From E-Signatures to E-Recording: Recent Legislation Encourages Paperless Real Estate Transactions
January 27, 2017
The advent of electronic signatures was intended to increase flexibility and convenience for business deals. However, it has also brought a myriad of enforceability questions. For example, can a real estate transaction – including everything from the listing agreement to the notarization and recording – truly be paperless?
The Nebraska Legislature has recently considered several new bills encouraging paperless real estate transactions. LB 36 was introduced on January 5, 2017, authorizing digital or electronic signatures for any instruments and recordings submitted to a Register of Deeds office. If adopted, LB 36 would allow individuals to submit documents to the Register of Deeds without original signatures, making real estate and loan transactions faster and easier. Last year, Nebraska adopted the Electronic Notary Public Act which becomes effective on July 1, 2017. For additional information on electronic notarization, please see our prior article at https://www.woodsaitken.com/real-estate-do-i-need-a-notary/.
An electronic signature is the first, and perhaps most important, step in a paperless transaction. Therefore, it is important that real estate professionals and financial institutions be familiar with the following basic electronic signature principles and requirements:
I. What is an electronic signature?
Nebraska adopted the Uniform Electronic Transactions Act (“UETA”) in 2000, which validates the use of electronic records and signatures. Electronic documents and signatures cannot be denied legal effect or enforceability merely because they are in an electronic form. Effectively, an electronic signature may be equivalent to a signature in ink on a piece of paper.
For practical purposes, the most common examples of electronic signatures include typing your name at the end of an email, signing your name on a trackpad using a stylus, or clicking the “I Accept” button to access a website or download. The symbol “/s/” or scanned handwritten signatures are also generally accepted marks.
For legal purposes, an electronic signature can be any electronic sound, symbol or process that is both: (1) attached to or logically associated with a record, and (2) executed or adopted with the intent to sign the record. Stated otherwise, an electronic signature cannot appear in a random email that makes no reference to the contract to which it is supposed to be related. The Eighth Circuit recently has indicated that a party’s statement in an email must “provide a sufficiently clear declaration of approval of the proposed agreement” in order to be considered a binding “stamp of approval.”
Further, the signor must actually intend to sign the writing and be bound by its terms. For example, if the name or signature is automatically generated without regard to the underlying document, some courts have determined that the signature requirement is not satisfied and the agreement is not enforceable. Therefore, the presence of an automated signature block with the sender’s name may not be sufficient to show that there was an intentional signing.
II. What are the basic elements to an enforceable electronic signature?
As discussed further below, to be enforceable under the UETA, an electronic signature generally requires (1) an agreement by the parties to conduct the transaction electronically, (2) the ability to attribute the signature to the signor, and (3) the retention of the electronic record.
Most importantly, the UETA applies only to transactions where each party to the contract has agreed to conduct the transaction electronically. The parties’ agreement may be formal (i.e. in writing) or informal (i.e. determined from the context and surrounding circumstances, including the parties’ conduct). The easiest way to satisfy this requirement is to explicitly agree to conduct the transaction electronically in the parties’ underlying agreement. Otherwise, a court will have to be involved to interpret whether the parties reached an informal agreement based on any ongoing email negotiations or the content of their emails.
An electronic signature is attributable to a person if it was the act of that person. Just like agreements on paper, a party may use any relevant evidence to establish that the electronic signature is or is not the “act of the person.” While this element can be established in many ways, authentication could be established by someone who saw the person actually sign the document. Alternatively, a party may point to any security procedures the sender has implemented (e.g. unique login IDs or password protected access) to show the electronic signature could not have been done by an imposter.
The UETA requires an electronic transaction to be recorded in an “electronic record” in order to be enforceable. An electronic record means information that is inscribed in a tangible medium (for example, a paper printout) or that is stored in an electronic medium that is retrievable in perceivable form (e.g. a PDF copy saved to a computer or cloud storage). Accordingly, keeping thorough records of electronic signatures and the related agreements is critical to enforcing an electronic signature.
This summary provides a broad and basic overview of electronic signatures. An experienced attorney can answer specific questions you may have about electronic signatures. Contact your Woods & Aitken LLP Real Estate or Financial Institution attorney to discuss whether electronic signatures may be appropriate to incorporate in your regular business practices or real estate transactions.