Electronic Real Estate Transactions (More …)

At the end of my previous post on the application of the E-Commerce Act to land transactions, I mentioned ‘measures that might be useful to ensure that the change does not increase the risk of real estate fraud’. (None of this affects the *registration* of land transfers by electronic means.)

I have recently had drawn to my attention a set of technical specification for electronic signatures in land transactions adopted by OACIQ, the Quebec governing body for real estate brokers (the equivalent of the Real Estate Council in Ontario and some other jurisdictions). These are very detailed, though in principle technology-neutral. They do not require a technology, but they require a lot of specific functionality (and insurance coverage).

OACIQ also has a system for certifying that any particular system meets the technical specifications.

It appears that the Quebec system aims to comply with the province’s framework legislation for IT matters, the Act to establish a legal framework for information technology. This Act set out requirements for electronic documents (mainly that the integrity of the information must be ensured – s. 5ff) and for some kinds of electronic signature, notably digital signatures supported by a public key infrastructure (s47ff).

Is that kind of detail needed in the law of Ontario (or the other common law provinces) to support electronic real estate transactions? Should people in the industry at least use the Quebec rules as a guide to prudent practice?

Do you think that land transactions present unique or special risks if done by electronic means? Are the standards of prudent practice applicable to land transactions documented on paper sufficient when applied to electronic transactions? If not, what should supplement them?

In your experience, do problems arise in land transactions (or any commercial transactions) because of flaws in a signature on a transactional document, or challenges to a signature or efforts to repudiate a signature?

Should the law focus on the integrity of the documents as a whole and their attribution however proved, rather than on the signature in particular? Or should that be a matter of practical guidance and education for those handling land transactions, whether lawyers or real estate agents?

What of the ‘self-represented’ buyers or sellers of land: should they be required to comply with such technical standards in order to create a valid transaction?

P.S. My own views on the law and practice of e-signatures are here, but what of their application to land transfers in particular? If you think I am wrong or incomplete on the general discussion, feel free to point it out as well.

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Comments

  1. John Gregory has asked whether we should guard against fraud in unregistered electronic real estate documents by either (1) adding formalities to the law or (2) adopting guidelines for prudent practice. In my view, we should reject (1) and encourage (2).

    In Ontario, we’ve just made a housekeeping change that allows the Electronic Commerce Act, 2000 to apply to electronic real estate documents. We shouldn’t go further by adding formalities to the law, either by statute or regulation. We should merely encourage professionals to develop suggestions or guidelines for prudent practice.

    For paper real estate documents in Ontario, we have a morass of ancient laws on writing, written evidence, signing and sealing. We should rationalize those laws, and clarify how the law on seals applies to electronic documents. Those laws show the dangers of formalities in the law. The previous exception in the Electronic Commerce Act, 2000 for electronic real estate documents showed some those dangers.

    A formality won’t guarantee that a transaction is honest, or that a party will obtain professional advice. A formality can be used dishonestly to escape an obligation. Parties are basically free to choose their own standards of proof.

    The purpose of the Electronic Commerce Act, 2000 was to enable electronic documents. In a fast-changing world, the purpose wasn’t limit ourselves to a particular technology. We shouldn’t let confidence or good intentions defeat the purpose.

    John Gregory and I have commented more fully on these issues in his articles on Electronic Real Estate Transactions, Electronic Seals and Ontario’s Electronic Commerce Act Amendment Passed].

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