E-signatures are on the rise in the rental market, but it is not always a good idea to have all documents signed this way especially where the document is a deed.
Many lettings agents and landlords will be familiar with Deeds and where and when it is appropriate to use them. Examples of such documents include:
- Deed of Guarantee,
- Deed of Surrender, and
- Deed of Assignment.
We do not propose to discuss in this post the circumstances in which these documents are used. This post will address whether it is appropriate to sign these documents by way of e-signature and where parties have elected to do so whether it affects the validity of the document.
We are aware that some agents and landlords arrange for the above documents to be signed by way of e-signature not as a deed but contractual agreement. We assume this is done because of the difficulties surrounding the witnessing of an e-signature so we will address this issue in a separate post.We have previously discussed e-signatures and the Law Society’s approach in respect of them. The post can be read here.
Briefly the Law Society’s opinion on a deed signed by way of e-signature is that they can be signed in this way as long as they are done so in the presence of another individual who must genuinely observe the signing. The individual who acts as a witness will then also be required to sign the deed either by e-signature or ‘wet ink’ to ensure its validity.
However, despite this practice note there remains a lack of clarity in the law. Therefore, last year the Ministry of Justice asked the Law Commission to consider the problems surrounding e-signatures and what if any legal reforms are required to create certainty. Late last year the Law Commission published its provisional findings on e-signatures and will also be publishing its final recommendations in the near future.
It is important to stress at this stage that this is only the Law Commissions findings and is not the current state of the law. Without any legal reform we will have to wait until a case comes before the courts and sets a precedent on the validity of deeds signed by way of e-signature.
Law Commission’s findings
Deeds must be signed and witnessed. Therefore, the Law Commission found that “it is logical that the requirement for witnessing may be satisfied by the witness watching the signatory apply their electronic signature in the same location”. Furthermore, the Law Commission takes the view that witnessing by video link is perfectly acceptable where the witness also signs the deed by e-signature. Although they did also question whether a system to achieve this currently exists.
At this stage agents and landlords are advised that deeds signed and witnessed electronically may not be valid. Where the enforceability of a deed is important to a situation then the advice is to have the deed signed and witnessed in the old fashion way.
Once the Law Commission has published its final recommendations any legislative change will not be immediate, if it happens at all. It is far more likely that we will see technological improvements, and possibly court cases, that will clarify the position before there is any further progress with the Law Commission’s recommendations.
The next post will address agents and landlords using contractual versions of agreements that ordinarily would be signed by way of deed and the validity of them.
Published 17 January 2019