We regularly discover issues where our clients have (in good faith!) executed documents and deeds incorrectly. The most common mistake we encounter is where deeds have been signed by someone who does not have authority to do so, either where a power of attorney has not validly been put in place (or has expired), or deeds have been signed by executive directors as opposed to company directors / board members. The implications of getting this wrong will depend on the circumstances; however, we have particularly seen the Land Registry becoming more strident in checking and rejecting documents which are executed incorrectly.
Due to the lockdown restrictions, a number of organisations were forced to close their offices and alternative means for the execution of documents had to be explored. Many organisations had restrictions in their governance documentation (constitutions, standing orders, and schemes of delegation) as to how documents could be signed and were forced to adapt and make changes in order to ensure that business could continue as usual. This has included greater use of powers of attorney (POAs) to allow persons other than board members/secretaries to sign deeds, use of electronic signatures, greater use of urgency procedures and, in some cases, witnessing documents in weird and wonderful places, such as board members’ driveways!
The greater use of alternative execution methods will of course mean that there needs to be strong oversight of compliance with delegated authorities and signing requirements.
We set out below the latest position on the use of POAs and the Land Registry’s position on electronic signatures and best practice within the sector.
POAs have been increasingly utilised within the sector during social distancing measures to facilitate the execution of transaction and project documentation. Depending on the corporate structure adopted by an organisation, only certain roles (board member, director, and secretary) are permitted to sign deeds and other documents on the organisation’s behalf, unless authority has been delegated to other individuals or corporate bodies to do so. In order for anyone other than those in the ‘permitted roles’ to execute a document on behalf of an organisation (excluding documents signed under seal), a POA will be required. POAs can be used to delegate authority to senior management or professional advisors to execute specific documents on an organisation’s behalf and so may result in added flexibility for an organisation.
Where POAs are to be put in place by registered providers of social housing, their scope should be carefully considered. Once put in place, their use and suitability should be kept under review and they should be formally reviewed and (particularly for charitable housing associations) renewed/rescinded every twelve months in order to remain valid.
The Land Registry recently announced that it will be accepting electronic signatures for some registration documents, such as transfers, leases, mortgages or deeds of grant. This would allow such documents, which would usually be executed as deeds, to be signed electronically by authorised signatories of the company / community benefit society. This is a welcome change within the sector and will aid flexibility moving forward.
In order to be accepted by Land Registry, it will be necessary to comply with the requirements set out in Practice Guide 8. All parties must agree to the use of electronic signatures and have a conveyancer acting for them. A specific process must also be used when setting up the document for signature. The online platform used for electronic signature must also include two-factor authentication to authenticate the signatories’ identities (including the identity of witnesses) – this usually includes the document being emailed to the signatory and then an authentication code being sent to the individual’s mobile phone. The document must also be dated within the online platform, which means that manual amendments post-signature would not be possible.
An electronic signature can be witnessed in the same way as a wet ink signature, provided that the witness is physically present to see the person signing adding their signature to a document on a screen.
Currently, the most commonly used electronic portals do not (as far as we are aware) allow for two factor authentication when using the “sign with witness” function. Therefore, witnesses need to be set up as signatories and will need to consent to their details being included in the completion certificate issued once the document has been completed. Witnesses will also receive a copy of the completed document, which may raise confidentiality concerns.
A working group has been established to review this further, and it is anticipated that there will soon be a move to acceptance of “qualified electronic signatures”, which operate on the basis that a Qualified Trust Service Provider is used (as the portal for signature) with certified standards to securely and accurately verify the identity of the signatory and protect the integrity of the document. This could increase the costs associated with the use of electronic signatures for Land Registry registrable documents, but may make electronic signatures using a witness much easier.
We have developed an execution toolkit specifically tailored for registered providers of social housing and their wider group structures. This toolkit will enable organisations to ensure they have complied with statutory and regulatory requirements when executing legal documents and includes a review of the organisation’s existing governance documentation, advice on its existing and future arrangements, and user friendly execution checklists that can be tailored for each entity in the wider group to ensure group-wide compliance. If you would like further information on the toolkit, please do get in touch.