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E Signatures and Property – The way forward?

In September, the UK’s first-ever property transaction was completed using a ‘Qualified Electronic Signature’. The use of this technology contributed significantly to the length of time that the transaction took, reducing this from the usual 6 to 8 weeks to only 24 hours. With this transaction likely signalling the start of a revolutionary step within property, we consider what E signatures are and whether E signatures will be a positive influence within property transactions going forward.

What exactly is an ‘E Signature’?

Surprisingly, there is more than one type of e signature. These come in many forms including:

  • Electronic Signatures:

These signatures simply eliminate the need for pen and paper and consist of signing your signature on a tablet, your laptop or using ‘e signature’ software such as Docusign which has recently been approved by the Land Registry. Whilst this is more environmentally friendly, it does not eliminate the need for a witness in transactions and cannot yet be used for deeds.

  • Mercury Signing:

Mercury signing has been advocated for by the Law Society since 2019 and has recently been approved by the Land Registry in light of the pandemic. Each client’s signature is witnessed and signed on separate execution pages. The execution pages are then scanned and attached to the electronic document creating one document for submission to the Land Registry. However, whilst this enables solicitors to complete or exchange without needing hard copies, it still does not eliminate the need for a witness. Furthermore, solicitors must mutually agree to use this method prior to sending the documents for signature.

  • Qualified Electronic Signatures:

Unlike the above methods, witnesses are not required when using a Qualified Electronic Signature (QES). Instead of a witness, QES software uses an independent identity check to verify the identity of the person ‘signing’. This saves time in having to find a witness and affords greater certainty when verifying the identity of the individual.

Currently, a solicitor or conveyancer is required to confirm that the transaction has complied with the Land Registry’s section 8 requirements for executing deeds when using an E Signature and verify that ‘to the best of their knowledge and belief, the requirements set out in Practice guide 8 for the execution of deeds using electronic signatures has been satisfied’.

So, will E Signatures be the way forward? –

  • The “Pros”:

As we know, it is incredibly common for clients to be based in different locations across the country and sometimes internationally. Therefore, it is undeniable that the implementation of E Signatures within property transactions will provide greater accessibility for clients. With ‘blended’ working likely to be a permanent way of working in light of the pandemic, E Signatures may be the desired option for clients. 

As mentioned, the first QES property transaction completed significantly quicker by using an E Signature. As the transaction demonstrates, there is no doubt that implementing E Signatures into property transactions will result in a faster, more efficient property transaction. With many complaints within property concerning delay and the timescales of the transaction, the use of E Signatures may further lead to a reduction in complaints made in this respect.

  • The “Cons”:

Whilst there are clear benefits to E Signatures, there are some points which remain unanswered.

Whilst practice guides have been published, the specific requirements for a satisfactory E Signature have not yet been solidified through statute. In light of this, it could be open to debate whether an E Signature complies with the signature requirements for a deed as required by Section 1 of the Law of Property (Miscellaneous Provisions) Act 1989.  Moreover, the lack of case law surrounding E Signatures means that it will be tricky to predict what the courts consider to be a successful deed if executed by an E Signature. Whilst the court may likely decide that an E Signature could be a valid form of deed execution, this still remains to be seen.

A key point to note is that whilst QES provides an independent verification check the software is still evolving. As we no doubt know, technology is not always reliable. By relying on technology rather than a witness, the risk of fraud or errors within transactions may increase. As a result of this risk, greater due diligence and caution will be needed by solicitors when employing this method.

  • The Future

Whilst more evidence is needed, the positives certainly seem to be outweighing the negatives when using E Signatures. We expect the use of E Signatures will gradually become more and more widespread and lead to a quiet revolution in the way property transactions are completed. We  are looking  forward to seeing how the use of E signatures  will increase and develop over the next couple of years and thereby forever changing the centuries old tradition and requirement of wet ink signatures on paper.

Please contact us if you would like more information about any aspect of commercial property law on 02920 345511 or commercialproperty@berrysmith.com