E-signatures are seen as a new, accessible and fast way to conclude deals. Property law, however, is a minefield of statutory requirements, making it important to know where and6 how e-signatures can be accepted during property transactions so that you are not caught out.
An e-signature is defined as;
'data in electronic form which is attached to or logically associated with other data in electronic form and which is used by the signatory to sign'.
This may be satisfied by many different forms, such as typing a name into a contract or email, clicking an 'I accept' button, pasting an image or using a web-based electronic signature platform.
The EU issued a directive in 2000 to implement the use of e-signatures in legal documents. Each country had discretion over the use and application and so inconsistency was rife, making cross-border business difficult. In 2016, the EU then replaced the Directive with a Regulation for the provision of e-signatures. Most documents in property transactions will be submitted to the Land Registry, making them the judge in these scenarios.
We can pinpoint the difficulties more easily by considering the process involved in various land transactions:
To be valid, a contract for the sale or other disposition of an interest in land must be:
If we look more closely, we start to understand why property law makes it more difficult to use e-signatures:
Most documents looking to create or transfer a legal estate or interest in land must be made by deed (with a few exceptions).
Deeds must be in writing, signed and delivered. This normally involves signature in the presence of a witness who then confirms the signature.
Many will argue that the same definitions used for contracts should apply to deeds. However, the Land Registry currently takes a cautious view in this regard. Many are conscious that it is hard to witness and attest an e-signature.
Further stunting the progression of e-signatures in deeds are lenders, who tend to insist on wet ink signatures on physical copies of the deed.
Pros and cons:
In an ever growing digital world, it seems that the positives of e-signatures outweigh the negatives:
A consultation by the Land Registry this year tried to settle the issue. It found that while they appreciate the need to embrace e-signatures in the future, they will not go as far as endorsing or accepting them currently. In the meantime, it seems we must abide by current practice, which usually means that deeds, leases and registrable transfers are signed as physical documents, while contracts can be electronically signed.
It is unlikely that e-signatures will be fully incorporated into the law surrounding all property documents soon, but hopefully this area will be the subject of reform at some point.
If you would like any advice on any property related matters or transactions, please contact a member of the property team.