Once the hard work of drafting, negotiating and agreeing documents is complete, the parties need to sign on the dotted line. Increasingly, electronic signing is being used in real estate transactions to facilitate faster and more efficient completions. Over the last few months, however, we have identified some recurrent pitfalls to watch out for.
The rise of home working
Because of the pandemic and the resulting shift to home working, more organisations than ever began looking for convenient ways to execute and witness documents remotely. Electronic signing fits that bill, and is also more environmentally friendly than physical signings, with less paper and ink required to bring a transaction to a close.
Whilst digital platforms for electronic signing such as DocuSign have been commonplace in some sectors for years, electronically signed deeds could not be registered at the Land Registry.
This all changed shortly after the pandemic began in 2020, when the Land Registry started to accept digital signatures for most documents for the first time.
Best practice for electronic signing
Based on our experience over the last year, we have developed the following tips for clients to take full advantage of electronic signing:
1. Make sure you have final documents before starting the signing process
Unlike with physical documents, electronic documents cannot be manuscript amended before completion; instead, the incorrect document must be withdrawn and re-signed.
Recirculating documents can delay completion: parties who signed a previous version of a document before a mistake is noticed will need to re-sign.
2. All parties must agree
One party cannot unilaterally choose to use electronic signing.
Also, generally, all parties to the documents must be represented by solicitors. Where you are contracting with, for example, unrepresented tenants, you cannot use electronic signing platforms. Think about this early to avoid surprises, or worse, having to re-execute documents that you have signed electronically.
3. Sealing or signing?
Only local authorities can apply a digital seal through electronic signature platforms. Every other organisation that executes deeds by applying a seal will need to seal a hard copy document in the normal way.
It is possible to have a "mixed" signing, with some parties signing a counterpart in hard copy or by Mercury, and others signing by electronic signature. You just need to agree that process up front.
4. Don't forget Mercury
The Mercury process sits between electronic signing and a traditional hard copy completion. The Mercury procedure allows signatories to print only the execution pages of documents, sign them and scan them back to their solicitor for completion.
For parties unfamiliar with electronic signing processes, or for parties who cannot sign by DocuSign for reasons mentioned above, the Mercury process can be just as quick and convenient as electronic signing.
5. Remember the Land Registry certificates
To register electronically signed documents at the Land Registry, you need a certificate signed by the conveyancer who controlled the signing process. In the certificate, the conveyancer confirms that they followed the step-by-step signing process set out in Land Registry Practice Guide 8.
Make sure that the person controlling the signing process agrees to provide the necessary certificate; without it, you cannot register documents at the Land Registry.
This rule applies not only to the transactional documents (leases, contracts, transfers), but also to powers of attorney. If an attorney signing a document is authorised to do so by a power of attorney which was signed electronically, you will need a certificate in relation to the power of attorney itself. This is often missed, especially if the power of attorney was entered into long before completion or was dealt with by a client in-house.
6. Witnessing still means actual witnessing
The witness must be physically present when someone presses the buttons to apply their electronic signature to a document, just like a witness of a hard copy signing. It is not enough for a witness to watch someone electronically sign over a video call.
Also, if possible, witnesses should not be related to the signatories. Given the rise of home working, however, a witness being a family member may be unavoidable.
7. Think about confidential information
A packet or "envelope" of documents sent for signing can contain multiple contracts. Even if a party needs to sign or witness only one document in the envelope, they can view all of the documents they are sent, not just the ones they need to sign unless the default visibility settings are adjusted.
To protect commercially sensitive information, separate confidential documents into a different envelope which is sent only to those people who need to see those documents. This will limit how many people can see your sensitive data.
8. Dating documents
By default, all documents in an electronic envelope will be dated with the same date.
If you need to date some documents with different dates, either put them in a different envelope or remember to insert the date manually.
9. Filing!
There will be no hard copy dated document, so the signed and dated PDF circulated at the end of the electronic signing process will be the only original. File it for future reference.
Avoiding potential pitfalls with electronic signing comes down to one thing: good preparation. If the electronic signing process is well-organised and issues are considered and addressed early, completion can run smoothly and save all parties time and expense.
