We have over the past few months seen a rise in the number of enquiries we receive about the use of “electronic signatures” for the signing of tenancy agreements.
This area is complicated and not 100% clear. For the purposes of this article when we refer to a tenancy agreement we mean an assured shorthold tenancy (“AST”). Historically the rule has always been that you should obtain a “wet” signature on the tenancy agreement from both the Landlord (or the Landlords agent) and the Tenant before commencement. Many agreements are also drawn up that they are a deed and the signatures are witnessed. Generally for a valid AST of 3 years or less this does not have to be by deed and so does not strictly require a witness.
There are various providers of electronic signatures which have a method of encryption and digital certificate which can be used to provide an audit trail of how, when and by what address/information they were created. It is obviously important that before opting for any electronic signature system that you ensure you are satisfied as to the system and that it can, if required, provide to you the proof and evidence which a Court may seek. EU Directive 1999/93/EC sets out the standard which should be met.
The Electronic Communications Act 2000 provided that electronic signatures can be used as evidence of a signature (see section 7 of this Act which provides a definition). This Act came into force in July 2000. The Land Registry also indicated it would be looking at adopting electronic signatures but at this time this appears to have been shelved for the time being.
What the Act means is if you have an electronic signature you can rely upon this as evidence in a Court of Law. This means is if you can satisfy a Court that there is a valid electronic signature you will then have a valid tenancy. If this was an agreement which had to be completed as a deed to comply with the Law of Property (Miscellaneous Provisions) Act 1989 (i.e. for a tenancy of more than 3 years) then this system would probably not work and you will probably need wet signatures. To satisfy a Court you would need to produce an audit trail and be able to explain how the system worked. Unless challenged by a party it is likely that a Court would accept this at face value.
It is worth bearing in mind that since of course a tenancy agreement does not have to be in writing even if a party did challenge the validity of the electronic signature it may well still be possible to show that the “agreement” was evidence in writing of the terms which had been agreed. This would be in the same way that when agreements are challenged you would often look to rely upon the conduct of the parties and correspondence/emails to satisfy a court as to the terms.
All of the evidence appears to be that there is no reason why a tenancy agreement can not be signed electronically provided you use a reputable form of electronic signature. There may be other issues relating to making sure you have correctly identified the parties but your existing procedures hopefully would cover this. We do, however, expect that it is likely that there will be some case law and no doubt at some point the Courts will give guidance on what they will expect to see but for the moment we are not aware of any such guidance.
What seems clear is that this form of completing agreements is going to become the norm. If anyone has any experiences relating to the use and interpretation by the Courts please do let us know. In the meantime if and when we hear we will blog further!