Real Estate Transactions and Electronic Signatures

In the past, real estate transactions were consummated by signing the dotted line with ink after printing the documents. Now, most, if not all, real estate transactions are being finalized by using electronic signatures. Technology is directly affecting real estate transactions since software programs allow the parties to electronically review and sign the papers. So, in this article, we will be discussing how technology affects real estate transactions and the relevant rules and regulations.

On June 30, 2000, the Electronic Signatures In Global and National Commerce Act (“E-SIGN Act”) was passed to ensure the validity for electronic records and signatures in commercial transactions. It was formally enacted under 15 U.S.C. §§ 7001, et seq. It actually grandfathered pre-existing contracts that were consummated between users and commercial entities in delivering electronic information. Yet, any contracts that were executed on or after October 1, 2000 are subject to the statute’s provisions.

The E-SIGN Act has several requirements. For example, a commercial institution should provide notice to the consumer and obtain prior consent. It should provide notice to the consumer regarding hardware and software requirements. It should be able to associate the electronic signature with the records. It should ensure proper retention and accurate reproduction of those records for a period that is legally required.

On October 1, 2000, the consumer consent provisions became effective but did not mandate the implementation of regulations. However, on March 30, 2001, the Federal Reserve Board adopted rules to establish uniform standards for the e-delivery of federally required disclosures for the following consumer protection regulations:  Regulation B, Equal Credit Opportunity; Regulation E, Electronic Fund Transfers; Regulation M, Consumer Leasing; Regulation Z, Truth in Lending, and Regulation DD, Truth in Savings.

According to the rules, an “electronic record” means a contract or other record created, generated, sent, communicated, received, or stored by electronic means. Also, an “electronic signature” means an electronic sound, symbol, or process, attached to or logically associated with a contract or other record and executed or adopted by a person with the intent to sign the record. See 15 U.S.C. §§ 7006, et seq. for more information.

E-SIGN Exceptions

The E-SIGN Act has certain exceptions. For example, it does not apply to rules that govern the creation and execution of wills, codicils, or testamentary trusts. It does not apply to state statutes that govern adoption, divorce, or other family law matters. It does not apply to some portions of the Uniform Commercial Code. The E-SIGN Act does not apply to court orders or other official court documents that must be executed in reference to court proceedings. It does not apply to any notice related to the cancellation or termination of utility services. It does not apply to certain real estate rights or procedures – e.g., default, acceleration, repossession, foreclosure, or eviction of an individual’s primary residence. It does not apply to the cancellation or termination of health or life insurance benefits. It does not apply to notices related to product recalls or material product failures that may endanger someone’s health or safety. Finally, it does not apply to notices related to required documents for the transportation or handling of hazardous materials, pesticides, or other toxic or dangerous materials.

The Uniform Electronic Transactions Act

The Uniform Electronic Transactions Act (“UETA”) is also an applicable statute when it comes to real estate transactions. It was approved by the National Conference of Commissioners on Uniform State Laws and it provides a framework to the states for resolving the legality of an electronic signature in commercial and government transactions. In effect, it ensures that electronic transactions are as enforceable as their paper counterparts. This means B2B e-commerce users will be held liable for their electronic signatures. It also has similar exceptions wherein it does not apply to wills, codicils, or testamentary trusts. It won’t apply to the Uniform Commercial Code except Sections 1-107 and 1-206 and Articles 2 and 2A.

It’s important to know your legal rights and responsibilities when it comes to real estate and technology laws. Please contact our law firm to speak with a knowledgeable real estate attorney at your convenience.