Electronically signed sale of property agreements is not yet legal

Private Property South Africa
Private Property Reporter |
Electronically signed sale of property agreements is not yet legal

Electronic signatures, also known as e-signatures, have been used by many commercial enterprises as a means by which documents can be signed quickly, and returned to sender. However, legally there is some confusion as to whether this form of signature is valid, and more so within the property industry where the commitment in an offer to purchase for example, commits the buyer to hundreds of thousands of Rands.

In South Africa, e-signatures are governed by the Electronic Communications and Transactions Act 25 (ECTA) of 2002, which defines electronic signatures as “data attached to, incorporated in, or logically associated with other data and which is intended by the user to serve as a signature.” We asked Carl Kellerman, Property Attorney at Phatshoane Henry Attorneys to clarify whether e-signatures are considered legally compliant, or if traditional wet ink signatures are still in play.

Q: Is an electronic signature acceptable on an OTP for the purchase of residential property?

No, according to Section 2(1) of the Alienation of Land Act 68 of 1981 (“ALA”) the alienation of land, which includes any immovable property such as, for example, residential property, shall only be valid if the alienation of land is contained in a written agreement and signed by the parties to the agreement. This section requires the physical signature with the word “signed” on a Sale of Property Agreement for immovable property by pen and ink on paper by the parties entering into such agreement.

Q: What residential property legal documents might allow for e-signatures?

It’s safe to say that documents such as, for example, resolutions that companies or trusts take to alienate or purchase immovable property, can be e-signed, however, we advise our clients to sign all documents in wet ink physically as far as possible. Documents such as the Power of Attorney to pass transfer and Agreements of Sale for immovable property must be signed physically at this stage.

Q: What are the threats around e-signatures in terms of cybercrime, if any?

I am not a tech expert when it comes to e-signatures, but I think that it would be easier to forge an e-signature, or use it without the necessary permission, and this is why the physical signing of the document / agreement is preferred.

Q: Why is there a lack of certainty from our justice system in terms of the validity of e-signatures?

At present, sale of property agreements in terms of the ALA must be signed in wet ink, alternatively a scanned copy of a handwritten signature attached to the Sale of Property Agreement electronically can suffice at the moment. It is suggested, however, that given the lack of certainty at present regarding electronic signatures, these should not be used to sign, specifically, Sale of Property agreements, given the risk that such may not be seen as valid.

Q: How will certainty be achieved (eg: through court cases)?

That is correct, legal certainty will be achieved by a competent court making a ruling to provide clarity, or if the legislature provides guidance via new legislation, or the amendment of current legislation like, for example, the Alienation of Land Act.

Q: What should the man-in-the-street, property buyers and sellers, be wary of in terms of the e-signature?

Whilst electronic signatures have increased in popularity in modern business practice, their validity as it pertains to the sale of property agreements does not hold water under the current legal framework. Until clear guidance is provided by our courts or legislative changes are introduced, it is advisable for the man on the street to stick to traditional wet ink signatures to avoid potential legal complications and litigation regarding the validity of the sale agreement.

Other resources:

5 things to know before signing your OTP

Everything you need to know about the OTP when buying property

Importance of checking documents carefully before signing an OTP

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