We have been advising many organisations on their business continuity plans as part of the social distancing measures introduced by the Government to tackle the COVID-19 pandemic. This has included implementing short-notice powers of attorney for the execution of deeds, and advising on when electronic signatures can be used.
Here are some tips if this is something you are considering or in the process of implementing at your organisation.
What are the rules relating to local authorities?
The common law position is that local authorities must (unless there is some provision in relation to a particular type of deed) seal deeds as they are “corporations aggregate”. Even if a constitution is silent about sealing of deeds, the authority is required to seal them - the constitution cannot purport to remove the requirement.
Section 1 of the Corporate Bodies Contracts Act 1960 relaxed the requirements that all contracts needed to be executed as deeds and therefore sealed, so that simple contracts could be signed under hand (and therefore electronically).
There is a need to ensure that the execution of a particular deed or document is authorised on a case by case basis - irrespective of the mode of execution – through a person or body that has appropriate authority to agree the decision.
When can electronic signatures be used?
The law around the use of electronic signatures is generally quite clear. An excellent summary of the issues is available in the Law Commission Consultation Paper 2018.
Your Standing Orders will already authorise specific persons to sign contracts/agreements (i.e. those that aren’t deeds) on the authority’s behalf. Ensure there is sufficient clarity and flexibility (and reduce to one signatory if more than one).
When it is not practical to obtain ‘wet’ signatures by post from those authorised individuals, you could consider using electronic signatures. This could be a copied and pasted scan of an ordinary signature, or a signature using specific software such as DocuSign, although there are certain documents e.g. for the Land Registry and Companies House that require “wet signatures”.
The position is slightly more complex when it comes to deeds, because most authorities will execute deeds by using their seal which requires the physical presence of those attesting the affixing of the seal.
As a general rule, the Land Registry will not accept electronic signatures on registrable deeds, however as of Monday 4 May, in response to the Covid-19 pandemic, they are introducing temporary changes so that:
- in addition to conveyancers and chartered executives, verification can now be undertaken by people who work, or who have worked, in certain professions (such as bank officials, doctors, dentists, accountants etc.) to verify a person’s identity; and
- deeds that have been signed using the ‘Mercury signing approach’ will be accepted.
The Land Registry has updated their practice guide in relation to the execution of deeds to reflect this (see paragraph 12 (Mercury Signatures): https://www.gov.uk/government/publications/execution-of-deeds/practice-guide-8-execution-of-deeds.
In summary, the temporary change in rules means that, for land registration purposes, a signature page will need to be signed in pen and witnessed in person (for example, witnessing a signature by video call would not be sufficient). Depending on the particular arrangements that have been agreed in advance between parties in relation to the ‘Mercury’ completion, the signatory would then return a scan of the executed signature page and the full final execution version of the deed, which constitutes a fully executed counterpart. The Land Registry will, until further notice, accept deeds executed in this way.
How can we make the signing of deeds easier during this time?
Firstly, reduce the number and type of documents that have to be executed as deeds by affixing the seal, so far as possible (although some may still need to be deeds due to being the transfer of land, for reasons of longevity or the absence or doubt around consideration). There may be discretion for the Head of Legal/Monitoring Officer (HoL/MO) to decide which documents need to be signed or sealed – if not you may need to change the Constitution.
Secondly, review the rules in your Constitution for the execution of deeds, reducing the requirement to one “authorised signatory” if there is currently more than one, and ensure flexibility around who can attest the affixing of the seal, giving discretion to the HoL/MO to appoint additional officers from time to time.
Thirdly, consider use of an electronic seal and/or appointing a power of attorney to enable deeds to be executed under hand by the attorney in the presence of a witness – again changes would be necessary to the Constitution in both cases. Section 7A of the Electronic Communications Act 2000 (and the EU eIDAS Regulations) states (in summary) that an electronic seal is admissible in legal proceedings. Following the logic of the Law Commission as applied to section 7 of the ECA in relation to electronic signatures, we would suggest that the Council is able to make use of electronic seals, subject to compliance with any requirements set out in UK legislation and the Council’s constitution.
If an authority wishes to use electronic seals or appoint others to have a power of attorney (e.g. a solicitor or member of staff in an alternative business structure or shared legal service), then there would need to be safeguards and a clear protocol on how such electronic execution of deeds and use of powers of attorney would work. For example the authority would need to keep a record as to the use of the seal for administrative purposes and to prevent fraud etc., so a practical procedure whereby a number to be recorded in the sealing book (or electronic record) would need to be obtained, along with relevant details of the document, the authority to affix the seal, the date and who affixed the seal would need to be prepared and introduced. Execution of deeds by a person with a power of attorney would also need to record the execution of the deed even if the seal was not affixed.
Where electronic signatures are used alongside this revised method of execution, this should be agreed with the other party to the deed, and there will be formalities to comply with that you will need to check.
How do we put a power of attorney in place?
A power of attorney must itself be executed as a deed, and will therefore need to be approved by the authority with commensurate amendments to the constitution, to authorise the appointment (which could be for a single transaction or more generally).
There are fairly standard forms available. Some key points to think about are:
- You should be clear as to the scope of the delegation – powers of attorney can be wide (allowing the attorney to take any action on an organisation’s behalf, or to agree changes to documents alongside signing them) or more specific (restricted to signing only, and in accordance with your internal processes for approval).
- Whether the power be exercised jointly or by individual attorneys.
- The duration of the power - the Land Registry has additional requirements where powers are over 12 months old.
- The form of your execution clauses for documents will need to be updated to make reference to the power of attorney, so you will need to ensure anyone preparing documents on your behalf knows about the change.
- The Land Registry has specific requirements in relation to deeds signed under a power of attorney.
Can we appoint our solicitors to sign documents on our behalf?
- It is possible to appoint your solicitors as your attorney. This is most commonly for the purposes of signing documents which they have negotiated on your behalf (particularly helpful where you have on-going bulk transactions).
- Check with your solicitors whether they would be willing to do this and their preference as to whether individual Officers, a law firm or individuals are appointed.
- Consider the scope of the power of attorney carefully.
- Engage with the firm in relation to the approvals process that you are proposing so that they can ensure it complies with their own internal procedures.
- Provide a copy of the council resolution approving the use of a power of attorney as evidence – it is likely this will be requested by third parties alongside a copy of the power of attorney itself.