15th October 2018
Banking & Finance Litigation specialist looks at the Law Commission’s consultation on the electronic execution of documents. Our specialist offers a practical insight to where we are now with e-conveyancing and, in particular, electronic mortgage deeds.
In a consultation paper published in August 2018 the Law Commission has sought to address legal uncertainty surrounding the electronic execution of documents, which is causing practical problems in today’s fast-paced, technology-driven business world.
For example, whilst basic contracts can be validly formed without any documentation or formality , other contracts and legal documents must comply with certain formalities in order to have legal effect. In particular, contracts for the sale of land must be in writing, contain all agreed terms and be signed by all parties; and transfers, charges and some leases must be made by deed (which involves signing, witnessing and attesting).
Whilst EU legislation  and the UK courts accept electronic signatures as valid; and whilst HM Land Registry is, as a matter of policy, moving towards digital conveyancing , the relevant UK statute, the Electronic Communications Act 2000, does not expressly allow electronic signatures. Neither does the law of England and Wales comprehensively confirm anywhere the validity of electronic execution in the context of deeds.
Where does this uncertainty leave lenders and conveyancers?
The Law Commission has, as part of its current consultation, published its initial conclusions that the law as it currently stands allows land contracts and deeds to be validly executed with an electronic signature. The consultation seeks views as to whether legislation should be enacted to confirm that.
As regards the additional steps of witnessing and attesting deeds, the Law Commission has concluded that the physical presence of a witness is still required. The consultation seeks views as to whether changes should be made to the law, and modern technological solutions allowed, so as to allow transactions involving deeds to become fully digital.
However, in the meantime, section 91 of the Land Registration Act 2002 (LRA) does allow for certain electronic documents to be regarded as a deed. Section 91 LRA and Land Registry policy and practice together provide that certification of electronic signatures (which involves the stringent verification  of the identity of the person providing the digital signature) can take the place of the traditional ‘wet’ signature and attestation process. That therefore seems to provide a practical ‘workaround’ in the context of e-conveyancing.
When it comes to the validity and registration of electronic mortgage deeds, HM Land Registry’s certification/verification process, alongside the ‘Know Your Client’ obligations which still apply to conveyancers, should ensure that lenders are protected.
In today’s mortgage market, where millennials are used to conducting all their social and economic transactions almost instantaneously and at the click of a button; where cost pressures and drivers for efficiencies are priorities for conveyancers, consumers and lenders alike; and where lenders (and, in particular challenger banks emerging in the market) are, for both commercial and regulatory reasons, moving towards increased digitisation, practical solutions to support e-conveyancing can only be a good thing.
Whilst the Law Commission’s conclusions to date are, in the main, helpful, it does seem that there is still some way to go before the legal position is both clarified and made fit for the digital future.
Responses to the consultation are required by 23 November 2018.
Walker Morris will monitor and report on key developments.
 See our earlier briefing for further information and advice about the basic principles for formation of contracts
 Regulation (EU) No 910/2014 of the European Parliament and of the Council of 23 July 2014 on electronic identification and trust services for electronic transactions in the internal market
 On 6 April 2018 the Land Registration (Amendment) Rules 2018 made it permissible for a disposition of land to be registered at HM Land Registry using digital documents with electronic signatures
 using the government’s ‘Verify’ service