Contagion … NSW selling the land titles registry to private operators … Other states like the idea … A fortune awaits successful tenderers … Milking critical infrastructure … ASIC company database also on the block … Politicians ignore ACCC warning about mismanaged privatisations
THE legislation to allow the private operation of the NSW land titles registry has passed parliament.
The Land and Property Information NSW (Authorised Transaction) Bill 2016 sailed through last week and the process of putting the registry on the block is the next step.
The one vote needed to get it across the line came from the old upper house god botherer, Fred Nile. (Thanks Fred.)
Already the Land and Property Information unit has been carved off from the Finance, Services and Innovation departmental “cluster” and the place has been crawling with suits from outside evaluating the silverware that Baird & Co is determined to flog.
State treasurer Gladys Berejiklian said that the legislation “provides a range of legislative and regulatory safeguards to protect the integrity of the property titling system while also protecting staff”.
Protecting the staff is a bit of a joke because at the moment the door has been closed on staff taking redundancies. LPI employees will have to take up positions with the private operator if positions are available. However, in years time the operator has the option under the Act of dishing out redundancies.
KPMG and Boston Consulting, Baird’s favourite asset floggers, have been in charge of plumping the asset for sale.
Needless to say, solicitors are furious but voices have been muted. Former Law Society president Margaret Hole has been on the front line of protests and lobbying the cross benchers. Here’s a summary of her submission.
She says there has been no independent assessment of the proposed sale of this critical piece of state infrastructure.
The suggested sale price for the concession to operate the registry for 35 years is between $700 million and $1 billion.
This would consist of a one-off payment and an agreed return to Treasury, subject to contract. Last year about $50 million was returned to the government by the Land and Property Information unit.
The new operator is likely to be a consortium comprising a bank, an insurance company, a foreign sovereign fund and an international superannuation fund. The real pot-of-gold lies in the imposition of title insurance, following the model of US title registries.
Title insurance is rarely purchased in NSW because of the integrity of the system and the indefeasible nature of the register, along with the operation of the guarantee fund. At the present time there would be no more than four or five claims a year against the Torrens Assurance Fund.
Title insurance on the purchase of a $1.4 million property is currently about $990.
Last year 213,000 transfers were lodged in NSW, which means that conservatively $210 million in insurance premiums can be raised by the operators holding the concession.
Over the 35 year term of the arrangement that would be $744 billion from land title insurance, which until now has been quite unnecessary.
The union movement, too, has been out on the battlements, with leaflets explaining what is at stake.
The British government has run several consultations on its proposal to change the ownership of its land registry.
In 2014 the plan was to create a service delivery corporation to run the day to day business of land registration. It could have been a government owned company, however the plan was hosed down after vocal opposition from the legal profession and other users.
In November last year the Chancellor of the Exchequer was playing with the idea of privatising the registry and that was dropped 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 next step.
Here’s a report from The Guardian in March.
However, the South Australian government is taking a feather out of NSW’s cap and says it is looking to invite the private sector to run the state’s registry.
Treasurer 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 are largely meaningless sops. The operation of the register, not the ownership of the data, is the key to the rivers of gold likely to flow 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.
Meanwhile, the Turnbull government is pressing ahead with the privatising of ASIC’s company database.
GetUp has been running a campaign against it with a video from investigative business reporter Michael West explaining why the company database should be retained as a public resource.
The deadline for submissions on the proposal is this Friday, with GetUp urging citizens to send a letter to the PM’s office asking him to keep the corporate database in public hands.
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 compromise the ability of investigators and reporters to search the data and make company linkages.
The sale of these public resources is proceeding in the face of warnings issued recently 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.”