Docusign and electronic signatures in property transactions

In 2019, the Law Commission confirmed that electronic signatures can be capable of satisfying the strict statutory requirements for the execution of deeds.

Since then, and most notably during the Covid-19 pandemic, the use of electronic signatures in property transactions has rapidly increased. However, while electronic signatures offer a more efficient and pragmatic approach to the execution of deeds, the formalities required under the law place a limit on this.

Under the law of England and Wales, for a deed to be validly executed it must be in writing, expressed to be a deed, and properly executed. For a company, this could be by sealing the deed or having it signed by either two authorised signatories, or a director and a witness. If a company’s articles or rules only allow for execution of a deed under a seal, then electronic signature is not possible.

If a deed can be signed by two authorised signatories or a director and witness, then electronic signature is a possibility. However, a witness to an electronic signature still needs to be physically present in order to properly witness the execution. Therefore, while an electronic signature can be more efficient as it removes the time taken to post documents between parties, the rules around its use have not adapted to the more flexible working life that has evolved in recent years.

However, further change may be on the way. The Law Commission’s current programme of reform includes a review of the ‘complex and arguably outdated’ law that applies to deeds. As part of this review the Law Commission will consider:

• broad issues about the efficacy of deeds, including whether the concept remains fit for purpose;
• whether there should be amendments to the existing requirements of deeds, including witnessing, attestation and delivery; and
• whether amendments to the law of deeds are required to ensure that compliance with the requirements of deeds can be facilitated by smart contracts.

The need for this review has been in part driven by developing technology and the use of electronic signatures, but it will also apply to deeds signed in wet ink. Details of when this review will fit into the Law Commission’s timetable are awaited.

The Land Registry has also announced that it will accept qualified electronic signatures (QES). This is the most secure form of electronic signature and removes the need for a witness to validate the execution by the person signing the deed, as the signatory will have proved their identity with the QES platform beforehand, allowing the platform to produce a certificate verifying their identity. However, a QES cannot be used where documents are to be signed in counterpart (where each party signs their own copy of the document) or if parties are using different modes of signing, for example one party by QES, and another in wet ink. Additionally, as the Land Registry has only been accepting QES documents for less than a year, the types of documents that this applies to are limited.

The housing team will be providing updates on whether the roll out of QES continues, and if the Law Commission’s review brings about further modernisation relating to the execution of deeds.