The Future of Electronic Signatures for Real Estate in Ontario
In 2013, Ontario passed an amendment to their Electronic Commerce Act to repeal the land transfer exception preventing the real estate industry from using e-signatures in their transactions. The effect of this amendment has been on hold as the legal community in Ontario debated if this increased the risk of fraud in real estate transactions. To address the legal community concerns, the Ontario government recently announced plans to consult the public to help shape a regulation for the use of electronic signatures in real estate transactions. The consultation document offers up the following draft regulation for the public’s consideration:
- For the purpose of subsection 11(4) of the Act, the following class of documents is prescribed: agreements of purchase and sale of land in Ontario.
- A legal requirement that a document of the prescribed class be signed is satisfied by an electronic signature only if the method of signature used:
- Is reliable for the purpose of identifying the person who signs;
- Ensures that the electronic signature is permanent and cannot be removed from the signed document; and
- Is accessible so as to be usable for subsequent reference by any person who is entitled to have access to the document or who is authorized to require its production.
The consultation document then asks whether the text supplied is an appropriate regulation. I applaud any efforts to advance the adoption and use of electronic signatures, but I do have a concerns.
Section 2.a of the regulation goes to the concern if the person signing the documents is really who they claim in the documents. This makes a lot of sense as a lot of money can change hands and fraud has been an issue in real estate transactions. At Silanis, we have deployed and developed various approaches over the years from ultra-secure smart-cards to knowledge-based authentication to relying on email notifications.
The correct approach will depend on the type of application, amount of risk and manner in which the documents are signed. With a mortgage, for example, one might apply online and identification would be based on verification of the information provided in the application followed up by a credit report. The risk is relatively low at this stage. At a closing, the risk is much higher with the transfer of money and real estate. However, even with electronic signatures, an attorney or notary must be present and verify the identity of the signers. This is just one example of how process and technology work together to produce a transaction that is more secure and reliable than paper.
Nothing is permanent in the digital world
Section 2.b presents a practical concern. The only way to ensure that an electronic signature cannot be removed from the signed document is to lock up this electronic document in a secure storage system to which no one has access. In our experience, this is not practical as e-signed documents, like their paper counterparts, must be accessible at any time by anyone needing access.
Silanis developed secure electronic signatures in the early nineties and were the first to embed a digital signature into the Adobe PDF document format as a form of electronic signature. The digital signature technology encrypts and secures a digital fingerprint of the data (known as a hash) to securely verify the integrity of the electronically signed record and embedded signature data. This approach is so secure, most governments use it as their standard for securing the integrity of data communications.
Electronic documents should meet at least the same standard as paper documents for originality. Like electronic files, paper documents can be modified after they have been signed. However, digital signature technology ensures that any modification to an electronic document or signature will be immediately and unequivocally detected. The same cannot be said for paper.
The general approach in most laws (including the Ontario ECA) is that the electronic signature be linked to the document data in such a manner that any subsequent change is detectable.
In case you’re wondering, Silanis has offered this technology through its web-based solutions since 2001 for our customers in banking, insurance, government, healthcare and many other industries.
Accessibility - the most common document format worldwide
Section 2.c is really important. Early on, we knew many documents had to remain accessible for long periods of time, such as mortgage documents that might have to survive for 30 years or more. Back in 2001, we chose to support PDF and since then it has become an international standard for archiving electronic documents. With the e-signed document remaining in PDF format, access to the document and the electronic signature data can be accessed by any PDF reader or viewer.
Not only is the document accessible but so is the signature audit trail and the process evidence. This is accomplished by recording all the web pages, documents, legal disclosures and actions taken by users, and linking it to final e-signed documents in a manner that enables the process to be accurately reproduced from start to finish.
What about the ECA?
The original Ontario ECA enacted in 2000 already contains the language found in 2.a and 2.c, so the proposed regulation is not a problem for these 2 sections. However, 2.b does have practical concerns as I have outlined. Furthermore, the ECA also addressed this issue in 2000 by requiring "the association of the electronic signature with the relevant electronic document is reliable" and this would seem more effective than the proposed 2.b.
If you would like to get more details and better understand the basics of how this technology works, you can download our Beginner’s Guide to E-Signatures.