The Current Status Of Electronic Signatures For Real Estate Transactions In Scotland, England And Wales

We see examples of electronic signatures all the time in everyday life – when you make that online purchase by ticking a box "accepting terms and conditions", when you "sign" a handheld touch screen to confirm receipt of your delivery and when you use your fingerprint to pay for goods on your mobile. What you rarely (if at all) see is the use of electronic signatures in real estate transactions – this article explores the reasons why.

Before transacting electronically with others, one needs to be sure that the electronic signatures will be as legally binding as traditional wet ink signatures and offer adequate protection from forgery. Otherwise remorseful purchasers and unscrupulous vendors could seek to unravel contracts after performance to avoid obligations that no longer suit them. Innocent parties could also be exposed to a whole new level of electronic identity fraud.

The law therefore needs to evolve to provide a framework in which electronic signatures are as binding and safe as traditional wet ink signatures. Here we will look at the current legal framework for the use of electronic signatures and in particular the barriers to their adoption in real estate transactions in Scotland, England and Wales.

Legal framework for electronic signatures

The starting point for regulation is the EU law, the Electronic Identification and Signature Regulation 910/2014, which came into force in July 2016 and has direct effect in all member states without the need for national implementation. This regulation is commonly referred to as "eIDAS"1 .

eIDAS introduced three tiers of electronic signature:

Simple Electronic Signature

This is the simplest and most commonly seen form of electronic signature and it doesn't require any special identification or security technology under which the signatory's identity must be verified. It is therefore evidentially the "weakest" form of signature.

Examples of such signatures include typing a name into an electronic form of a document, scanned signatures, tickbox plus declarations, and electronically pasting a signature (in the form of an image) into a soft copy version of a contract in the appropriate place.

Advanced Electronic Signature

This type of signature relies on technology to verify the identity of the signatory. For an electronic signature to be "advanced" it must be:

(1) uniquely linked to the signatory;

(2) capable of identifying the signatory;

(3) created using electronic signature creation data that the signatory can, with a high level of confidence, use under his sole control; and

(4) linked to the data signed therewith in such a way that any subsequent change in the data is detectable.

Examples of advanced electronic signatures include using a web-based platform to apply a signature to a document.

Qualified Electronic Signature

This is the signature that has the highest evidential value and therefore presents the highest level of protection. A Qualified Electronic Signature needs to satisfy all the requirements of an Advanced Electronic Signature and in addition:

(1) be created by a Qualified Electronic Signature creation device which meets additional requirements laid down in eIDAS and is on a Europe-wide list of certified devices e.g. a secure smartcard; and

(2) have a qualified certificate for electronic signatures issued by a qualified trust service provider which meets other requirements laid down in eIDAS. This type of signature is not commonly used in the UK, in part because of the need to verify a person's identity first. One example of a Qualified Electronic Signature would be the Scottish Law Society's smart card scheme for solicitors; however it has not been widely adopted, due to concerns about liability.

Domestically, the Electronic Communications Act 2000 (ECA) was updated in light of eIDAS. Section 7 of the ECA provides for the admissibility of electronic signatures in legal proceedings...