Sign of the times

22 / 09 / 2020

Those of you tasked with completing real estate deals and executing deeds and documents during the Covid lockdown will be pleased to hear that Land Registry has finally taken a leap into the 21st century and changed its policy on the acceptance of documents for registration executed using electronic signatures (also known as e-signatures). Previously Land Registry would not accept documents for registration (other than a specific type of mortgage executed using Land Registry’s own software) which had been executed using any form of e-signature, be it scanned copies of “wet ink” signed documents or those executed using an e-signature platform such as DocuSign.

New Land Registry policy on documents executed using e-signatures

Thankfully, Land Registry has bowed to pressure from lawyers and industry bodies and updated its policy on the acceptance of documents which have been executed using e-signatures. For the first time, Land Registry is now accepting documents for registration which have been executed using two methods of electronic execution, provided that Land Registry’s rules governing the signing and completion process set out in Practice Guide 8 are strictly followed. This means that deeds which record dispositions of land such as transfers, leases and mortgages, can now be executed using methods of execution which are compatible with arrangements where the signatories are not physically present in their place of work or their solicitor’s office.

The two methods of electronic execution which Land Registry has accepted are:

1. the “Mercury option 1” signing method of exchanging or completing using PDF/JPEG copies of wet ink signed documents; and

2. documents executed using an e-signature platform such as DocuSign.

Mercury signings

Many of you will have some degree of familiarity with the use of PDF scanned copies to exchange contracts. Land Registry is now accepting the use of Mercury “option 1” signed and completed deeds for registration purposes where they comply with Land Registry’s guidance.

In case you were wondering, the word “Mercury” stems from the name of a court case in 2008 which led to a review of practices on the use of scanned copies of signature pages for completions. Following the Mercury case, The Law Society issued guidance to solicitors on best practice for the execution of documents by virtual means, and this is where the option 1 procedure stems from. Options 2 and 3 are not acceptable to Land Registry. The Law Society’s guidance has recently been reviewed and updated to take account of changes in practice including the Land Registry’s guidance on this topic.

Key to use of the option 1 procedure is that a complete final execution version of the document is also attached to the same email by which you return a scanned copy or photograph of the signed signature page to your solicitor. This is so that there is clear evidence of the intention to enter into all of the terms set out in the document. Simply returning a copy of the signed signature page by email to your solicitor does not meet the formalities of option 1. Your solicitor will be able to advise further on the technical details.

Electronic signatures

Where all parties are represented by conveyancers Land Registry will now accept documents which have been signed and completed using DocuSign or an e-signature platform. Land Registry’s guidance specifies that a conveyancer must issue the documents for signature and that they are to be completed within the e-signing platform. Land Registry also mandate the use of a six digit “one-time password” (referred to as an OTP) which acts as two factor authentication sent in a text message by the e-signature platform to the mobile phone of the signatory and any witness. Land Registry’s requirements for witnesses go above and beyond the processes which the e-signature platforms have created for witnesses, making it difficult to use an e-signature platform where a signature is to be witnessed. We hope that Land Registry and the e-signature platforms will work together to resolve these discrepancies at the earliest opportunity. In the meantime, for corporates we recommend executing by way of authorised signatories, such as two directors or one director and a company secretary. This process works well with DocuSign.

The conveyancer submitting the documents for registration must give a written confirmation to Land Registry that the requirements set out in Land Registry’s guidance have been satisfied. When we are instructed on a transaction we will advise our client on execution matters to ensure the transaction documents are completed and registered at Land Registry without any additional delays. DocuSign provides an audit trail setting out the details of the signatories and the date and time when all of the signatures to a document are applied, which can be useful to keep with the completed documents.

Land Registry has confirmed to us that where documents are executed in multiple parts by different parties, so long as the party which executes using DocuSign completes their part of the document in DocuSign, the other parties to the document can sign using traditional wet ink signatures and date their part “by hand” if that is more convenient for the parties.

Witnesses

It is important that where any signature is witnessed, the witness is physically present when the signatory applies their signature to the document. For an e-signature applied using DocuSign this means that the witness would see the signatory adding their signature to a document on a screen.

Electronic signing for Wedlake Bell’s clients and deals

For a number of years, where the circumstances have been appropriate to do so, we have been using the Mercury option 1 method of completion. Following Land Registry’s acceptance of Mercury signed and completed registrable documents we expect the use of the Mercury option 1 procedure to increase on real estate deals.

Wedlake Bell use the DocuSign e-signature platform on deals where the parties wish to sign using e-signature software. DocuSign enables us to prepare, send, sign, act on and manage our agreements significantly streamlining the document signing process for those documents where its usage is permitted by the law. The DocuSign system is just one of the ways in which we are trying to digitise our interactions with clients and external parties and work more efficiently, especially whilst a large proportion of people within the real estate industry continue to work remotely.

Key points

  • Lease and transfers can now be signed electronically in the same way as other contracts
  • There are many ways to “sign” electronically but the Land Registry only accept two of them, be careful and check with your lawyers
  • Witnesses need to be in the same room or outside space as the signatory. Facetime, Zoom and Skype aren’t legally effective ways to witness documents