Electronic Signatures in Real Estate Transactions

Are Electronic Signatures Legal on Land Transfer Agreements in Ontario?

In Ontario, real estate transactions, specifically agreements of purchase and sale, are deliberately exempted from the protections of the Electronic Commerce Act 2000, S.O. 2000, c. 17 (ECA).

This is currently under review by way of Private Members Bill 28 (formerly Bill 69) which passed the second reading on March 21, 2013 and is now being further studied in committee before third and final reading. While other Canadian provinces, the United States and Europe have been using e-signatures for a while, Ontario realtors will continue using paper because of provincial regulations that prohibit the use of electronic signatures on agreements of purchase and sale.

The practice of manually signing a paper document, scanning it, and faxing a copy has been allowed in Ontario since the ECA was passed in 2000, but that aspect of electronic authorization is not an issue. The issue involves an electronically generated and applied signature which does not require a realtor to carry a paper copy of a document with a manual signature on it. The entire process is electronic, thereby allowing convenience and faster deal processing.

The purpose of the bill is to facilitate the use of electronic signatures in real estate transactions by removing the exception in the Act which prohibits land transfer documents from being signed by an electronically generated signature. The bill proposed that these land transfer documents would be subject to the reliability requirements contained in section 11(3) of the ECA. These requirements are intended to ensure that an electronic signature is reliable to identify the person signing and reliable to associate the electronic signature with the relevant electronic document.

The proposed bill will delete an exemption of electronic agreements of purchase and sale from the Act and grant the agreements legal protection. Currently, electronic agreements of purchase and sale are exempt from legal protections of the ECA. If passed, the amendment means realtors and consumers will have the confidence to use electronic handling of agreements where consumers amend and sign using their computers or tablets.

Likelihood of Success: Electronic Commerce Amendment Act, 2013

Given the fact that Private Members Bills rarely become law, there is concern as to whether Bill 28 formerly Bill 96 will actually become law and therefore grant protection for the use of electronic signatures in land transfer agreements.

A government which wants to support a Bill will prefer to sponsor it itself, rather than allow a Private Member to do so. The chances of a Private Member’s Bill going through all stages remain very slim, unless there is unanimous consent to it.

In this instance, the proposed amendment came from Private Members Bill tabled in May 2012 but later died on the order paper as a result of the October 2012 prorogation. Interestingly, it was reintroduced earlier this spring and passed second reading with overwhelming support of all three parties. This unanimous consent in both first and second readings seems promising and as described by Todd Smith “a victory” for the real estate industry.

Minister Sousa and Premier Wynne have also included this proposed amendment in the 2013 Ontario Budget, hence it is likely this Bill could actually become law.

Despite the optimism, there are concerns that this Bill could become another statistic. Removing exclusions from the Act is entirely consistent with modern real estate practice however, without addressing the details of requirements to ensure reliability of signatures, the amended Act will subsequently default to whatever systems are implemented by realtors to process real estate agreements. In response to introduction of the Bill, the Ontario Real Estate Association (OREA) has indicated that realtors and their clients would access agreements of purchase and sale through a central portal. No details have yet been provided by the OREA as to the requirements for acquisition and processing of electronic signatures and documents within this system, nor of the applicable security standards or access and privacy policies.

Without appropriate policies and procedures being implemented there is some risk that e-signatures will be held invalid for insufficient reliability. Despite the foregoing, if Ontario is one of the last provinces to recognize the validity of electronic signatures in land transfer agreements, surely most of the work has been done by other provinces to ensure safeguards are in place, as a result the OREA would have other systems to model.

This is already permitted in 30 European countries, the United States and all but two Canadian provinces. When the ECA was originally passed in 2000, there were concerns about the security of electronic signatures. However, since then technology has improved exponentially. This was the central reason to move Bill 28 to the committee stage. It only makes sense that the use of electronic signatures is worthy of consideration.

If all goes well and Bill 28 passes third reading, it is highly likely this amendment will receive Royal Assent and therefore legitimize the application of electronic signatures on land transfer agreements in Ontario.

The content of this article is intended to provide a general guide to the subject matter. The information does not constitute legal advice and a solicitor and client relationship is not created.