As 4th May HM Land Registry will accept deeds that have been signed using the ‘Mercury signing approach’, in response to the Covid-19 outbreak.
Temporary changes — which could result in transactions completing faster — have been introduced to make it easier to verify a person’s identity and sign deeds.
This means that, for land registration purposes, a signature page will need to be signed in pen and witnessed in person, and not by a video call.
The signature will then need to be captured, with a scanner or camera, to produce a suitable copy of the signed page.
Each party can then send a single email to their conveyancer, attaching the final agreed copy of the document and the signed signature page.
The news follows a feature published in the March/April issue of the Bridging & Commercial Magazine, which stressed how the Mercury rules could help save real estate transactions during these unparalleled times.
In addition to conveyancers and chartered legal executives, the Land Registry has announced that verification can now be undertaken by people who work, or have worked, in certain professions including:
- retired conveyancers, chartered legal executives, solicitors and barristers
- bank officials and regulated financial advisers
- medical doctors, dentists and veterinary surgeons
- chartered and certified accountants
- police officers and officers in the UK armed forces
- teachers and college and university teaching staff
- members of parliament and Welsh Assembly members
- UK civil servants of senior executive officer grade or above
HM Land Registry stated that it will regularly review its practice, policy and procedures, taking guidance from customer feedback.
Practice guide 8: execution of deeds will be updated with more information on this, today.
“These are important and necessary (albeit temporary) changes in light of what is likely to become a much longer period of disruption,” stated Ranjeev Kumar, partner at Watson Farley & Williams.
“They are necessary in the context of existing HMLR arrangements (which have been seen as being inflexible), modern working practices, the overwhelming need for business continuity, and the overall response of the business community to Covid-19.
“They should serve to mitigate some of the major challenges in real estate finance transactions.”
Despite the expanded list of non-conveyancer professionals, Ranjeev does believe it should have included postmen and postwomen.
“This would have been very useful,” he said, “they turn up to your house on most days, plus we trust them with our post!”
Nicky Richmond, managing partner and head of real estate finance and banking at Brecher, noted that it was “rare” that the Land Registry did anything which anyone outside the world of property law might want to read about, “but today is that day,” she said.
She highlighted that the move would be welcomed by lenders as they recognised some of the practical challenges that faced the industry in this lockdown period.
“Prior to this change, the Land Registry required the applicant for registration to send a certified copy of certain deeds, including legal charges, to the Land Registry.
“A document can only be certified where one is holding an original — this has caused delay during the current crisis, as it is taking much longer to get deeds back to lawyers for them to certify.
“In plain English, it means that the wet ink version — which previously had to be with the lender’s lawyer, or under its control through an undertaking — is no longer needed for the application and a scanned version can [be] certified.
“We know that certain lenders have been advised that ‘virtual’ witnessing, ie by video, would be adequate — the Land Registry statement makes it clear that this is not (and has never been) the case.”
She added that, for lawyers, the ability to rely on a scanned version of a signature was an “epic change” and should mean that transactions could be completed more quickly.
However, Nicky spoke a word of caution.
“The Land Registry rules are draconian, precisely because Land Registry fraud is so rife,” she claimed.
“Lenders and their lawyers will need to be extra vigilant in the current environment, and each lender will form its own view as to what it will be prepared to accept.
“The changes are stated to be temporary but, given the likelihood of a long period of restrictive movement and semi-lockdown, it is likely that they will become the new normal — like everything else.”
Jodi Lund, partner and joint head of real estate finance at JMW, agreed that, while the changes will be a temporary solution due to Covid-19, “this will surely push the envelope further towards a fully digital property transfer and security perfection process, which will only streamline the current process and benefit the specialist finance industry in terms of speed and efficiency.”
She believes that the acceptance of the Mercury method would take the concept of the land registration electronic mortgage system further, and make it much more wide reaching, including in the specialist finance sphere.
B&C is told that a consistent requirement of solicitors acting for lenders is ensuring they have the document its clients rely on to hand, and to ensure it can promptly deal with registration requirements.
“To date, while electronic filing is regularly used, its built around the assumption and premise [that] we are in possession of the original wet ink-signed deed,” said Joe Middleton, managing partner at Lightfoots LLP.
“This ease of satisfying this requirement has been severely tested in the last six to eight weeks, so being able to accept and then file with the Land Registry deeds executed using the Mercury signing method will help to negate several hurdles.
“Of course, this is only a Land Registry requirement, so it still requires the lenders’ willingness to accept this and complete the deal on this basis — but I suspect most will be agreeable to ensure that those completions capable of completing, can do so.”
Despite the development, he doesn’t think this will hugely speed up the bridging timeframe but will serve as a sidestep to transactions that were ready and able to proceed where the deed signing obstacle was a preventing matter.
“The reality is, there are numerous other factors holding up the progression of bridging deals.
“How documents are executed and what the Land Registry will now accept as a validly executed deed is only one relatively small aspect, and one that, so far in my experience, has rarely been the reason why a case hasn’t been able to proceed as all parties hoped.
“That said, small gains are important as no one thing will solve a problem.
“So, a more relaxed, flexible and sensible (in [this] climate) approach to deed execution will serve as the crucial problem solving factor on certain deals.”
What do specialist lenders think of the Land Registry’s changes to signing deeds?
Joshua Elash, director at MT Finance, told B&C that the Land Registry deserved a “great deal of credit” for being proactive in adopting a position it had previously refused to consider.
“That said, it is hoped that the more serious lockdown constraints will soon be lifted, facilitating the execution of documentation in the traditional and accepted fashion.”
He explained that MT Finance had adapted with creative solutions to work around issues throughout the lockdown period, and maintained a panel of solicitors which had been able to attend borrowers personally to witness their signatures, while adhering to the highest of safety standards.
“In one instance, we had a mortgage deed witnessed through a front-room window,” he added.
“Any flexibility the Land Registry can show to assist the market in getting back to business full time is welcome, but lenders also need to continue to think and act in a creative fashion to assist borrowers during this period.”
Duncan Kreeger, founder and CEO of TAB, said that it was “very welcome news” to see the Land Registry assisting and allowing transactions to complete more smoothly.
“When something new is piloted like this, it is important to use it carefully and understand exactly what, if any, additional risks may come with it.
“We don’t see this as an opportunity to cut corners and push things through, but should be very useful when relevant.”
Arya Taware, founder and managing director of Future Bricks, believed the changes were a “great move”.
“…The property industry is always the last one to join in when it comes to technology,” she added.
“We hope that such technology-driven implementation will be adopted at a wider scale within our sector going forward.”
Scott Marshall, managing director at Roma Finance – which returned to the specialist lending market on 1st May — stated that the Mercury signing method aimed to reduce problems with post, paper and scanning.
“This is still a long way off e-signing, which has to be the ultimate aim once HMLR have solved any fraud-risk issues – which isn’t easy,” he commented.
Lewis Casserley, co-founder and principal of new bridging lender Albatross Capital, noted that HMLR had taken a “huge step forward” and would “hopefully act as a catalyst to boost transactions numbers, and [the] speed thereof, in the near term.”
Paul Clampin, chief lending officer at Landbay, concluded that anything that sped up the transaction time was a positive thing it would support.
He believes that electronic signatures should be used as standard across the mortgage process.
“If this is achieved, it could be one positive thing to come out of this lockdown period.”