Update: On July 27, 2020, the Land Registry announced that it will accept for registration electronically signed documents within specific requirements. For more details, please see our July 30, 2020, alert.
As working from home becomes the new “normal”, the UK real estate industry has eagerly awaited a Land Registry response and, in particular, whether execution formalities would be reconsidered in light of COVID-19. On May 1, 2020, the Land Registry took the positive step of temporarily relaxing its requirements to make it easier to sign deeds for land registration purposes.
Subject to a few, limited exceptions, the grant or transfer of a legal interest in land must be made by way of a deed.
The main difference between a deed and a written contract is in relation to how the document is executed. In England and Wales, whereas a contract only requires a simple signature, additional execution formalities must be complied with in order to ensure that a deed is enforceable. For a UK company, this means (in the absence of a power of attorney arrangement) a deed must be executed by:
– two directors;
– a director signing in the presence of a witness; or
– a director and the company secretary.
While some deeds can be executed by electronic signature, the difficulty in real estate transactions is that, if the deed has to go to the Land Registry, electronic signatures are not acceptable. As a result, in the real estate world, the only deeds which can really be executed by electronic signature include licences for alterations or rent deposit deeds, but not documents like transfers, leases, mortgages or deeds of grant (dispositionary deeds) which must be circulated in their entirety for “wet-ink” signatures. Even where the parties agree to complete on a scan of a signature on a wet-ink document, the full hard copy as signed must still be provided afterwards to the Land Registry. Although the Land Registry currently is developing a new digital service for the registration of mortgages, for which the Land Registry itself will supply digital signatures, a comprehensive digital conveyancing service is still some way off.
It had been hoped that the Land Registry would issue guidance to soften the requirements or speed up the process, especially for general dispositionary deeds, given the difficulties in getting wet-ink signatures during lockdown. However, this has not happened. Instead it issued a softening in its approach to photographic copies of signed deeds. The Land Registry has now confirmed that, from 4 May 2020, it will accept for registration a deed executed as follows:
- The conveyancer sends over by email a full copy of the deed in question (including any plans and attachments) to the client signatory.
- The signatory prints out the signature page (only) and signs this in pen, with the signature witnessed in person. The witness should be someone physically present with the signatory (i.e., someone who is in lockdown with the signatory, such as a partner, or perhaps an adult child). Please note, witnessing a signature via video call is not permitted; however, there is no reason why the witness and signatory cannot be separated by glass if the witness is able to see the signatory signing.
- The signatory captures the signature page, with a scanner or a camera, to produce a copy of the whole signed signature page.
- The signatory then sends its conveyancer a single email, attaching the full and final agreed copy of the document and the copy of the signed signature page.
The practical benefits of this will be limited. There are three main advantages:
✔ Speed — this can be done very quickly.
✔ Privacy — it avoids the need for hard-copy deeds to be sent to the director’s personal address during lockdown.
✔ Receipt and mail — it avoids difficulties in sending and returning deeds in the mail or by courier (bearing in mind that neither the director nor the conveyancer are likely to be in, or able to access, an office).
Although far from perfect, the Land Registry’s response is at least a welcome step in the right direction. McGuireWoods will continue to monitor the Land Registry’s approach in the event that further allowances are made in the near future.
For more information, please contact one of the authors of this alert, a member of the real estate and land use team, or your regular McGuireWoods attorney.
McGuireWoods has published additional thought leadership analyzing how companies across industries can address crucial business and legal issues related to COVID-19.