E-Sign Lease Agreements

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Understanding the Legalities

Starting with the passage of the E-Sign law in 2000 (formally the Electronic Signatures in Global and National Commerce Act), landlords, including self-storage landlords, were given the opportunity to conduct their leasing online, entirely through the internet. Now, almost 20 years later, the self-storage industry is finally shifting to take advantage of this legal entitlement to conduct their leasing online and through other automated technologies.

A Few Pointers To Consider
The issue of knowledge and consent is crucial in an e-sign lease. The communication that is sent concurrently with the offering of the lease and the execution of that lease should include language that addresses two vital parts: 1) that the person signing the lease electronically “consents” to the enforceability of the electronically signed document, and 2) that the parties to the transaction both communicate their understanding that the electronic exchange between them is intended to ultimately create a contract. The goal is to avoid any misunderstanding as to the actuality that a contract is being created and can be enforced. Any risk that the contract would not be enforced would flow only from any misrepresentation contained in the delivery of the agreement that suggests the electronic transaction did not formally result in a contract being formed.

In fact, one important case that dealt with electronic signatures involved Best Buy and the customer’s additional acceptance of a magazine subscription at the time of their online purchase. The customer electronically agreed to her primary purchase transaction but then unknowingly signed up for an accompanying magazine subscription that was included within the language of the final purchase agreement but was not shown at the same time that the purchase was finalized. In that case, the electronic signature was found to be invalid and the transaction canceled due to the lack of association between what was being signed and the purchase at issue. It is therefore crucial in self-storage leasing that the operator present the lease terms as part of the electronic document actually being signed. In other words, that the act of signing is directly associated with the document that is presented with it.

Are E-Signatures Trustworthy?
Yes. Not only are e-signatures more practical in this age of rapid mobile information and time sensitive buying, but e-signatures allow “real-time” resolution of contract issues. Further, e-signatures have been found to be safe and not easily prone to fraud or hacking. To support this issue, the law requires that online businesses also create a retention system for their electronic transactions so that they are retrievable. As such, once the customer signs the agreement, they should also be given the ability to later retrieve a copy of the executed agreement from the business’ records retention system. Moreover, the federal law also provides that if there is a change in the hardware or software requirements needed to access or retain the electronic record, which may create a risk that the customer would not be able to access its records, the customer must be notified and given the option to provide their assent in writing. The importance of a clear method to retain and recover electronic contracts is crucial along with the ability to present a verifiable audit trail for the use of the website, including information on the date, time, and source of the original record, as well as any modifications made to the record. Such a clean audit trial not only removes the question of trustworthiness from the transaction, but further enhances the admissibility of the executed document if needed later for enforcement.

The federal e-signature law does give consumers the right to use paper contracts, if requested. So, business operators do need to have an available “opt-out” option for tenants who may choose to review and execute a paper lease or request a physical copy of the document they are signing (either by e-mail or by mail to the customer after execution). The law even provides that the customer can later change its mind and request a paper lease to be provided after the fact, even if not requested upon execution.

Finally, a number of states have adopted the Uniform Electronic Transactions Act (UETA), which provides for the legality of electronic contracting under individual state laws. The law basically recognizes that a contract cannot be denied legal effect and enforceability simply because the record that was created was electronic as compared to a physical form. Although the federal E-SIGN law will control in most instances, there may be some specific issues that will need to be included in the online portal for the contract should the operator manage facilities in more than one state.

Scott Zucker is a partner in the law firm of Weissmann Zucker Euster Morochnik & Garber, P.C. in Atlanta, Georgia.

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