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Progress at last: Acceptance of e-signatures by HM Land Registry

29 July 2020
The use of electronic signatures has remained steadfastly on the horizon since the introduction of the Land Registration Act 2002. This contained the necessary enabling provisions for e-signatures, but until now HM Land Registry have only taken tentative steps in this regard with the acceptance of electronically signed mortgage deeds for certain types of domestic re-mortgages

Many conveyancing practices are decades (or even centuries) old. Property lawyers are generally a conservative bunch and are notoriously slow to embrace change, the pace of transformation and development is slow and indeed there has been remarkably little affront amongst the profession about the lack of progress. However, a seismic change appears to have occurred today. 

In what represents a major development in property practice in England & Wales the Land Registry has today quietly changed tack and will now accept e-signatures in respect of certain types of registrable property transactions. They have updated their practice guide on execution of deeds with a short additional segment to reflect their new requirements. [1]

This step will be met with relief in many quarters. The events of the last few months appear to have played a major part in forcing the hand of the Land Registry, in the current environment wet ink signatures have proven to be impractical, or even impossible. 

Furthermore the widespread use (and acceptance by the Land Registry of 'Mercury' PDF documents (which involves printing and scanning of wet ink signatures) represents a cumbersome and dated halfway house. Both routes add significant additional friction to property transactions.   

The new approach from the Land Registry opens the door for practitioners to start to utilise electronic signature platforms such as DocuSign and Adobe Sign to complete high value property transactions using e-signatures. 

Such platforms present significant opportunities to centralise and streamline the process of signing transactional documents.  They enable law firms and other businesses to quickly circulate all types of legal documents for signature and facilitate their prompt signature and return by entirely electronic means. 

In England & Wales these platforms have been used, so far, for some property agreements (which in their own right do not have to be registered at the Land Registry) and relatively low commitment transactions such as short term leases and licenses to occupy.  

The Land Registry's announcement represents a major step change in practice and both lawyers and clients are now in a position to embrace this technology for more significant undertakings such as transfers of property and long leases. The days of waiting for transaction documents in the post or cumbersome 'Mercury' signing appear to be coming to an end. Simply put, e-signature platforms enable parties to sign valuable transaction documents electronically, in a matter of moments, from their PC or phone.   

The Land Registry have set out some quite specific requirements which follows common e-signature workflows: 

  • all parties must agree to the use of an electronic signature;  
  • all parties must be represented by a conveyancer in order to use e-signatures;
  • a conveyancer must set up and control the signing process; 
  • the conveyancer should upload the agreed document (with all plans) and populate the platform with name , email address and mobile number of the signatories (and any known witnesses);
  • fields to be completed are to be highlighted and the order in which they are to be signed is to be determined;
  • six digit authentication codes (described in the guidance as 'one time passwords' (OTP)) must be used for both signatories and witnesses (who should receive the same by mobile);
  • witnesses must be physically present with any person electronically signing (notably the guidance requires the witness to be invited to sign via email, 'in person' signing by a witness is not provided for) ; 
  • witnesses must record their name and address details on the signature platform; 
  • a conveyancer's certificate is required to accompany any Land Registry application to certify that the terms of the Land Registry's policy have been followed, this must state as follows: 'I certify that, to the best of my knowledge and belief, the requirements set out in Practice Guide 8 for the execution of deeds using electronic signatures have been satisfied';
  • 'mixed signings' – one party electronically, one party wet ink, are permitted, and also 'mixed platforms', these routes will generate additional due diligence;
  • where a deed is being signed by a company by way of two authorised signatories (i.e. two directors, or a director and secretary) then (in the usual way) no witness will be required; 
  • the guidance provides that the Land Registry will accept e signatures for transfers of property, leases for 7 years or more, deeds of easement, charges, discharges of charges, and powers of attorney (but not lasting powers of attorney).

They recommend (but do not mandate):

  • including the words next or beneath a witness signature block  'I confirm that I was physically present when [name of signatory] signed this deed' ;
  • that conveyancers retain with their conveyancing file a copy of the completion certificate or audit report produced at the end of the signing process to record the email addresses the documents were sent to, the one time password method used, the fields that were completed, and the IP address of devices used.

As such, before a transaction can be conducted via this route practitioners will need to agree who is to sign, which platform is to be used, and who is to control the signing and completion process. A professional protocol will be necessary to ensure that a consistent approach is taken to this process. A good degree of co-operation is going to be required between professionals, particularly in the next few months as lawyers get to grips with what are for many new and unfamiliar processes. 

Furthermore it should be noted that that there is a significant disjoint between the current witness functionality on DocuSign and the requirements of the Land Registry. In the light of this e-signatures should only be used for registrable transactions by companies executing by 2 directors/director and secretary or LLPs executing by 2 members. Registrable documents which require witnessing should still use wet ink or Mercury

What sort of practice develops remains to be seen but it should be noted that the requirement for a 'conveyancer's certificate' places the risk associated with e-signatures firmly in the hands of the legal profession – particularly firms acting for buyers, tenants and funders. This requirement generates new risks and additional administrative due diligence burdens. It seems likely that further layers of protection may be required (perhaps in the form of additional professional undertakings from firms acting for sellers, landlords, borrowers). [2]

All stakeholders will need to remember that new processes are always targets for fraudsters, particular vigilance will therefore be needed. Professionals will need to remain careful to ensure that they are dealing with the actual legal owners of the subject property, identity fraud is an ongoing and pervasive risk in property transactions. A new process has the potential to distract attention from this risk.  

This is a significant step in an ongoing process of evolution and development toward true electronic conveyancing and presents the legal profession with the opportunity to more widely get to grips with e-signatures in property practice. There is one final caveat, it should be noted e-signatures are to be accepted by the Land Registry 'until further notice'. The Land Registry will no doubt adapt and develop its approach in the light of the good and bad experiences of the coming months (and hopefully years). The adoption of more sophisticated forms of electronic signature with higher levels of security and traceability is likely to be on the cards.

References:

[1] HM Land Registry: Practice guide 8

[2] The City of London Law Society raised concerns about this requirement, see: Response of the CLLS Land Law Committee to the Draft Practice Guidance on Electronic Signatures published by HM Land Registry on 9 July 2020 

Further Reading

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