Sign of the times – The new execution method for lockdown16 Mar 2021 // Insights
Real Estate Finance Solicitor Jonathan Bower discusses the innovative document execution method that has increased in popularity due to the pandemic.
When the first national lockdown was announced on the 23 March 2020, few could have foreseen the disruption which the Covid-19 pandemic would wreak on almost every area of life. Drastic and immediate changes were required in order to keep businesses moving, and the legal profession was no different.
With much of the country confined to working from home, property transactions were being conducted solely through email, phone, and post – meaning that clients were unable to attend firms to sign documents. Enter the Mercury method, or to be precise, the Land Registry’s guidance on the execution of documents by virtual means.
The concept of electronically signing documents is nothing new. In 2017, NatWest introduced their paperless mortgage scheme which used technology to sign a mortgage deed electronically using a mouse or tablet. However, until last year this method of signing documents was rarely used. Whilst the Mercury method doesn’t permit electronic signatures, it does allow for completion where it is difficult/impossible to be holding the original documents. As such, it might be considered a halfway house between execution in person and electronic signatures.
The name mercury comes from the 2008 case R (Mercury Tax Group Ltd) v HMRC , where Lord Justice Underhill stated, “that that language necessarily involves that the signature and attestation must form part of the same physical document being signed”, therefore allowing the execution pages to be signed separately, but then attached to the rest of the document.
So how does the Mercury method work?
Firstly, both parties must clearly agree to the Mercury method being used, before undertaking the following 8 step process.
•STEP 1 - Final agreed copies of the transfer are emailed to each party by their conveyancer.
•STEP 2 - Each party prints the signature page only.
•STEP 3 - Each party signs the signature page in the physical presence of a witness.
•STEP 4 - The witness signs the signature page.
•STEP 5 - Each party sends a single email to their conveyancer to which are attached the final agreed copy of the transfer (see STEP 1) and a PDF/JPEG or other suitable copy of the signed signature page.
•STEP 6 - The conveyancing transaction is completed.
•STEP 7 - The conveyancer applies to register the disposition and includes with the application the final agreed copy of the transfer and the signed signature page or pages in the form of a single document.
•STEP 8 - The application is processed by HM Land Registry following standard operating procedure.
The main advantage of the Mercury method is that it does not require the borrower to attend a solicitor’s office to sign the documents (though the signatories will need to sign in the presence of a witness). All that is required is for the execution page to be printed off, signed and witnessed, and scanned back to the solicitor. With some finance documents regularly exceeding 100 pages, the advantages in saved time are self-evident - not to mention printing cost and to the environment.
So why isn’t the Mercury method used more regularly? The answer is that some lenders are wary to complete on scanned copies of documents. This might be due to the mistaken belief that you need to be holding the original finance documents to enforce the security. More likely, it is a result of lenders’ independent legal advice requirements. Most lenders require that borrowers are advised on the nature and effect of the finance documents, in the presence of their solicitor – with the solicitor then witnessing the documents. Obviously, with the Mercury method, that isn’t possible. However, due to the pandemic, some lenders are allowing advice to be given over video call, though the finance documents still need to be witnessed in person by an independent adult witness - as this is a requirement for all deeds - in which case the Mercury method would be ideal.
In a fast-changing world, it remains to be seen whether the Mercury method will supersede more traditional methods of execution and become the commonly accepted method in a post Covid-19 world.
Should you have any questions regarding the above information, or need any real estate finance related advice, please get in touch with our Head of Real Estate Finance, Adam Miller, on email@example.com or 020 7725 8038.
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