Tuesday, August 24, 2010

Do we care if Ontario sells off Land Registry?

Why we need public input on the land registry system

Ontario’s new Electronic Land Registration Services Act appears to be an attempt by the provincial government to raise cash by selling off registration access rights, and potentially even registration data, to address its budgetary needs.

The Act received royal assent on May 18, and will come into effect on a day to be proclaimed by the provincial government — without debate or public input. It was introduced on March 25 as part of one of the government’s budgetary bills, and passed through the legislature without any real public knowledge, no publicity and no input from users of the electronic land registration system.

The Act was introduced and administered by the Ministry of Finance, rather than the Ministry of Government Services, which normally oversees the land registration system. During the last 30 years, the Ministry of Government Services and its predecessors have proactively sought and responded to input from the major stakeholders prior to virtually all legislative and regulatory amendments to the electronic land registration system. The system we have now is far more user friendly, and operates far better, as a result of this input from the major stakeholders and the corresponding cooperation from the ministry involved.

In other words, this convention of prior stakeholder consultation works well and the public is much better off for it. Why the change in procedure?

This new Act provides for the government to enter into “service provider agreements” where it will license to a service provider the access, use, copying, selling and other dealings with the land registry and writs data, and the resulting sublicensing to the end user. The Act also creates the office of the Electronic Land Registration Services Commissioner to oversee and regulate the financial and operating relationships among the government, the primary land registration services provider and the subsequent end users. This Act also exempts these agreements and the information provided to the new commissioner from public scrutiny under the Freedom of Information and Protection of Privacy Act.

Shortly after the passage of the new Act, the public became aware that the Ontario government was seriously considering creating one big “SuperCorp” by amalgamating Ontario Power Generation, Hydro One, Ontario Lottery and Gaming Corp. and the LCBO in order to sell 20 per cent or more of this large entity, thereby raising cash to address the current liquidity needs of the government. The new Act seems to be another attempt by the provincial government to raise additional cash by selling off access rights, and possibly the registration data, to address the cash needs in the current budgetary cycle.

One need only consider what happened with the sale of Highway 407 or the sale by the City of Mississauga of a portion of its hydro corporation, to appreciate the potential problems and long-term pain that can result from such decisions by the government.

The current electronic land registration system was built in a joint venture with Teranet Inc. and the provincial government subsequently entered into an exclusive license for the operation and management of the electronic land registry system with Teranet Inc. This license expires in 2017, and the government has until at least 2014 to decide whether it will renew Teranet’s exclusive license on its expiry in 2017.

Other alternatives to consider at that time include having the province operate the land registration system itself or, more likely, inviting competitive bids from multiple third parties for the subsequent operation of the electronic land registration system. There does not appear to be any reason to have this new piece of legislation passed and service provider agreements negotiated now.

A number of real estate practitioners and other electronic land registry system users have started to question the fees charged by Teranet, especially in view of the corresponding fees being charged in other provinces for access to their newer electronic registry systems. Although we may be faced with the current exclusive license for its remaining term, there is no reason not to open this service to competition after the expiry of the current license.

This concept of the partial sale of public assets to raise money to invest in current budgetary items is problematic in several ways.

The first concern is that any potential buyer will only invest significant dollars in all or some of these assets if they gain a reasonable degree of control over such assets. That loss of control generally hurts the public, since there are significant increases in access fees and other costs, and a reduced ability of the government to make decisions in the public’s best interest.

Money raised by selling public assets is, for the most part, only partially used to pay down debt or for long-term infrastructure projects which will benefit the province. Large portions of the money raised from prior asset sales by the province have been used to subsidize current services to the public which have no long-term financial benefit. Some skeptics have alleged that these subsidized services serve only to buy votes for the government in the next election. What we end up with is short-term gain in exchange for long-term pain.

At the very least, the government’s decision regarding the electronic land registration system should be the subject of an open consultation and public debate well in advance of any final decision. This would allow the public and all stakeholders to be fully informed and express their views.

At the time of writing this article, the negative publicity and public outcry appear to have caused the provincial government to reconsider the creation and sale of the so-called “SuperCorp.” We can only hope that similar pressure will cause the government to reconsider any rash decisions about the electronic land registration system.

Steven Pearlstein is a partner at Minden Gross LLP in Toronto and a certified specialist in real estate law.
David Pylyp This is definitely worth some long term conversation. What are your thoughts?

3 comments:

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Bruge said...

I think we should care, I talked to my real estate law yr about this and he said that it is very important to learn about land registry.