of electronic signatures, but the advanced electronic signature is the one that is viewed as the most secure. It is classified as class 4 because it uses technology like cryptography, the usage of private keys, public keys, and so forth. It ensures that the data that is signed with the electronic signature cannot be changed along the way until the recipient receives it.

Currently there are few service providers in the country that have been accredited to issue that type of an advanced electronic signature. The accreditation authority is the South African Accreditation Authority. A service provider that says it has the right technology, processes and capabilities for producing advanced digital certificates has to go to that authority for assessment. The Accreditation Authority falls under the Department of Telecommunications and Postal Services and the Director General is responsible.

Ms Mahlaela said there are only two digital certificate service providers that have been accredited by this authority to issue advanced electronic signatures. That is the South African Postal Office Trust Centre, and LAWtrust. The Electronic Communications and Telecommunications Act provides that they can use the SAPO Trust Centre because it has been accredited to issue advanced electronic signatures.

The Chairperson thanked the Deputy Minister and DRDLR for the presentation and responses.

The Chairperson said the Committee will ensure that at its next meeting it will wrap up and complete all its processes and adjourned the meeting.

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