Technology is rapidly changing the way in which business is done. Consumers are growing used to an on demand service – whether that is in relation to their banking, shopping or leisure time. Arguably the B2B world, including within real estate, has been slower to react and embrace new ways of working. Could the developing technology and law around e-signatures be a game changer?
What is an e-signature?
The e-signature is not a new concept: the Electronic Communications Act 2000 and eIDAS permit the admissibility of an e-signature as evidence in legal proceedings.
There are many different ways of effecting an electronic signature onto a document: pasting a signature, typing a name, using a stylus on a touchscreen. The eIDAS Regulation (EU) No 910/2014 goes further in defining three types of electronic signature:
+ A basic electronic signature which can be applied to a document, e.g. adding a scanned signature.
+ An advanced electronic signature which is linked to the signatory, is capable of identifying the signatory and is created using signature creation data that the signer can use under their sole control.
+ Finally, a qualified electronic signature which must meet advanced electronic signature requirements and be backed by a qualified certificate, issued by a trust service provider.
What are the advantages of e-signatures?
Web-based signature platforms can be used for e-signing documents and offer a number of advantages over current practice. These include: ease of execution, reduced risk of errors in execution, enhanced security and ease of administration: they even tick the eco box (saving printing and posting). They are particularly useful where signatories are located abroad where historically a transaction could only move as fast as the courier carrying the documents.
So why haven’t they been adopted more widely?
The problem that remains is the validity of electronic signatures - particularly around legislation that requires a document to be “signed” or executed as a deed.
The general approach of the courts has suggested that an electronic signature should satisfy a statutory requirement that something be signed. However, there have also been some curved balls including the decision in Cowthorpe Road 1-1A Freehold Limited v Wahedall where the court was adamant that only pen and paper would suffice.
The Law Commission attempted to provide some clarity on e-signatures in its 2018 consultation. It suggested that an electronic signature is capable of meeting legal requirements where there is an intention to authenticate the document, but sought views on whether legislative reform was necessary to improve confidence in the market and encourage a wider uptake of e-signatures in practice. We await the outcome of that consultation with interest.
Are e-signatures acceptable in real estate transactions?
In its 2016 practice note the Law Society acknowledged that the Land Registry and Land Charges Registry required wet-ink signatures on any paper versions of documents sent to them, and HMRC “would normally” expect to stamp a wet-ink version of the document with a wet-ink signature. Essentially this means that any real estate document that does not require registration at the Land Registry may be suitable for electronic signing and we are finding that our clients are increasingly keen to adopt this technology where possible.
Wholesale adoption of e-signatures across real estate may not, however, be too far off, in the light of the Land Registry’s Digital Street initiative. In 2018 it trialled its “sign your mortgage deed” allowing borrowers to digitally sign their mortgage deed online and witnesses no longer needing to be present when the document is signed. This is a progressive move from HM Land Registry and shows its intention to move towards modernising and speeding up real estate transactions.
Could E-witnessing be next?
When executing a document as a deed using a sole signatory or swearing a statutory declaration, a witness is required. Might it be possible to witness electronic signatures by video conference or is physical presence always required? We have seen the use of video link to give evidence in court proceedings in a number of cases - could this pave the way for a wider acceptance of remote witnessing?
The Law Commission has suggested that it is “best practice” for the witness to be physically present and in the absence of clear statute or authority on the point the risks will be too great for most to take.
However, we welcome the Land Registry and Law Commission's interest in this subject and are confident that the Law Commission’s consultation and its outcomes will encourage more use of e-signatures, paving the way for quicker, safer transactions in real estate and beyond in the years to come.