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Utilizing Electronic and Digital Signatures in Real Estate and Commercial Transactions

Electronic signatures have become an everyday part of business deals and contracts around the world, beginning in 1996 when the UNCITRAL Model Law on Electronic Commerce was adopted by the United Nations. Three years later, the U.S. Code broadly defined e-signatures in the Uniform Electronic Transactions Act (adopted in the State of California) as “an electronic sound, symbol, or process, attached to or logically associated with a record and executed or adopted by a person with the intent to sign the record.”

Both the UETA and the Electronic Signatures in Global and National Commerce Act (ESIGN) state that a document or signature cannot be denied legal effect or enforceability solely because it is in an electronic form. Additionally, laws specifically allow electronic signatures to be used in real estate transactions. Up until recently, however, e-signatures were not commonly used in real estate transactions because financial institutions were hesitant to accept electronic signatures on documents relating to real estate transactions. More recently, e-signatures finally began to gain momentum in the real estate industry, with more banks and financial institutions beginning to accept electronic signatures on documents related to real estate transactions.

As in the case with contracts signed on paper in handwriting, legal disputes can also arise concerning the authenticity of e-signatures. For example, a buyer or seller can claim that he or she did not sign or authorize the contract, or the buyer or seller can claim the content of a document is different than the actual document he or she signed. The authenticity of e-signatures can be proven in a variety of ways, including:

• Signer authentication – for instance, verifying a signer’s identity prior to signing or assessing a document by utilizing software that forces the signer to access the software via a link sent to a personal email account

• Activity logs – logs tracking information including the computer the software was accessed from, the software or web pages accessed by the signer

• Data security – information about how the software is physically and electronically secured to prevent tampering after a document is e-signed.

Notably, the California Code of Regulations provides specific guidelines for digital signatures used by a public entity that usually require a handwritten signature, such as submitting applications for business permits at the local level, or applying for a zoning permit. For a digital signature to be valid for use by a public entity, it must be created by a technology that is acceptable for use by the State of California. More specifically, an acceptable technology must be able to create signatures that meet the following criteria:

1) it is unique to the person using it;
2) it is capable of verification;
3) it is under the sole control of the person using it; and
4) it is linked to data in such a way that if the data is changed, the digital signature is invalid.

There are currently eight digital signature certification authorities approved by the California Secretary of State: (1) Comodo Certification Authority; (2) DigiCert, Inc.; (3) Entrust, Inc.; (4) GeoTrust, Inc.; (5) GlobalSign, Inc.; (6) IdenTrust, Inc.; (7) Thawte, Inc.; and (8) Symantec Trust Network.

Finally, while most real estate contracts can be signed electronically, ESIGN and/or UETA exclude certain documents from being enforceable. As a result, the California Association of Realtors recommends that at least the following documents not be signed electronically:

1) Landlord – Tenant Forms, e.g., 48-Hour Notice of Inspection Prior to Termination of Tenancy; Notice of Change in Terms of Tenancy, or Three-Day Notice to Pay Rent or Quit

2) Seller Financing Addendum and Disclosure

3) Home Equity Contract Forms -e.g., Notice of Default Purchase Agreement, Mortgage Loan Disclosure Statement

If you have any questions about whether you can utilize electronic signatures in contracts relating to your real estate transactions, contact the Bay Area real estate attorneys at Cirrus Law PC today. Our real estate lawyers also represent all parties in commercial and residential real estate development, commercial tenants, transactions and disputes if a real estate deal goes awry.


Digital Signatures, California Secretary of State

U.S. Bank Broadens Use of E-Signatures to Loans, by Penny Crosman, American Banker

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