By HELEN HULL
Are digital signatures the same as electronic signatures? The short answer is “no”. They are different. Here we explain how they differ and what all agents need to know about using them.
Advancements in technology have led to a rise in the use of digital signatures and electronic signatures. While the terms “digital” and “electronic” are often used interchangeably, there are important differences.
“A digital signature is a type of electronic signature, however it’s much more sophisticated and secure,” Toby Blyth, Partner at law firm Colin Biggers and Paisley, said. “Whereas an electronic signature can be as simple as using your finger to sign your name on a tablet or iPad, a digital signature has special encryption to ensure that signatures are legitimate and documents are not altered after being signed.
“Much of the confusion stems from the fact that we’re moving from an 18th century legal world, where signatures were physical, to an electronic world, where suitably encrypted data and secure keys can be used to verify transactions.”
“It’s important to check with your provider about the type of signature being recorded. Is it simply an electronic signature? Or is it a digital signature? And you need to understand the different implications of each.” – Cassandra Lantry, Leah Jay
Understanding the difference
According to Cassandra Lantry, Director and General Manager at Leah Jay, electronic signatures and digital signatures are great tools, however she stressed the importance of being aware of the differences between them.
“They are more convenient for real estate clients and create huge efficiencies for agencies,” she said. “However, as with anything, you need to be aware of just what it is that you’re working with.
“It’s important to check with your provider about the type of signature being recorded. Is it simply an electronic signature? Or is it a digital signature? And you need to understand the different implications of each.
“A digital signature provides encrypted evidence of the signing of the document and should be used for all binding contracts and agreements, such as contracts for sale, agency agreements and residential tenancy agreements. Electronic signatures, on the other hand, do not have that same level of security and shouldn’t be used to sign binding contracts and agreements.
“Having a digital signature in place provides you and your agency with a much higher level of protection should a signature ever be challenged.
“At Leah Jay, we use DocuSign, as well as other automated systems, that have digital signatures built into them to sign managing agency agreements and leases. The functionality of these systems creates efficiencies in our office and also improves the experience for our clients.”
“The seamless integration of REI Forms Live with DocuSign means that you don’t need to login to DocuSign – it’s all done within REI Forms Live. This minimises duplication of data and you can also see the status of the electronic signatures within REI Forms Live.” – David Howell, Dynamic Methods
Gatekeepers for identity
While digital signatures provide a high level of security, Toby Blyth said agents also have a critical role to play in confirming the identity of signing parties.
“Real estate agents are the gatekeepers for human identity,” he said. “Although an agent may not necessarily be a Justice of the Peace, they do perform a similar function in that they verify identity and ensure that copies of documents are true duplicates of originals.”
Mr Blyth noted that the new electronic conveyancing regime and PEXA are good examples of relatively secure, cohesive systems.
“These are true digital signature regimes,” he said. “The electronic signature regimes, where PDFs and emails essentially mimic the paper world, are not secure and have led to instances of fraud and difficulties for agents where there has been interception.
“Verifying the identity of a property owner or purchaser before a transaction passes into the digital world requires physical intervention by an agent. Verifying someone’s identity from a driver’s licence or other identification documentation in an online environment is risky.”
Mr Blyth pointed to the Supervision Guidelines, which set out what agents must do in relation to identification checks for the purpose of fraud prevention.
“The steps set out in the Supervision Guidelines act as a tripwire for fraud and are intended to prevent instances of unauthorised transactions,” he said.
In this context, Mr Blyth also noted that section 9(1) of the Electronic Transactions Act 2000 (NSW) provides that electronic signatures can only be used, if:
“(a) a method is used to identify the person and to indicate the person’s intention in respect of the information communicated, and
(b) the method used was either –
(i) as reliable as appropriate for the purpose for which the electronic communication was generated or communicated, in light of all the circumstances, including any relevant agreement or
(ii) proven in fact to have fulfilled the function described in paragraph (a), by itself or together with further evidence, and
(c) the person to whom the signature is required to be given consents to that requirement being met by way of the use of the method mentioned in paragraph (a).”
Mr Blyth explained that section 9(1) clearly requires prior activity to enable the agent to identify the signer.
“The agent may simply push the identification back to an earlier instance,” he said. “For example, where the agent met the signer in real life and steps were employed to identify the signer independently of the signer's mere assertion.”
“Verifying the identity of a property owner or purchaser before a transaction passes into the digital world requires physical intervention by an agent. Verifying someone’s identity from a driver’s licence or other identification documentation in an online environment is risky.” – Toby Blyth, Colin Biggers and Paisley
Real estate agreements and forms
David Howell, the Founder and CEO of Dynamic Methods – the company that developed the platform powering REI Forms Live – said there are a number of questions that REINSW members should be asking of technology providers when qualifying a potential electronic signature solution.
“Can that solution prove that it has not been tampered with after signing,” he asked. “Also, from a warranty or liability perspective, will the provider assist in a situation where you’re being asked to prove that a document has not been tampered with after signing? Will they go to court to help you in this situation?”
Mr Howell underlined the importance of doing your research around how electronic signatures and digital signatures are being used elsewhere.
“You need to understand what consumers are already using, so that you can provide them with something that they already trust,” he said. “Most people have signed a document electronically in the past across a range of different industries, including banking, accounting or in their own business. If they’ve used a certain system in the past, they’ll be more likely to be comfortable using it again.”
Mr Howell said you should also ask what information the provider can give you about the signing process and the signature flow.
“Will you be able to specify the order in which a document is signed,” he asked. “In some instances, the order of signing does matter; for example, in the case of a tenancy agreement, where you would generally have the landlord sign last. As the agent, you need to be in control.”
Mr Howell said digital signatures and electronic signatures don’t compete with each other.
“They do different things – and together they make for a better solution,” he said. “The seamless integration of REI Forms Live with DocuSign means that you don’t need to login to DocuSign – it’s all done within REI Forms Live. This minimises duplication of data and you can also see the status of the electronic signatures within REI Forms Live.
“We store a copy of the digitally and electronically signed documents for seven years.”
REI Forms Live – Complete your agreements and forms online
REINSW agreements and forms set the industry standard and are the most widely-recognised agreements and forms available – and with REI Forms Live you can complete them online and gain digital signatures seamlessly with DocuSign.