For lenders and lawyers, there are many risks which impact upon an enforceable mortgage deed from fraud to non est factum. Following the Land Registry’s (HMLR) announcement on enabling the Mercury signing approach during lockdown, there seemed to be confusion among some media as to whether a digital signature deemed a mortgage deed validly executed.

Is the Mercury rule changing the landscape for conveyancing?

In practical terms, the Mercury signing approach means that an individual can import a digital signature into a document and that document or deed will be accepted as validly executed. However, this does not change the legal execution process for mortgage deeds – ie deeds that transfer an interest in land which must comply with Land Registry statute. Unequivocally, to be enforceable in law, mortgage deeds require a wet signature and they must be physically witnessed.

Supported by our legal adviser, Jonathan Newman, Brightstone Law, we explored this further.

“It is important to clear up the first point as to whether we are referring to a document or deed and the specific characteristics of the deed, for example a deed which deals with the disposal of an interest in land – ie a mortgage deed, “must still be signed in pen and witnessed in person to be valid and enforceable.”

Newman clarifies “There are two stages to create an enforceable mortgage deed, first its execution, and second, its registration. I am not aware of any lawyer in the land that will take the risk of receiving an electronic signature that may or may not be associated with the true deed and may or may not have been signed with a wet signature, by the individual applying for a mortgage. When submitting a deed for registration purposes as being a true copy of the original, lawyers must take every precaution to ensure that it is the original copy, otherwise the risk is too great.”

Therefore, in Newman’s view nothing has practically changed. Even if an electronic copy is issued to the Land Registry, the solicitor will still have to certify to its integrity, when they make the online application to the HMLR.

The purpose of a deed is to mitigate the risk

As an underwriter of risk, there are many dangers for our lenders and our insurer from fraud to non est factum due to incapacity or other similar risks. A physically witnessed, wet signature on a mortgage deed is fundamental to ensuring this risk is mitigated.

Lenders must be certain that their assets are protected and that a recovery can be made if the worst happens. In order for law firms to protect themselves from recovery action where a mortgage deed is unenforceable, deeds must have a wet signature and that on application of the mortgage deed, it is verified that the electronic version is a true copy of the original.

Is there are future for digital signing of deeds?

The only time I can see it changing is when we can use authenticated digital signatures. Scotland has achieved it with their lawyers but, of course, we need something fail-proof for the members of the public. As technology evolves, this may become possible. But again, having a physical witness present remains an issue.

Final word for lenders?

Our advice is to stay safe with a validly executed deed – this way the lender and their conveyancer are protected from any risk associated with the execution of mortgage deeds.

Notes & references

_{Whilst the final submission to the Land Registry via digital signature is helpful, physical witnessing cannot be avoided. In its COVID-19 update the Law Society guidance confirms in point 2. Physical Witnessing “HM Land Registry practice will continue to reflect its view that it would be unsafe to accept any form of witnessing other than contemporaneous, physical witnessing, as being sufficient for the purposes of section 1(3) of the Law of Property (Miscellaneous Provisions) Act 1989.”} 

_{In the Mercury Tax Group case (High Court, Nov 2008), where substitution of the signature pages from a previous deed affected the validity of the final deed, the Judge held that “adding a signature page to a deed or using a signature page from a previous draft of the deed in a final draft would not be valid”.  This in turn means that an endorsement to the integrity of a deed is required to ensure the document that is being signed is a true copy of the final deed.}