24 July 2020 by Melanie Carroll

A new dawn, a new day for digital deeds?

The Covid-19 pandemic has presented challenges for the legal sector, particularly real estate lawyers, who have been working from home and contending with printing, posting and scanning original documents.  It is has become clear that the process is still too paper-based and that there needs to be a ‘digital dawn’.  The Land Registry (LR) has now made an important announcement, which will make a significant difference.

Where are we now?

The Land Registration Act 2002 provided a legal framework for the use of digital signatures but concerns over security and the ever present risk of fraud mean that the LR has not accepted electronic or digital signatures in the past (save for some digital mortgages).

The pandemic forced the LR’s hand and they allowed “Mercury signing” where deeds are signed in pen to create a “wet signature”, and witnessed in the usual way, but then the page is captured on a scanner or camera to produce a PDF or similar, which is then emailed to the lawyer handling the matter.

Whilst this relaxation assisted enormously in the crisis, in the opinion of many it didn’t go quite far enough.  Hence a new and exciting announcement earlier this month…

Where are we going?

The LR set up a group at the beginning of lockdown, with representation from throughout the sector, to consult on and explore using electronic and digital signatures in property transactions.

There is a difference between electronic and digital signatures – the former is a simple replacement of a wet signature whereas a digital signature is a different legal approach entirely with a series of specific requirements. Digital signatures are more secure as the process positively identifies the signatory and the documents are encrypted, meaning they cannot be altered.

The LR has announced that it will accept electronic signatures and has issued some guidance – with more to follow.

The electronic signing process will need to be consented to by all parties, who must be represented by a lawyer and it is the lawyer who will co-ordinate the signing.  It is possible for one party to apply a ‘wet’ signature, whilst the other party signs electronically, provided counterpart documents are used.

What difference will this make?

There has long been criticism that buying property is too paper-based, and takes too long, and that the industry has been slow to change.  It is clear that Covid-19 has been the catalyst for this change in policy – one good thing to come out of the pandemic…

This will enable the real estate sector to catch up and keep pace with sectors that have long used electronic signatures.  The process should be more seamless, with greater flexibility, and improve speed.

The guidance will be formalised in the coming weeks and we are looking forward to further embracing the use of technology in our sector, whilst keeping our clients at the core of everything we do.

For further information, please contact Melanie Carroll or one of the other experts in our Residential Real Estate team.

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