Jumping signature hurdles

The Covid-19 pandemic has profoundly altered both our personal and professional lives, disrupted the business world and accelerated the pace of digital transformation. Even the way we sign documents has not been immune. Pre-Covid-19, perhaps because of convention, legal requirement or the natural human reluctance to embrace change, the cumbersome process of signing documents pen on paper remained the norm. Now, with offices closed, homeworking the new normal and pressure to get contracts signed quickly to reduce the risk of deals falling through, e-signatures are being embraced. The benefits of having the right digital tools in place are obvious and significant. Early adopters of e-signature platforms have been well placed to support clients wanting to proceed with transactions, and have seen an immediate reward for investing in more efficient ways of working. When offices eventually reopen, it seems unlikely that clients will wish to give up the convenience of signing documents any time, anywhere, particularly if they are working more from home. E-signatures are undoubtedly here to stay, but what are the limitations on their use and what practical issues do you need to consider? What does the law say? In its report, Electronic execution of documents, published on 4 September 2019, the Law Commission confirmed that an electronic signature is capable, under English law, of being used to execute documents (including deeds) as long as the signatory intends to authenticate the document and the usual formalities are satisfied. That conclusion was based on a review of existing legislation and court decisions relating to both wet ink and electronic signatures. Then on 3 March 2020, shortly before the start of the lockdown, lord chancellor and secretary of state for justice Robert Buckland QC issued a written ministerial statement endorsing the Law Commission’s conclusions and stating that electronic signatures “are permissible and can be used in confidence in commercial and consumer documents”. Where do the limitations arise? All parties to the transaction, and any lender providing finance, must consent to the use of electronic signatures. While Covid-19 has swept away many concerns about the use of technology, some parties may still have their own views on the security and reliability of electronic signatures and may not regard their use as appropriate. It’s always best to ask about using electronic signatures early on. Where one or more of the contracting parties is an overseas entity, you will only be able to proceed with the use of electronic signatures if local counsel is willing to issue a legal opinion confirming that the electronically signed document will be legally valid and enforceable in the relevant jurisdiction. The constitutional documents of the signing party may not permit the use of electronic signatures. Although this is unusual, particularly for companies and other entities incorporated under the Companies Acts, this should be checked. If the place of signature or the location of the document is important, perhaps for tax reasons, it may be preferable to avoid electronic signing as the answers to these questions are often unclear. Land Registry’s position on e-signatures The stated remit of the Law Commission report expressly excluded transfers, leases and other registrable dispositions, so the Land Registry is free to follow its own path on this issue. It will not accept for registration an electronically signed dispositionary deed other than a digital mortgage which has been created, signed and dated electronically using its own digital mortgage service. While this position has not changed following lockdown, the Land Registry has publicly commented that it is “liaising with key stakeholders to explore other possible options”, which is a positive first step. Although the Land Registry’s position limits the use of electronic signatures within the real estate sector, there are a surprising number of common documents that fall outside of the registration net. They range from construction warranties, development agreements and contracts for sale and lease, to management documents that are regularly issued by investors. Why the fuss about e-signature platforms?  Three words describe why we are so enthusiastic about using an e-signature platform: efficiency, traceability and speed. Once final form documents are sent for electronic signing, we can track their progress and in the event of delay, automatic reminders can be issued. The process can be tailored to suit each client’s own governance needs with approval workflows put in place and key people automatically notified when documents are signed. Using an e-signature platform can also help manage signatory absences, whether through sick leave or furlough, as documents can be re-routed at the touch of a button to alternate signatories. As one of our construction colleagues commented recently: “It took my trainee less than a day to get a set of appointments and warranties signed and completed last week. We’d usually be at that for weeks chasing everyone to send them back. Years in the case of a sub-contractor warranty!” Those who are reluctant to use e-signatures often cite security concerns, but it is worth remembering that we don’t usually get an audit trail with a wet ink signature – a signed document may turn up in the post without explanation of the process that has been followed. In comparison, a document signed electronically through an e-signature platform is returned with an automatically generated “certificate of completion” that records the e-mail addresses the document was sent to, when the document was signed and the IP addresses of the devices used. What is the process for using an e-signature platform? You should agree with the counterparty’s solicitor at an early stage how the process will run. While it is permissible for different parties to use different methods of execution (for example, one party signs electronically and another wet inks the document), the most efficient and secure way is for the document to be signed and completed within the e-signature platform. You will need to: Agree which solicitor will send the documents to all the parties for electronic signature; Obtain the names and e-mail addresses of the signatories together with confirmation that they permit their details being stored on the e-signature platform (and being recorded in the certificate of completion); Agree the document signing order; Decide at what stage in the process the counterparty’s solicitor will view the documents and give approval; Agree that all documents will be held jointly to the order of both law firms from the point at which the first electronic signature is applied to the documents, and that they will not be dated within the e-signature platform until a completion telephone call has taken place. As for a wet ink signing, a witness must be physically present to see the signatory adding their signature to the documents on screen. The witness will receive an e-mail requesting that they add their electronic signature and details to the documents once the signatory has done so. Most e-signature platforms allow witnesses to fully view all documents sent within an electronic envelope, so if there are confidentiality concerns a corporate signatory may choose to execute by two directors signing instead of one director signing in front of a witness. E-signature platforms are here to stay Electronic signatures have arrived, and won’t be going away. Provided thought is given to the issues that arise from their use, e-signature platforms offer us the ability to streamline what is otherwise a slow finish to a transaction – let’s grab this opportunity with both hands. Katherine Crowley is the practice development manager in the real estate business group at Womble Bond Dickinson (UK) LLP and Tarnya Mason is an associate director in the real estate division and knowledge at Penningtons Manches Cooper LLP