Electronic signatures in real estate: the future

Thomas Ferguson, Senior associate in the Russell-Cooke Solicitors, real estate, planning and construction team.
Thomas Ferguson
4 min Read

The use of electronic signatures is not a new idea. During the Covid-19 pandemic, the Government convened a Working Group to consider the technological and practical issues relating to electronic signatures. Additionally, the group recommended possible developments in practice, technology and the law, with a view toward increasing the security and reliability of electronic signatures.

For an introduction to electronic signatures in real estate, read more here.

The beginning of the end of the witness requirement?

Although significant reform of the law was outside the remit of the Working Group, they did suggest that the Law Commission should consider the removal of the witness requirement on deeds.

They came to the conclusion that “QES…are capable of fulfilling the same objectives as physical witnessing and attestation.” They concluded the witness plays only a minor role in reducing the risk of fraud or signing under duress.

Given the advancements in electronic signature technology and the Government-led drive to develop a digital identity framework in the UK, the Working Group considered that QES can offer a signatory more protection than that provided by a physical witness.

QES requires the parties to identify themselves to a certificate provider therefore linking the identity of the signatory to a signature. An electronic signature also produces a secure audit trail of digital information such as date, time and location that is not available with traditional signatures. Therefore, there is a strong argument that a QES is a more reliable way to protect against fraud and duress.

The removal of the witness requirement would also allow English law to catch up with other comparable international jurisdictions that do not impose a physical witnessing requirement on execution.

This may increase the use of English law to govern international contracts. HM Land Registry has made a move in the right direction by conducting a pilot scheme allowing certain conveyancers to register specific documents signed via QES without the need for the signature to be witnessed.

Embedding the use of electronic signatures

HM Land Registry is a leading body for the use of electronic signatures. Their guidance and pilot schemes encourage the use of electronic signatures by industry professionals.

However, it is also important that electronic signature platforms adapt and evolve to ensure that they meet any requirements (including any new requirements) set out by HM Land Registry or future statutory instruments.

The Working Group suggested the Government can encourage the use of electronic signatures by insisting on their use on all future Government contracts with third parties.

This would increase practitioners’ confidence in their reliability and security. It would seem sensible and in line with the recent UK and Singapore Digital Trade Deal which looks to achieve mutual recognition of electronic signatures. This would also meet another of the Working Groups’ recommendations to create “a cross-border database of permissible regulatory and execution modes.”

Best practice guidelines for the use of electronic signatures

In order to minimise the concerns regarding security and reliability, the Working Group set out best practice guidelines for the use of electronic signatures. These guidelines can be summarised into five high-level points:

  1. Agree as early as possible that a document is to be executed electronically and the procedure for doing so. Determine the optimal form of electronic signature for the transaction.
  2. Where a signing platform is to be used, choose one that provides at least a minimum set of security/safety/functionality with a strong audit trail that demonstrates an intention to sign by the signatories.
  3. Consider whether additional evidence to record the identity of the signatory and the fact that the signatory is approving the document and has the intention to be bound is necessary and/or appropriate.
  4. Where possible, provide multiple options to vulnerable customers or counterparties so that these groups can adopt a method of signing that suits their needs.
  5. Intention to authenticate should be easier to demonstrate for those with secure digital identities, but the latter should not be essential.

It is hoped that these guidelines, read together with the HM Land Registry guidance, will afford practitioners more confidence in the correct use of electronic signatures.

The argument for the use of electronic signatures

The main advantage of electronic signatures is to produce a more efficient and convenient transactional process without sacrificing reliability or security. The current evidence suggests that they can achieve this goal.

Not only do electronic signatures make the transactional process quicker and more convenient but there is also evidence that they reduce the instances of fraudulent signatures or signing under duress, therefore increasing the security and reliability of documents signed electronically.

There is no denying, however, that this is a complex area of both law and technology and the risk of fraud cannot be ignored. The Working Group recognises this concern, which will be one area of focus in the second phase of its report which has yet to be published.

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