Unlock the Power of eSignature Legality for Real Estate in Canada

How to eSign a document: e-signature legality for Real Estate in Canada

so good morning everyone is everyone having a good day away to you you don't have to answer but if you want to if you want to unmute your microphone I'd be welcome participation in the seminar today's topic is electronic signatures and real estate transactions and I do have to speak about the the gorilla or the elephant of the room and I want to talk a little bit about the pandemic at the end so before I start I do want to say that real estate is considered an essential service as lawyers and his brokers we're all still working obviously as an agent you have to take up that you have to take additional precautions to keep yourselves and your clients safe I do understand that the way your showing houses has changed but I do see business continuing it's not as much as we normally expect at this time of the year which is which we had started off with a very hot spring market and we were talking about multiple offers and multiple representation a few weeks ago although I do still see some multiple offers it's mostly restricted to condominiums right now we have to think about how you can keep in touch with your clients and get them ready to to make a move or to buy and sell real estate when things get better and things will get better for all of us once the numbers get better and occur flats so first I'm going to talk about electronic signatures and at the end I'm going to talk about the four most common pandemic questions that I'm dealing with on a daily basis and I do want you to feel free to interrupt me my name is John felides I'm a real estate lawyer I've been practicing real estate since 2004 probably in 2003 and 2004 remember that we had stars and that's that's her the time that I started prior to coming into the real estate business I was a real estate broker for over 20 years and I basically grew up in the real estate business so my studies have been in real estate at York University I've been a broker manager at top Korea and currently I teach for the real estate Institute of Canada so basically this is what I want to cover today I want to give you a little bit of an intro to the legislative background I want to talk about statute of frauds the e-commerce act how reliable is it nurtures our pipe ADA rules of evidence under the Canada Evidence Act in the interior Evidence Act and secure electronic transaction with regulations and I'm going to mention some ecig mature technology providers at the very end so this is a very common issue that I see with electronic signatures we have a buyer who has used Adobe Photoshop and cut and pasted the signature onto the APS the seller has accepted it is an electronic signature using a service provider from offshore so imagine your seller is in China or Europe and they're using an electronic service provider similar to documents on offshore and your buyer has just pasted an image of their signature on the deal the sellers lawyer asks you for original documents or for the documents to be we executed with ink signatures the buyers Berger says don't worry about it it's a deal you act for the buyer who is correct is this a problem for you have you fulfilled your on your obligations under Reba so what is rebus a Rico's position under code of ethics is that you use your best efforts to prevent fraud misrepresentation or error or any unethical practice in respect to trade in real estate agents must ensure that technology they choose for electronic signatures must provide secure authentication and prevent unauthorized use the agent must be able to confirm that the signature is from the person it's supposed to be how do you care me out your own due diligence generally I say consult with your broker record understand the implications of the technology that we're using keep up with the updates and use a use a well recognized and legitimate software that has that is reputable and has licenses so so that's a big mouthful how do we do all these things question yourself as to where is the where is the head office of the company and where is the server located so if they're both in Ontario you're probably on a good track the problem is having an eSignature provider who's in Europe or China is the jurisdiction in the record record-keeping in different privacy legislation so the problem is is kind of her unit of access to to the proof that you need in case there ever was a dispute as to if your if it was a seller had signed you're acting for the buyer remember that this is how a signature started in 1999 we had a uniform electronic commerce act that was passed and this is the background legislation for all electronic commerce it's based on the United Nations law that was adopted in 1996 and Ontario adopted its only electronic commerce act in the year 2000 and it applies to most electronic transactions or it did apply other than real estate real estate was a specific exception and the reason we had this exception was the statute of frauds and historically agreements of purchase and sale and lease for more than three years had to be in writing that's a statute of frauds and that's a very old legislation this changed in 2015 when the Act was amended and removed real estate transaction exceptions so since 2015 the e-commerce Act applies to real estate transactions so I'm sure all of you have have done real estate using electronic signatures up to now this is what the statute of process the main statutes requires real estate transactions to be in writing no interest in land can be made or created without a written and signed agreement between the parties or some memorandum or note thereof no action can be brought in court without a memorandum or note a written contract meets the requirement order there's no requirement than the memorandum has to be on a particular form courts have found that written proof of oral agreements can be in an electronic form and even exchange of emails courts have stated that a plaintiff may sue on a contract like a real contract really that requires to be in writing even though he is not signed it providing there's some memorandum to the contract I'd like to give you an example of what happened to one of my clients one of my clients was purchasing a restaurant and a building and my client and the seller decided that they were going to exchange some money without any contract without any paperwork at all so the buyer gave $100,000 to the seller without any paperwork the only people work that they had was the liquor license transfer for the restaurant plus their verbal understanding apparently the seller changed their mind and big Clayton statute of frauds that there's no contract and there's there's nothing to support the transaction the fact that there was a liquor license transferred was enough for my client sued the seller and forced the transaction to close and the reality is is there was enough evidence to support what he was claiming to have been a verbal agreement and it did feel kind of fulfil the statute of frauds so basically the identity of their parties was was dealt with the property was mentioned there was no other reasons that have a liquor license transfer other than the sale in that case the price was something that they had verbally determined and it wasn't in dispute and there was an intent to sell so basically that created enough evidence so you have to be careful when you make agreements don't think just because you haven't filled it out on a real form that you can walk away there's also a court case here where there's an unsigned offer with park performance eerie sand and gravel here the court decided the offer was signed only by the offeror and was not signed by the seller on all these extensional terms but there was performance and because there was part performance it may have been enforceable as a result of this case agreements of purchase and sale which did not satisfy the written requirements and do have part performance are likely to satisfy the statute of frauds and courts so this is the electronic commerce act documents that create an interest in land now exist electronically and this is a statutory confirmation of the statute of fraud it means that the essential terms of a real estate contract can be silent electronically the act has not changed the requirements for establishing and contracts you still need a signature I'm not saying that you don't need a signature you still need something and there are what are called functional equivalency rules so what is an electronic signature electronic could be a recorded transmitted or stored digital signature in the form of electronic or magnetic or optical means this is this is the definition from the act it could be done using an agent through a computer program or it could be basically any electronic information a person adopts to to to resemble their signature so you can you can pick a PDF or a signature blog and attach it and that is an electronic signature so the very first situation that we talked about fulfills the electronic signature so even though the seller in that case was from out of country although we're missing the evidentiary requirement of how are we going to prove its in that would be an enforceable contract the buyer side with cut and paste that's also an enforceable contract the definition of an electronic signature is very broad but it can be anything from someone typing their signature and saying this is my signature I intend to be bound or they can use a touchpad or an iPad or they can attach a PDF signature or a block signature block feasted on to a document copying or scanning and elated and original ink signature is also allowed any sort of electronic technology is allowed to indicate a signature has been made obviously I think the best thing to have is some kind of an image or a digital certificate that accompanies the signature that authenticates your electronic signature but the electronic commerce act is so broad that it allows almost anything to be an electronic signature so these are the important provisions of the electronic signature Commerce Act no person is required to use an electronic signature so what if I don't want to use an electronic signature if I'm a seller and I say I only want a written signature what does that mean to your buyer what that means is that the the seller is going to demand an electronic signature signature and that's his choice he could do that by withholding signing himself but generally speaking this is not in the interest of most sellers if the buyer has signed electronically and we intend to be bound there's no reason why the seller should also be able to sign electronically to satisfy the written legal requirement of any product signatures the document that sign has to be acceptable and usable for subsequent reference so once you have an electronic signature on your agreement you have to be able to store it and recover it whenever you need it it has to be capable of being retained by the other person as well as other parties if the document is not capable of being retained that creates a problem so snapchat doesn't work for electronic signatures the Act also talks about the reliability of the documents and basically the electronic signature has to be reliable for the purpose of identifying the parties and it has to be associated with the document that we're talking about up till now I haven't heard of any problems with electronic signatures the main problem that I hear and if anyone wants to comment on that is sometimes people will sign and not realize that they've also released the document and then they changed their mind about signing so if you accept the document and then you want to go back and negotiate it you have to make sure you haven't released it if you've released it the other side may make me Stephen accepted agreement that you may not have intended to release the them and you've communicated your your acceptance of an offer so how reliable are electronic signatures so basically in Ontario the province has left it up to the person relying on the electronic signature to determine if there's if there's if there's sufficient enough and reliable in the light of all the circumstances it's up to us to take to have the right evidence and have the documents that we sign accessible to all parties and after after the agreement is made other legal provisions so other legal provisions that we that we look at is what courts will say in the event of a legal dispute we have to consider if there's any legislative provisions that would prevent us from using using an electronic signature the Canada Evidence Act provides some proof of authenticity of an electronic signature basically as an agent you have to be prepared to give some testimony as to how the signature was prepared how it was how the document the other document was prepared and how each of the parties signed electronically to comply with by Peyton Wilson secure electronic signature there's should be a list of requirements for electronic signatures the must be satisfied so this is the list of requirements so basically the electronic signature must be unique to the person using it the person using it must have control of the technology the technology must be used must identify the person using the signature and the signature should be linked to an electronic document this is a process that a lot of the software that people are using does for you automatically so you don't have to think about it and obviously we all know or infanticide I'm sure there's but if you do software's they're designed to fulfill these requirements the storage of the data should be in Ontario because that's the jurisdiction that we're in we don't want to have another jurisdiction storing the data and if you have the data stored in the United States it's also subject to the United States rules and homeland security so they would have open an open window into what's going on with you in your transaction these are the rules of evidence for proving an electronic signature any person seeking to admit an electronic document as evidence as the burden of proving its authenticity so if I was a seller how do I prove the authenticity of the buyer signatures the buyer says someone else but my signature there if it was only a kind of paste there would be a little harder to prove because we don't have even though it's a legitimate in the public signature I don't have a third party or Authenticator other than the witness or real estate agent who was involved in the transaction I believe that that would be answered on a balance of the probabilities and it would be one extra step in a trial of someone who's claiming that as a defense so you never want to go there although I do see electronic signatures being used as cut and paste or a finger tracing of a signature basically this is a secure little electronic signature regulations and this they're talking about the application a private encryption key I think that's a little technical for now I would like to go on because I do want to spend some time at the end talking the book ohrid I don't want to miss the time I have for kovat but these are the the main technology signature providers so doc II dr. sign a Fanta sign the next one does anyone use use one of those signature providers key signature providers one of them is offered to you for free which one is that anyone unmuted No basically all of these a signature providers fulfill the electronic signature regulations I would suggest you stick to one of the main providers if you don't have them set up you can also do cut and paste in someone signing but in the event there is a dispute as to how many as to the authenticity of the signature then you may run into trouble so basically yeah does the Act change anything in creating legally enforceable documents I don't think so I think that offer an acceptance whether it's electronic or an in-person signing is a functional equivalent and it's up to the users to determine if there's satisfied your favorite reliability in the standards of the electronic document that they're using the authenticity in the electronic document still has to be proven under the Canada Evidence Act which has more stringent requirements than those set up by the parties generally speaking if someone's given a deposit it's pretty hard to back out of the signature so now let's talk about what I really wanted to talk about today so tipping I wanted to also talk to you about some pandemic stories so basically for eSignatures I would say that try to use or thangka sign and but don't shy away if someone wants to cut and paste your objective is to make a deal and you have to rely on the document that's put before you making the deal I don't know if anyone has ever challenged an electronic signature up to now so coded kovat is an issue now that is coming coming up daily in our lives I think that the news just repeats the word public continuously my law practice is open because we're an essential service and I can tell you that we have undertaken extra steps to protect everyone's safety we're no longer meeting clients we are meeting clients via Skype in via FaceTime and they're signing the documents at home they actually email the documents to their homes and that's how we're doing our closings this month this month which is April we have the same volume of closings as April of last year that said real estate is a lagging business some of the main questions I get asked about hope it is about residential tenants so imagine it's the first of the month and your tenant says can you defer pay the further rent they don't want to pay rent because they're laid off so what should you do if you're a landlord or what should you do if you're a tenant should you let them to further ants if you're a landlord should you deliver an end form notice that they haven't paid rent and you want the place back you want to evict them the problem with evicting them is that you can't get a hearing out because the the landlord and tenant tribunal is closed I would say it's more likely that you should negotiate or take less and defer the balance while the pandemic is on the whole idea is that we're going to have a reset in the business and everything is going to go back to normal in a few months and yes the tenants may owe you a few months rent there is legislation but is it an ounce and it's gone into play today where people get some relief it's not a lot of relief but in some cases it's better than unemployment so plan a let them differ the rents yes that's possible plan me deliver an end for notice you can do that to kick them out but how is that going to help that people are just not looming right now and or negotiate to take less until the pandemic is over defer the balance I would probably try to never see thee forgive the rants well good luck with that I don't think anyone wants to forgive rants so this is a common story another common story is we have a seller here who has already bought a property with a firm deal and now she has changed her mind about lying because she cannot sell her current home she says she cannot complete the transaction no one is coming to view her home because because of the pandemic and as a buyer she's also asking asking the seller to give her a break is she acting in good faith is she trying to fulfill her obligations so up to now I will tell you that there is no pandemic relief legislation for buyers and sellers the buyer does need to close the transaction there could be pandemic relief clause written into the agreement a pandemic relief clause would be phrased as a force majeure clause and a force majeure clause does something that's more commonly used when there's natural disasters or Wars I don't know of anyone who's used the pandemic relief closet I was a seller I would not accept the pandemic relief clause basically force majeure is an intervening act that's beyond the contemplation of either Barney and it should delay or cancel the transaction so in this case my my buyer was also a seller cannot call them on any force majeure clause the other option for her is the claim frustration of contract so once frustration of contract frustration of contract would be that she would have to claim that it's impossible for her to complete the contract due to unforeseen circumstances the standard to prove that is very high it's probably unlikely she'd be able to prove frustration and contract my suggestion with her to her would be to go and negotiate with the seller to extend the closing date or even try to get a mutual release if the seller hasn't purchased anything it's very likely that the seller will refuse but the case law is that the seller should negotiate in good faith and if the buyer does claim frustration and force majeure the buyer will likely have to pay damages to the seller and a judge usually decides if the buyer was acting in good faith and the seller was acting in good faith to fulfill their obligations under the contract before options that presented I like option number D the best because it would allow the buyer to continue to do her purchase if she has enough equity and refinance her old house and turn it into a rental but this is something she can only decide with a financial adviser it's clearly not what she intended but it is an option she could talk to her mortgage broker financial advisor and possibly find that kind of relief so there is no automatic indemic relief legislation even though we do see a lot of talk about it there is nothing out there right now I also hear stories about people worried about the registry office not being open I will tell you it's very unlikely the registry office will not be open the registry office is electronic so it'll be open all the time during the normal hours the only thing that I've known to close the registry office is a power outage or a big storm and that's not a likely event to have happen I would say that you know we worry about putting these clauses in but a lot of these issues have already been dealt with and there's a lot of case law and lawyers seems to follow the case law and necessary extensions so if the registry office does closed usually lawyers cooperate sellers wanna sell and buyers want to buy and they find a way to cooperate and they act reasonably and in good faith to continue their deal so here's here's another story that I hear very often you've listed a tenant in property and the tenant the tenant has now repeated showings they say no showings during social distancing he's advised the seller that he will allow one person to come and do a video walkthrough and you should sell it by video what are your options is that tenant being reasonable I think everyone would agree now because of the fear to health and safety and to one's family I think the tenant would be with acting within their rights to keep you out of the house I think you should consider doing video walkthroughs and use them to market your property it is possible then that a seller or a landlord can give the tenant and for notice of default interfering with the landlord's rights if the if the landlord insists the tenant can also bring forth human rights complaints against the landlord but I would say that very few landlords should insist right now I think that the option of providing safety procedures for showings for with the cooperative tenant is possible so safety procedures could include a lot of different things including wiping down all surfaces after a showing having the listing agent present and so on that's kind of onerous I don't really think we'd want to push that using the walk through a video walk fitting and sell the house conditional on inspection is probably the best bet the final option is take the listing off the market and we list it when things are normal that's also an option but I would say if you have to sell and you have to sell and and giving video videos showing is better than no showing at all and make a deal conditional on inspection of the property that's that's my favorite solution for that so this is the 4th pandemic story so your clients have a restaurant or daycare tenant and they are required to close during the pandemic the mayor of the city says landlords you have to be nice and cooperate what does that mean this these are commercial tenants is the landlord have to cooperate with commercial tenants the tenants have stopped paying rent and they ask for an endemic mentality what options does your client have so on a commercial tenant can your landlord lock them out so usually with a commercial lease you can lock someone out and then based after you give a notice your lease will have the notice period under the commercial tendencies act the Meadowlark anomaly lock someone up or they can destroy on their goods I believe that now that the courts are closed I think that the tenant may even go open the door again with a locksmith and this very little a landlord can do I would suggest it's not a good idea to lock out a tenant during the pandemic because if a court determined that the landlord was not acting reasonably and in good faith the man who probably would have to pay damages to the tenant even though the tenant hasn't paid the rent so I do worry about taking drastic measures and locking people out the other option is negotiated with the tenant possibly ask the tenant to provide financial proof that they can't afford to pay and even accept a lesser amount or defer and defer the balance that's probably one of the best options the last option C I have heard of landlords and tenants for months free rent that's not always possible and words don't have to pay property tax they still have to pay HST and they have to pay for insurance for the property some municipalities are allowing property tax to be deferred it doesn't mean that they don't have to pay to all that means they still have to pay the property tax later so the idea behind these for pandemic stories is that yes we do have legal rights we can exercise our rights but are reacting reasonably and in good faith given the situation at hand so the the guiding principle is reasonability and that's on the reasonable person standard and acting in good faith when should any contractual relations you're not supposed to use the relationship to take advantage of the other party you do have to give them a break so I do like the idea of negotiating and and giving the other side of rate allowing them to close the transaction