Law Commission Considers Electronic Signatures of Documents

The Law Commission is having a consultation around the use of electronic signatures, click here to read more. While this encompasses all uses of electronic signing it will be of interest to landlords and letting agents in relation to the signing of terms of business and tenancy agreements.

The use of electronic signatures is increasingly common, especially in parts of the sector that see high turnover of tenants in a short timeframe, such as student lettings. However, there has been a degree of concern as to whether the use of electronic signatures is valid in law.

Interestingly the Law Commission concludes that an electronic signature is valid in the creation of a contract as long as that contract does not need to be entered into by way of a deed. That means that a terms of business can be signed electronically as can a tenancy for less than three years at a market rent which takes effect immediately. This will leave student tenancies in a difficult situation as they are often signed in advance and so should in fact be carried out by deed. However, in practice the current law will still hold these to be effective even if they are not signed by deed and so the Law Commission’s view that existing law does allow e signatures appears to be correct.

The Law Commission does not discuss the issue of certificates. This leaves such things as tenancy deposit protection less clear. There the agent or landlord must certify that information provided is true to the best of their knowledge and belief. It is unclear whether a e signature can do this.

The Law Commission is also thinking about what forms of e signature are likely to be acceptable. There are still problems with e signature systems in that they usually rely on an email being sent to somebody and them then reading and acknowledging a document by following a link in that email. The difficulty with this is that it is hard to verify that the person who was sent the email is the same person who acknowledges the document and that either of these people are the person actually named in the document. It is likely that their will need to be developments in this area before the e signature situation is fully mature and ready for widespread adoption. However, the view of the Law Commission that e signatures are legally valid is likely to give a boost to this area. Indeed, such things as Distributed Ledger Technology (also known as Blockchain or the technology that sits behind Bitcoin) are likely to be used in future e signature systems.

However, the view that the Law Commission is adopting will be of great interest to agents and landlords who have been tempted by e signature offers but have been reluctant to go ahead with the uncertain legal status. It is likely that providers of e signature systems will be pleased by this view as well and will use it in their sales activities.