Electronic signing and tenancy agreements

26th January 2021 Commercial Litigation

One of the side-effects of the Covid-19 pandemic and the increase of remote and home working has been a massive increase in the use of electronic signatures on all sorts of documents. The Law Society has recently produced a new Q & A document on electronic signing while the Scottish Law Society has updated its comprehensive guidance completely. So what is the position for estate and letting agents. Can they e-sign and what can actually be signed.

What is an e-signature?

The first question is what do we mean by electronic signing? This can cover a range of options from simply typing a name into the signature space on a contract in a word processor or sending an email confirming agreement to a contract through to the use of a fully-fledged electronic signing platform.

Terms of Business

An agent’s terms of business is a simple contract and can be signed by any reasonable electronic method. This would include the typing of a name in a box or acknowledgment of the terms and agreement to be bound by them in a personal email. There is no particular need to use a more complex system which requires signatures to be applied using a touchscreen or similar but naturally such a system is helpful if someone later tries to deny that they signed the terms. Where a company is signing then ideally a signature is needed by two directors or a director and company secretary as this makes it easy for them to sign separately otherwise there is a need to sign before a witness.

Tenancy Agreements

Any tenancy agreement can be signed as a simple contract if it is not for more than 3 years and takes effect immediately. Therefore typing a name into the signature box or a clear email are both perfectly acceptable means of signing a tenancy agreement. A tenancy for more than 3 years must be signed as a deed and this will mean witnessing a signature. However, even if such a tenancy was signed as a simple contract (and they often are) the courts will not allow landlords or tenants to avoid the tenancy agreement. Therefore in practice it rarely matters all that much if a tenancy agreement is not signed as a deed.

Guarantee Agreements

A guarantee agreement do not have to be signed as a deed if they are signed before the tenancy agreement. If an agent wishes to use electronic signing then structuring guarantee agreements in this way is helpful. As with tenancies an email or types name in the signature box will do if the guarantee agreement is not being signed as a deed. However, the enhanced traceability of a structured electronic signing system would be helpful in resolving disputes.

Deposit Certificates

Tenancy deposit prescribed information also needs to be signed. It is not clear if a landlord can use e-signing for this. If the landlord is a company or the agent is signing for the landlord and is a company then a simple signature is risky as the recent decision in Northwood Solihull has made clear.

Deeds and Companies

Many documents can be signed as simple contracts. However, if a deed is involved or it is a company signing this is more difficult. Electronic signatures can be used for deeds and company signatures but the current legal viewpoint is that the witness must be physically present with the person signing. So, it is not possible for the main person signing to use an e-signature and then for another person to remotely apply a witness signature. This is very difficult to police using any form of electronic signing and so, in practice, this may be a problem for agents. This will be a challenge in respect of companies singing tenancy agreements and deposit protection certificates and in relation to any form of deed. This is also a problem in respect of deeds of surrender if a tenant wants to leave a tenancy early.

Witnesses Generally

In many cases the process of witnesses is often over-complicated by well-meaning people. For most purposes a witness merely needs to be someone independent that is someone who is not party to a contract or directly affected by it. So, a tenant should not witness the signature of their own guarantor and a landlord and tenant should not witness one another’s signatures. However, family members are acceptable witnesses provided they are not parties to the contract and an agent is an acceptable witness for a landlord and tenant signature as well.

Using E-signatures

From the above it will be seen that agents can easily implement a simple electronic signature scheme using email to help resolve a lot of immediate problems caused by Covid. If they wish to use an e-signing service this will have advantages in ensuring consistency and making sure everyone get the process right as well as improving tracking of documents in the event someone claims that they were not the person signing. However, not all systems are the same and it is worth thinking through the process of purchasing a system to ensure it actually does what is needed. Considerations to think about include:

  • How the system ensures that the person signing is the person the agent is expecting to sign. Does it just rely on an email or does it ask for additional information like a security code or date of birth?
  • What data is being recorded and retained to demonstrate genuine agreement to a contract and its terms;
  • Linking with other systems operated by the agent. How easy is the system to use in practice?

The other key point for agents to consider is whether a use of e-signatures fits with their business model. There are risks to e-signatures which may make them unsuitable for high value tenancies where there is a greater risk of dispute. They are also unlikely to be suitable for every document and some documents, deeds of surrender for example, will probably need to be signed in another way.

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David Smith is a Partner located in Londonin our Commercial Litigation department

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