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What’s in a name….Can you sign a lease electronically?

Reasons to choose Wilson Browne

Increasingly as a society we are going paperless, with the falling use of cash and cheques and an increase in online transactions (over 30% of all retail sales in the UK last year were online).

While it is generally accepted that electronic signatures are legally valid, certain sectors remain uncertain about going paperless – and not without good reason.

The Law of Property Act 1925, the basis for most modern land law, requires certain documents to be made by deed for them to be legally effective including easements (normally rights of way but this can include other rights) and leases for more than 3 years.

Most leases should be registered at the Land Registry – either because the lease itself is compulsorily registrable (the term doesn’t start for 3 months+ or they are for a term of 7 years+), or because the lease contains easements, which must be separately registered to be legally effective. The Law Commission is currently reviewing how easements in short leases are dealt with but for now, if your lease has easements then there are risks when not registering your lease.

Until very recently, despite the Electronic Communications Act 2000 confirming that electronic signatures are admissible in court and a growing body of case law confirming that electronic signatures are enough to satisfy the statutory requirements for a signature (including typing a name into an email), the Land Registry was unable to accept any documents for registration that hadn’t been signed in wet ink.

During the national lockdown, the Land Registry expedited some of the plans it was working on and they are now able to accept electronic signatures for a number of different types of documents – including registrable leases and easements. The Land Registry has produced detailed guidance on two different ways of signing documents electronically

  1. “Virtual signatures”; and
  2. “Mercury signatures”

Virtual signatures involve documents being uploaded to specialised online platforms, which then circulate an electronic copy of the document for people to approve and apply an electronic signature to (by typing their name in a box).

There is never a physical document and the whole process is completed online. While this can be quicker than waiting for normal post it often comes with additional fees from the online platforms and depending on who needs to sign can come with additional concerns.

A Mercury signature (named after a tax case that involved a detailed review about what constitutes an electronic signature) involves being emailed the document, only the signature page and plans being printed, physically signed, scanned and emailed (together with the original attachment) back to a lawyer for them to merge the documents to form a digital original document.

While this method requires the signatory to have access to a printer and either a scanner or a camera, it too avoids the delay caused by needing to post documents and does not require any additional software so no additional costs are incurred.

Whether you are using virtual signatures or Mercury signatures, we can advise you on what the best process (whether virtual, Mercury, or wet ink) for you to use is given the nature of your proposed transaction and guide you through the detailed processes that need to be strictly followed.

Generally speaking, wherever practicable wet ink signatures are generally still considered to be the simplest, easiest, and most practical way of signing documents.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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Michael Goldfinch

Posted:

Michael Goldfinch

Solicitor

Michael is a solicitor in the Commercial Property Team based in the Kettering office. He has a wide variety of experience in real estate transactions. Michael also acts for commercial property lenders, property investors and landowners.