Our position on the use of virtual execution and e-signature during the coronavirus (COVID-19) pandemic
We’ve been issuing advice and support, and will continue to do so, to help solicitors and their clients through this difficult period.
This note, which brings together a variety of established guidance in relation to virtual execution and the use of e-signatures, forms part of that work. It sets out:
- a pragmatic and accessible statement of the law
- views as to best practice
- suggestions as to how the interests of clients may be best served in the current challenging climate, and
- suggestions as to how contracts may be entered into in an effective manner, where it's not possible to follow what we otherwise understand to be best practice
This note was updated on 18 June 2020 to include tips on how to operate in practice.
We welcomed the justice secretary’s positive response to the Law Commission’s work on electronic execution in early March (before the severity of the COVID-19 crisis unfolded), and look forward to participating in further work on this issue.
We’ve been working hard to facilitate legal transactions in an increasingly digital world. In particular:
- following the decision of the High Court in Mercury Tax Group (and another) v HMRC [2008] EWHC 2721 (Mercury), we developed a practice note on execution of documents by virtual means (issued on 16 February 2010) (the Mercury practice note) and
- we developed a practice note on execution of a document using an electronic signature (issued on 21 July 2016) (the e-signature practice note)
(together, the practice notes).
The objective of each of the practice notes is to support solicitors and the clients of solicitors in delivering transactions in an evolving commercial environment, in a practical and pragmatic manner, but with legal certainty.
Since the outbreak of the pandemic, the law in these areas remains unchanged.
The current pandemic and subsequent social distancing rules and the lockdown have placed an increased focus on the ability to conduct non-face to face transactional closings, as traditional processes are unable to continue.
Given the current uncertainty regarding how long the lockdown and social distancing measures will remain in place, many solicitors and clients are considering virtual execution (including the use of e-signatures) as a practical means for completing transactions in a timely manner.
This note intends to bring the practice notes to the attention of all solicitors, to provide some top tips and an update on recent relevant advances in the use and acceptability of electronic execution.
When reviewing this note, it’s vital also to consider the manner in which a document is to be used.
Whether it’s appropriate to use an electronic signature may depend on any relevant legislation, regulatory requirements within the specific practice area and the type of document being signed or executed.
The provisions of this note and the practice notes do not apply to the execution of wills.
For example, HM Land Registry has its own rules in relation to electronic signatures, and not all documents bearing an electronic signature are admissible for registration at Companies House.
Particular attention needs to be paid to documents which must be presented to a notary and sent overseas.
If you’re in any doubt, contact the relevant registry before execution occurs.
Tips on how to operate in practice
As technology advances there is sometimes uncertainty about how a new way of doing something fits in with accepted norms. Before deciding how best to proceed you should understand how the law views what you wish to do.
Our two practice notes, on electronic signatures and virtual execution, will help you with this. You will also need to know whether there are any specific requirements for the area of law you’re practising in.
The following tips on how to operate in practice are based on feedback from our members. They aim to support you to complete a transaction by virtual execution with confidence.
Ultimately you will have to decide what practices are possible and what level of risk is acceptable based on the specific transaction.
1 Best practice
Follow the:
- practice note on execution of documents by virtual means
- practice note on execution of a document using an electronic signature
- Q&A on how to use electronic signatures and complete virtual executions
2 Agree
Speak to the lawyers on the other side of any transaction to ensure that there is clear agreement on how to manage the transaction.
3 Verify
Consider what steps (if any) you wish to take to verify the identity and authority of each person signing beyond that which is required by law, including the anti-money laundering regime.
How best to do this may depend on common practice in the relevant area or specific regulatory requirements. For example, on certain transactions solicitors may be involved in checking the identity of a signatory, the authenticity of a signature and/or whether a document has been properly approved. On other transactions the identity, authenticity and approval can be assumed. The use of electronic signatures will not change this.
If authenticity cannot be assumed you may wish to use additional and objective sources of verification. This could include using video or photographic evidence. One technique that has been used is to make a live recording, which is then shared with all the parties as soon as possible.
4 Evidence
Ensure that you have the evidence immediately to hand on file in a timely and accessible manner. This may include taking screen shots if you cannot save the evidence directly to your system.
5 Report
Use electronic means to report back to all parties that the transaction has closed.
6 Understand
Make sure that you’re aware of the legislative, regulatory or cultural requirements for virtual execution and e-signatures in the relevant legal area.
Even if performed electronically, the current law is that the witness must be physically present when a deed is executed by or on behalf of the maker.
It is possible to demonstrate physical presence while also maintaining social distancing with appropriate safeguards, although there are practical challenges. When operating on the extremities of what may reasonably be considered to constitute presence, you should collect clear evidence of presence, such as a video recording (subject to getting appropriate data protection rights consents).
Specific Land Registry COVID requirements
Mercury signatures
- HM Land Registry will accept deeds that have been signed using the Mercury signing approach (option 1 in the Mercury practice note)
- For land registration purposes, a signature page will need to be signed and witnessed in pen and then captured, with a scanner or a camera, to produce a PDF, JPEG or other suitable copy of the signed signature page. Each party sends a single email to their conveyancer to which is attached the final agreed copy of the document and the copy of the signed signature page
Physical witnessing
HM Land Registry practice will continue to reflect its view that it would be unsafe to accept any form of witnessing other than contemporaneous, physical witnessing, as being sufficient for the purposes of section 1(3) of the Law of Property (Miscellaneous Provisions) Act 1989
Recent developments
Since the publication of the e-signature practice note, there have been two important developments – the Law Commission’s report on electronic signatures and the justice secretary’s response to this work.
As mentioned above, the law in this area remains unchanged in light of the pandemic, but we look forward to working closely with government on future reforms.
The Law Commission statement of the law: execution with an electronic signature
The Law Commission published the conclusions of its work in the autumn of 2019 and confirmed that an electronic signature is capable in law of being used to execute documents (including deeds). This was helpful as it corroborated the view we previously expressed in the e-signature practice note.
The Law Commission emphasised the need for authentication and the need to follow formalities of execution, and highlighted that the courts have previously held that simple markings such as an ‘X’ made by the hand of the maker may constitute a valid and binding signature.
In many cases, execution by means of an authenticated electronic signature will deliver much greater transactional certainty and security than means of execution previously upheld by the courts.
However, at the time of writing there is no definitive statement from a higher court upholding electronic signatures and, in the absence of a court decision or primary legislation, there remains an inconsistent approach to the use of electronic signatures.
The Law Commission has recommended a review of the law of deeds and suggested that government may wish to consider codifying the law on electronic signatures in order to improve the accessibility of the law.
The Law Commission has also recommended an industry working group be established to consider the question of video witnessing of electronic signatures.
The justice secretary welcomed this further work in his statement on 3 March 2020.
We support both of these proposals, and look forward to further engagement with the Law Commission and government on these issues, which are unlikely to be progressed until the lockdown has been lifted.
Justice secretary's response to the Law Commission
As referred to above, on 3 March 2020 Robert Buckland MP (lord chancellor and justice secretary) made a written statement to the Houses of Parliament laying out the government's response to the Law Commission report on electronic execution of deeds.
In the statement, the government welcomed the work of the Law Commission and committed to a future review of the law of deeds (but without making it a priority item).
The justice secretary indicated that he did not see the need for confirmatory primary legislation endorsing the use of electronic signatures and specifically stated:
'the existing framework makes clear that businesses and individuals can feel confident in using e-signatures in commercial transactions'; and that 'electronic signatures […] are permissible and can be used in confidence in commercial and consumer documents'.
The justice secretary did not raise any note of caution or qualification in the use of electronic signatures in relation to deeds.
He acknowledged the continuing issues with the security and technology of electronic signatures, and committed to government convening the industry working groups recommended by the Law Commission to examine this issue further.
He was also keen for further work to be done on the video witnessing of electronic signatures.
We support both of these proposals, and look forward to further engagement with the Law Commission and government on these issues, which are unlikely to be progressed until the lockdown has been lifted.