Epiq Systems, Inc.
Real Estate

Language of electronic commerce bill confusing

By Lisa Laredo

Ontario's Bill 28 of the 2013 session of the legislature is a private member’s bill intended to amend the Electronic Commerce Act by removing the exemption from that act for documents, including agreements of purchase and sale that create or transfer interests inland and require registration, to be effective against third parties.

The existing Electronic Commerce Act, 2000, (ECA) imposes the requirement that an electronic signature on such documents be "reliable" for the purpose of identifying the person signing and also that the association of the electronic signature with the relevant electronic document be "reliable." There is no definition of what constitutes "reliable," nor are there any regulations which assist in the definition.

The existing ECA has within it s. 31(2) which exempts documents of title from the application of the act. By so doing, the act appears to protect the Ontario electronic land registration system from the application of the ECA.

Bill 28 would repeal s. 31(2) and thereby create confusion in the operation of the land registration system. This legislation is intended to adopt the recent changes to the Uniform Electronic Commerce Act which bring real estate documents within the ambit of electronic commerce.

In Ontario, the bill, if passed, will have minimal impact. This province has a legislated regime of electronic registration which is comprehensive and provides the sole method for creating most of the documents mentioned in the bill. The bill seems to say that it applies to all registrable real estate documents that create or transfer an interest in land. In reality, the language is inappropriate to a province like Ontario which already has a complete scheme for creating registrable documents.

The only available scope for the bill is in the area of agreements of purchase and sale and any other type of agreements which create an interest in real estate, such as an agreement to lease. There is uncertainty in this area because the electronic signatures of both parties must be reliable and there must be a reliable association of the electronic signature with the electronic document. We do not know what "reliable" means. In addition, most people do not have electronic signatures and would not know how to create one. Electronic commerce transactions are voluntary in that both parties must consent to the use of electronic documents.

This fact alone will reduce the use of electronic documents in the field of real estate. Of course, with the passage of time and the increasing computer literacy of the population, there will be an increasing willingness to use electronic documents. Electronic commerce legislation is enabling legislation. To believe that the inclusion of real estate documents within the ambit of the ECA will reduce the amount of paper associated with real estate transactions is pure fiction.

Invariably, electronic documents will be printed in hard copy. In all likelihood, there will be administrative guidelines that require real paper signatures as additional safeguards. Until there are standards to assess the reliability of an electronic signature and its association with the document intended to be signed, and given the limited impact of electronic commerce legislation in the area of real estate, I believe the legislation should not be passed in its present form. Further, the bill contains language which can only create confusion when applied to the present system of electronic registration in Ontario.

For all of the above reasons, the bill should either be abandoned as serving no significant purpose or redrafted to define what is reasonable and limit its effect to real property documents, if any, not captured by the current electronic registration system.

All of the above may have been superseded by recent legislation. In the recently passed budget bill in Ontario the ECA was amended by repealing section paragraph 4 of s. 31(1), the section that exempted real estate documents. This amendment is applicable only after it has been proclaimed. The amendment did not touch s. 31(2) and thereby preserved the clear distinction between the ECA and electronic land registration.

Given the recent provincial amendment to the ECA, I do not see any future for Bill 28.

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