Effective July 1, 2015 an amendment to the Electronic Commerce Act, 2000 makes it permissible for parties to use electronic signatures to sign agreements of purchase and sale and other documents that create or transfer an interest in land.

Background

Lawyers who can still remember their first year contracts course from law school will recall that oral contracts (and other forms of non-written contracts) can nonetheless be enforceable contracts – but the Statute of Frauds (which dates back to a 1677 English law) carves out an exemption to this general rule for contracts which purport to transfer an interest in land. This was, ostensibly, to prevent fraudsters alleging (and “proving”) an oral sale of land where none existed.

When Ontario’s Electronic Commerce Act, 2000 (“ECA”) was introduced in 2000, it allowed certain documents to be signed with electronic signatures. However, documents that “create or transfer interests in land and require registration to be effective against third parties” were exempted from the modernization efforts and still required handwritten signatures (see former s. 31(1)(4)). Once again, over 300 years later, the concern was fraud.

The ECA was amended in 2013 to make it apply to such documents, however the section was never declared in force. The question has been raised whether electronic land transactions would be more susceptible to real estate fraud than transactions based on paper. It had been suggested that the risk of fraud might be reduced by specifying the kind of electronic signature that could appear on the basic sales document, the agreement of purchase and sale. As a result, the amendment languished while the government considered whether to make a regulation about e-signatures and if so, in what form.

The Amendment

Ultimately, as of July 1, 2015, the section prohibiting electronic signatures on certain land documents was simply repealed – no additional regulations were passed. The legislation now simply provides (in s. 11(3)) that electronic signatures will be effective only if at the “time the electronic signature is made, (a) the electronic signature is reliable for the purpose of identifying the person; and (b) the association of the electronic signature with the relevant electronic document is reliable.”

In other words, there are no explicit standards of reliability or security for electronic signatures in the statute. Just as with handwritten signatures, it is up to the person relying on them to decide if they are sufficiently reliable.

Implications for Business

Ontario joins the ranks of Quebec, New Brunswick, Manitoba, Newfoundland and Labrador, and Prince Edward Island, provinces which have similar laws allowing electronic signatures in real estate deals.

The use of electronic signatures is optional so those who prefer ink to digital methods will not be forced into adopting the technology. Banks and other organizations that routinely handle documents purporting to transfer an interest in land (and are the ones who will be seeking to enforce such documents against third parties) will want to review their practices around such documents if they anticipate moving to electronic signatures, and will want to ensure they have adequate processes and procedures in place to support reliability of electronic signatures.