On 27 July, the Land Registry announced that from now on it will accept land transfers, leases and mortgages signed using electronic signatures. This is a positive development for property owners, occupiers, investors and their lawyers.
The Registry has historically insisted on paper documents signed in what lawyers like to call "wet ink". Since March, with investors, tenants and their lawyers all working from home and socially distanced, printing, posting, signing witnessing and returning paper documents has been problematic.
In early May, the Land Registry took the step of allowing documents to be signed using scanned signature pages. This is where a signatory prints out the final page of a document, signs it, puts it through a scanner and then emails it back to their lawyer. Not exactly advanced digital technology – but progress of sorts.
The latest electronic signature announcement is a bigger step. Anyone dealing with property can now complete transactions using an e-signing platform. Mishcon de Reya has been using e-signatures for several years for non-property related transactions.
Why has it taken the Land Registry so long?
The Land Registry has been looking at electronic conveyancing since the 1990s. The delay has been due not to lack of will, but to concerns about security. The England & Wales Land Registry gives a legal guarantee that the contents of the register are correct, so if there is a fraud, it has to pay compensation. As a single building could be worth hundreds of millions of pounds, one can sympathise with its cautious approach.
What conditions are attached?
The Land Registry's caution can be seen in the list of rules it has laid down for electronic signatures to be used. Here is a selection:
- Every party to the transaction must be represented by a solicitor or other professional conveyancer. The logic is that solicitors are best placed to ensure the technology is used in a legally compliant way. This will, however, pose problems where a mortgage is being paid off and the outgoing lender is not using lawyers; or an unrepresented tenant is surrendering a registered lease; or an attorney is signing.
- Each signatory must input a one-time password (OTP) sent to them by text message by the e-signature platform. Most e-signature platforms have the facility to do this.
- Where a signature needs to be witnessed, each witness must also input an OTP sent to them by text message by the e-signature platform. Traditional "wet ink" witnesses have never needed identity checks and the majority of platforms do not have this functionality at present.
Where does this leave us?
E-signatures can be used for Land Registry deeds where the signatory is a company, but only if signed by two directors or one director plus the company secretary (not if signed by a single director in the presence of a witness).
The password requirements for witnesses means that for the time being, e-signatures cannot be used for Land Registry deeds where the signatory is an individual, unless the witness is identified in advance and treated as an additional signatory. This will usually mean that the signing platform allows them to download the signed documents, raising serious confidentiality and data protection concerns.
We think this issue will probably be solved by e-signature platforms adding password functionality for witnesses as well as signatories. It seems unlikely that the Land Registry will relax this requirement. We will report on developments in this space as soon as they happen.