Online systems are convenient, as tenants will not have to visit your office. They could also save time. But are they possible?
There was quite a lot of interest in my earlier post signature of documents in an electronic age. Here we look at taking things a bit further.
I have been involved in setting up two online systems. Neither are perfect, but so far as I am aware, they have worked.
The legal problem and the law
The problem is that a tenancy created at any time other than at the time the tenant goes in (ie by the tenant signing the tenancy agreement at the time they are given the keys) must be by deed.
This is set out in the 1925 Law of Property Act (s52), which says that all conveyances of land must be by deed. A tenancy agreement is a form of conveyance as it is transferring a legal interest in land / property.
However this rule is relaxed in s54 for leases of under 3 years at a market rent which take effect immediately. So under s54, if you go into a property and start living there and paying rent, that creates a proper valid tenancy. Even though there may be no tenancy deed, or just a tenancy document which is not a deed.
The first solution – total remote dealing
This was a system I helped set up a couple of years ago for a company which provides student accommodation. Its a while ago now so I can’t remember the exact details. I know it took ages to work it all out.
As the students never see the properties before signing up (many of them are coming from overseas), the contract is subject to the distance selling regulations and we had to incorporate all the notices regarding that in our procedure.
++ Note – the Distance Selling Regulations no longer apply to tenancies (although they did when this post was written) ++
The students had to navigate through an online procedure, make payments online, and then accept and agree to the tenancy contract by ticking a box and pressing ‘enter’ (or something similar). The system included taking a guarantee.
I explained to the clients that although a contract could be created online, this could not create an actual tenancy agreement as this needed to be created by deed if the agreement was made in advance.
However a tenancy would be created anyway when the students went into possession under LPA25 s54 and so far as I could see, this would be governed by the terms of the contract they had already accepted (which would probably take effect in equity).
As a tenancy is this weird mixture of land law and contract law, I don’t see why the tenants should not be bound by the terms of the contract even though this was not set out in any actual tenancy deed.
My advice to them was that they should get the students to sign a proper tenancy agreement at the time they picked up the keys, but apparently this is not practicable.
The second solution – the multiple counterpart deed
Here a landlord / letting agent wanted tenants to be able to download and sign tenancy agreements, without having to do this in the agents office.
In all cases (I was assured) the prospective tenant (or at least one of joint tenants) would have been shown round the property and so the distance selling regulations would not apply here.
The system we worked out was that the tenants would be given a special login to a place where they could download the tenancy agreement (which would be created by information given by them online). They would all need to sign their own copy of this, as a deed (ie by getting their signature witnessed), and then send that off to the agent.
The tenancy agreement contains a counterparts clause which provides that the tenancy agreement can comprise a number of different counterparts which taken together will form the agreement.
Once the signature pages have come in from all the tenants, these are then checked and collated. Once they are all present, the whole agreement is scanned and a pdf sent out to all parties.
These are two solutions. There are probably others. If you have any other ideas please do share them.
To the nay sayers, I would say that online procedures is what people want. They are going to start doing this whatever the lawyers say about it. So I think that we should try to work creatively and find a solution which fits in (more or less) with the law we have. Rather than wag out heads and say “no, no, no” which is just going to irritate people.
But it would be nice if this situation could be addressed at some time by our law makers and if the current system, created nearly 100 years ago, could be brought up to date.