To address the spread of Covid-19 law firms and corporate entities all over Ireland have been ordered to work from home. In this dramatically changing working environment, it has become increasingly important to consider how we can adapt the way that we work, particularly in relation to the execution of real estate documents. Not only international but domestic clients are asking why electronic signatures are not being used all of the time. It is time to move the discussion forward.
As a paperless law firm, all of Leman’s files have been digitised and are available on our document management system. When physical deeds and other documents come into the office, they are immediately scanned to the digital file. This allows the Real Estate team to carry out 99% of our work from home. We run into difficulties when trying to conclude a transaction once documents are in agreed and executable form. Unfortunately, the rules around execution of deeds and certain other real estate documents in Ireland (which must be executed in wet ink) often create a logistical headache for solicitors and signatories alike, and not only in these unprecedented times.
What are E-signatures?
Electronic signatures or E-signatures are digital versions of your handwritten signatures which, depending on the level of security, may be acceptable as a legally approved digital equivalent of your handwritten signature. They save time and money and are better for the environment. They are not just photocopies!
E-signatures in Ireland are governed by the Electronic Commerce Act 2000 (the “E-Commerce Act”) and Regulation (EU) No 910/2014 on electronic identification and trust services for electronic transactions in the internal market (the “eIDAS Regulation”).
The eIDAS Regulation provides for three types of e-signatures: -
1. SES (Simple Electronic Signature)
SES are permitted under section 13 of the E-Commerce Act for simple agreements. They are already used for some HR documents such as employment contracts and some commercial agreements.
2. AES (Advanced Electronic Signature)
AES are permitted under section 14 and 16 of the E-Commerce Act for documents where a signature is required to be witnessed e.g. a contract for sale and documents which require a seal. AES offer a medium level of security. They typically involve the encryption of an electronic document using a code/ pin which is unique to the signatory. The document can only be de-crypted and signed by the signatory.
3. QES (Qualified Electronic Signature)
The QES is the most secure version of electronic signature available. It requires personal identification of the signatory and the creation of a qualified certificate which adds a layer of identification and security. They are not commonly used in Ireland at present.
The Current Position: Execution of Deeds in Ireland
Deeds executed by Irish companies
Deeds executed by Irish companies can be executed in one of the following manners: -
a. by a director (or someone authorised by the directors to sign on their behalf) and countersigned by the secretary or by a second director. The company seal must be affixed to the execution page. The seal must be physically affixed to the document; or
b. by an attorney on behalf of the company who has been authorised (under a Power of Attorney (“POA”) to execute deeds on its behalf.
The POA removes the necessity to use the company seal and allows for only one signature on a deed (the POA’s signature must be witnessed if the document is a deed). This is a practical solution which Irish companies should consider over the coming weeks and months. Board resolutions and a quick review of the company constitution will be needed – but nothing a good corporate lawyer won’t be able to manage.
Deeds executed by individuals
Deeds executed by an individual must be witnessed by another individual who must also be physically present when the signatory signs the deed.
The E-Commerce Act states that the witnessing requirement in respect of deeds (other than deeds creating interests in land) executed by an individual, (including any individual acting under a power of attorney) is met where either: -
a. the witness is physically present when the signatory applies his/her e-signature, and the witness then applies his/her signature underneath as witness by his/her e-signature; or
b. the witness is physically present when the signatory applies his/her e-signature, but does not have his/her own e-signature, and prints the e-signed documents and witnesses using a wet-ink signature.
How does this work in Irish real estate transactions?
A contract for the sale of land can be concluded electronically but the deed of conveyance/ transfer must be signed in wet ink. Deeds of conveyance/ transfer, leases and other deeds which create interests in land are expressly excluded under section 10 of the E-Commerce Act from being executed electronically.
A practical example – Earlier this week I sent a deed (relating to a real estate transaction) to my client, an Irish company, for execution. My client’s sole director is based in Hong Kong and the company secretary is based in Dublin. In order to execute the deed, I emailed the deed to my client to print and sign in Hong Kong. My client then couriered the hard copy signed deed to the company secretary in Dublin. The secretary countersigned the deed and affixed the company seal before couriering the document to me. This wastes time and money and is detrimental to the environment.
In practice, many aspects of the legislation are either under-utilised or not used at all in practice. Some examples include: -
i. Section 16 of the E-Commerce Act allows for execution of documents “under seal” using AES;
ii. Under section 14 of the E-Commerce Act, a signatory may sign a deed using AES and the witness may also use AES to sign the deed. This would seem to imply that the witness could be in another location when they apply their signature by AES; and
iii. The eIDAS Regulations allow for electronic sealing or E-sealing of deeds. There is currently no electronic means for affixing a seal in Ireland.
Once we get through this unprecedented period, serious consideration needs to be given to the amendment of the legislation to allow for E-signature of deeds used in real estate transactions. The reluctance to embrace e-signatures stems from a fear of fraudulent behaviour. In reality, wet-ink signatures carry many of the same risks and e-signatures may actually be more secure.
Many other countries have extended the use of E-signatures to certain real estate deeds. Germany has allowed E-signature of short term residential and commercial lease agreements. Denmark has allowed for E-signature of lease agreements (except termination notices under residential leases). The President of the Law Society of Ireland stated in a recent notification to its members that “The Society cannot override the legal requirements by issuing a practice direction on alternative methods of execution or witnessing.”. Hopefully, if some good is to come out of this crisis from a legal perspective, the issues around execution of real estate documents and the practical solutions which are offered by technology will be brought to the fore. This crisis has shone a spotlight on some outdated practices which need to be reviewed and updated.
Leman Solicitors have extensive experience in dealing with a wide range of Property matters. Please do not hesitate to contact Karl or any of the team on 01 6393000 or visit www.leman.ie
A qualified electronic signature shall have the equivalent legal effect of a handwritten signature.