Insights

With stringent social distancing measures still in place, many professionals working in the real estate industry are considering electronic signatures as an alternative method of concluding contracts and securing the execution of formal deeds.   Prior to the Covid-19 lockdown, the use of electronic signatures was rare but with signatories confined to home, reliance on the traditional ‘’wet ink’’ signature approach can be a challenge.        

Requirement for Writing

In a commercial property context, there are a number of circumstances where Scots Law requires that a written contract be used to record the terms of a deal e.g. the constitution and variation of a contract for the creation, transfer, variation or extinction of a real right in land i.e. a contract to transfer or lease a property.  The most common method of concluding a contract for the sale or purchase of property in Scotland is by "missives" (an exchange of formal contract letters), which are ‘’wet ink’’ signed by the respective parties' solicitors.

Recent legislation (including The Land Registration etc. (Scotland) Act 2012 and the Electronic Documents (Scotland) Regulations 2014) permits the use of electronic documents where a written contract is required, except for wills, testamentary trust dispositions and settlements or codicils. Electronic documents are documents that are created in electronic form, for instance, Microsoft Word documents, PDFs and emails.

More recently, the Scottish Ministers passed the Registers of Scotland (Digital Registration, etc.) Regulations 2018 to facilitate the introduction of digital registration services by Registers of Scotland. In addition, they include a presumption in favour of the use of digital registration services to accommodate the registration of electronic documents.

Electronic Signature v Electronic Delivery

When a deed or contract is signed by traditional means (with a wet ink signature) it can be converted into an electronic document and delivered by electronic means (e.g. scanned and emailed, with the wet ink signed principals following by courier or post). This is not the same as having a deed with an ‘’electronic signature’’ embedded within it.  The principal of an electronically signed deed is the electronic file itself - the principal of the electronically delivered deed is the principal deed with wet ink signature - not the electronic copy.

Given that is possible to conclude a contract by electronic delivery, the need to use electronic signatures in Scotland has been rare.  Furthermore, a contract that has been traditionally signed and delivered electronically can be registered with Registers of Scotland, as long as the original signed version is presented for registration (not the electronic copy).   This is very different from a situation giving rise to the need to register an electronic copy deed which has been electronically signed.

What is an Electronic Signature?

The Electronic Identification and Signature Regulation 910/2014 defines an electronic signature as ‘’data in electronic form which is attached to or logically associated with other data in electronic form and which is used by the signatory to sign’’. An electronic signature can, therefore, only be used with an electronic document.

There are various types of e-signature available.  The most basic form is known as the simple electronic signature. Examples include the use of a finger or stylus to sign on a pad when a parcel is delivered, clicking an onscreen button such as “I agree”, “Submit” or ticking a box saying “I accept the terms and conditions”.  Also included are e-signatures on an e-signing platform. 

For any document that must, by law, be created in writing i.e. documents for the constitution of rights in relation to land, an Advanced Electronic Signature (‘’AES’’) is required. An AES must be uniquely linked to the signatory, capable of identifying the signatory, created under the sole control of the signatory and linked to the data to which it relates in such a manner that any subsequent change of the data is detectable. 

If you wish to register a document with Registers of Scotland, it also needs to be "self proving" meaning that if the signature was ever challenged in the future there would be a presumption that the signature was valid unless proven otherwise. This is the highest standard of signature of Scotland and is usually achieved by having a wet ink signature witnessed.  With regards electronic signatures, a Qualified Electronic Signature is required for a document to be self proving.  The highest standard of electronic signature, a QES is an Advanced Electronic Signature created by a qualified electronic signature creation device, and which is based on a qualified certificate for electronic signatures.

For other types of electronic documents, any form of electronic signature may be used however, an AES and a certified QES will carry greater evidential weight in the event of any dispute.

Registration of Deeds

One of the major sticking points with the use of electronic execution, in a commercial property context, is the general inability to register completion documents when the document has been electronically signed. This affects any document that may fall to be recorded/registered in the Register of Sasines, the Land Register of Scotland or the Books of Council and Session. 

Whilst the Registers of Scotland (Digital Registration, etc.) Regulations 2018 facilitate the introduction of new digital registration services to deal with the registration of electronic documents, further regulations have yet to be issued to allow registration of such electronic documents.  In most cases, therefore, wet ink signature is the only option for deeds that create, transfer or vary real rights in land or buildings.

Due to the Application Record closure at the outset of the Covid – 19 lockdown, Registers of Scotland have introduced a digital platform for accepting digital applications to register deeds.   This may, in due course, pave the way for property documents to be registered in electronic form with electronic signatures but the option is not yet available.  As the new digital platform for accepting applications to register develops, it is hoped the acceptance of electronic signatures will, soon, be facilitated.  This would be welcome tool for the purposes of efficiently managing registration of property deeds in the midst of the ongoing Pandemic.

If you need require advice/assistance regarding options for concluding contractual arrangements during the Covid-10 Pandemic, please get in touch with your usual contact at Stronachs LLP.