With the nation facing a period of unprecedented disruption as a result of the Covid 19 lock-down, corporations across the country are invoking their business continuity plans providing for alternative business processes.
One aspect of this is how real estate documents can be executed in the current lockdown with usual signatories dispersed, authority processes disrupted and limited resources to copy and circulate documents. This briefing explores the options available for electronic execution of such documents.
An electronic signature is capable in law of being used to execute a document (including a deed) provided that:
- the person signing the document intends to authenticate the document; and
- any formalities relating to execution of that document (i.e. set out in statute) are satisfied.
Although an electronically signed document is legally valid, it is important to consider whether the document will need to be filed with HM Land Registry or any other authority or registry which may insist on a “wet ink” signature – see below for further information.
What constitutes an “electronic signature”
Electronic signatures can take a variety of forms, provided the two limb test above is satisfied, such as:
- somebody typing their name into a contract or email with contractual terms
- a person pasting a scan of their signature into a soft copy contract in the execution block
- a person using an electronic signature platform to click to insert a typed or handwriting font into the execution block
- a person using a e-pen or finger to sign their name on a tablet.
Is an electronically signed document an “original”?
Yes. A practice note issued by the Law Society confirms that electronically signed documents can be treated as “originals”
Real Estate Contracts
Contracts for the sale or other disposition of an interest in land must comply with certain statutory formalities. These include (amongst others) a requirement that the contract must be:
- in writing and
- signed by or on behalf of each party.
Electronic signatures will satisfy each of these tests: “in writing” simply requires the words to be in a visible form and a “signature” is any mark intended to give authenticity to the document, so can be any of the forms of electronic signature mentioned above.
Although it is possible for deeds to be signed electronically, the formalities for signing deeds must still be followed.
Deeds executed by individuals
For individuals, a deed must be executed in the physical presence of a witness who attests the signature. This is the case even where both the person executing the deed and the witness are executing / attesting the document using an electronic signature.
It is possible to witness electronic signatures through the witness being physically present when the electronic signature is applied and applying their own signature (electronic or otherwise). However, it is unlikely that a witness observing signature by videoconference or similar technology is acceptable.
Deeds executed by companies
Under the Companies Act 2006 English companies can executed deeds either:
- by one director in the presence of a witness, or
- by two directors or a director and the company secretary.
Where a deed is signed by one director in the presence of a witness, the guidance above in relation to deeds executed by individuals is to apply.
Where two directors or a director and the company secretary are signing a deed on behalf of a company, the officers can sign documents in “round robin” format or in counterparts to meet the requirements for due execution of a deed by a company.
Exception – Documents requiring registering at HM Land Registry
Presently, HM Land Registry will only accept electronic signatures for digital mortgages. This means that any real estate deeds which are registrable with HM Land Registry will need to continue to be executed in traditional “wet ink” format.
Where time is an issue the parties may agree to complete on the basis of electronically signed documents with the “wet ink” originals following post-completion. In this situation, it would be prudent for the parties to consider also putting in place a side letter or statement within the relevant document which records that the parties:
- acknowledge that completion will take place on the basis of electronic signatures
- confirm that each signatory has also executed the engrossment with a wet ink signature, and
- undertake to send the “wet ink” signature pages to their respective solicitors as soon as reasonably practicable and in any event within the relevant HM Land Registry priority period.
The ability to executed real estate documents electronically will be a useful tool during the Covid-19 lockdown and indeed in future transactions long after. However, care must be taken to ensure that proper procedure for executing deeds is followed, and that “wet ink” signed documents are provided where registration is required at HM Land Registry.