Law Times

Page 4 July 13, 2015 • Law Times www.lawtimesnews.com Real estate changes Fraud concerns persist as electronic signatures allowed By Tali Folkins Law Times hanges to Ontario's Elec- tronic Commerce Act allowing for the use of digital signatures in real estate transactions could increase the risk of fraud, one real estate law- yer says. The changes, which came into effect July 1, make electronic signatures equivalent to those on paper documents. The new rules are an effort to make buying and selling property much easier since meetings to exchange and sign dozens of paper documents such as offers and agreements of purchase and sale will no longer be necessary. But Blair Drummie, a crimi- nal lawyer who also practises real estate law, has some concerns that allowing digital signatures on agreements of purchase and sale may open up some potential for fraud. He says that although digital signatures are probably fine for subsequent versions, the original document should be on paper with the prospective buy- er signing it in the presence of real estate agents. "They should at least hang onto the originat- ing document and then require a signature on that" so that real estate agents can meet the buy- ers in person and confirm their identification, he says. Otherwise, a would-be fraud- ster could use a fake digital signa- ture to purchase a home in some- one else's name. Alternatively, fraudsters could claim a digital signature signed without witness- es wasn't in fact their own, says Drummie, suggesting that could give them another layer of protec- tion if the matter came to court. "I wouldn't be comfortable in any way having somebody call me up whom I've never met, I've never checked their ID, say- ing, 'I want to buy this house and my offer is going to come to you with a digital signature and could you please present it?'" he says. "I wouldn't do that. I would say you have to come in with two pieces of ID and I will draft your offer and you'll sign it in front of me." In general, says Drummie, the changes are likely to benefit real estate agents and their clients more than real estate lawyers. Andrew Fortis, a partner at Hummingbird Lawyers LLP and secretary of the Ontario Bar Association's real prop- erty law section, agrees. Since lawyers don't have to be physi- cally present at the signing of agreements of purchase and sale, they often receive the doc- uments by fax anyway, he says. Parties must sign closing docu- ments, on the other hand, in the presence of lawyers, something that allowing digital signatures won't change. "I don't see a material impact at this moment," says Fortis. Still, he says it will be inter- esting to see what changes will emerge in the next few years. It's only a matter of time, he says, before people will want to be able to sign closing documents electronically as well, meaning that existing law around han- dling them may evolve as well. The Electronic Commerce Act, which went into effect in 2000, was an attempt to remove legal barriers to electronic com- munications. It exempted land transactions, however. The real estate industry pushed for the province to re- move the exemption and allow for electronic signatures for land transactions, but some lawyers had concerns about fraud. The province passed an amendment removing the exemption in 2013 but didn't proclaim it in force until it could finalize changes to the regulations aimed at ensur- ing the reliability and security of electronic signatures. Five other provinces already allow digital signatures in real estate transactions. In response to the concerns raised by lawyers like Drummie, the Ministry of the Attorney General noted it's not aware of any increases in fraud in other areas since the act took effect in 2000. It also pointed out there's no generally agreed method of identifying people, something that's true for both paper and electronic signatures. LT NEWS Get quick access to expert commentary that will help you gain knowledge about the National Defence Act and supporting regulations governing the Department of National Defence and the Canadian Forces, as well as related agencies. No matter what your level of experience or specialty, you can depend on this book to provide the military law information you need. 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