Deeds: clearing the confusion on what a deed is, when to use one and why
This article tells you how to create a deed and when you should use one. It also tells you the advantages of using a deed over an agreement.
"Sorry, but I do not trust you. Sign here."
The law at its most basic is that if you put your name to a document you are bound by it. Today you can also be bound by an electronic signature provided it is clear that you intended to be bound.
Lawyers like certainty and safety, so they often use a deed because it costs nothing to do so, avoids the slightest risk, and adds an aura of "legal mystery".
Deeds are often used unnecessarily. This article explores the real differences between the two and explains when to use a deed.
In any UK jurisdiction, a document need only be "Signed as a deed and delivered" to be a deed. Signing as a deed requires those very words and the signature of the person "making" the deed. The signature should be on the document itself approximately in the space provided. The words of execution should name the signatory or otherwise make clear who has signed the document. For obvious reasons, the signature ought to be in ink or some other indelible medium.
The signature should be witnessed. The witness must write his or her name and address below or very near the maker's signature. The law says that the witness must "sign". That means he must write his name. It does not mean that an illegible scribble is satisfactory. He is not a party to the document. He is there to be able to confirm at a later date, that the person who signed was the person named. So an illegible signature would not help to find him! The witness must also add his private address - again to facilitate finding him later. The witness must not be a spouse or close relative; and best not a life partner either.
Most deeds also use the word "deed" in their title. That is helpful, but not strictly necessary.
Long ago, it was necessary to confirm delivery by spoken words as well as by handing your deed to your counter party. Gradually, the process has become simpler. Now, all that is required is to demonstrate an intention to be bound by the deed in order for delivery to take place. You do not need spoken words. It is enough to hand over the keys, or take some other action indicating your intention.
So, although "delivery" has become virtually taken for granted, it is still good practice to use the words "and delivered" in the attestation at the end.
There are several but only one is important:
- Signing as a deed requires a witness, and having a witness around makes it very difficult indeed for anyone to deny that such a document was properly signed and as to when it was signed. That was more important before the days of electronic communications, but the principle is the same today.
The other less important reasons are:
- A deed is binding without "consideration". That means one party (or maybe more than one if there are many parties) gives no value.
Deeds are often mistakenly used instead of an agreement under hand because consideration required in an agreement is assumed to be money or equivalent (market) worth. However, value is rarely a problem and shouldn't be a deciding factor in whether to sign the document as a deed. Consideration can be any value, whether "a peppercorn", or "one pound" or "the goodwill I know this gift will foster".
- You can have a single party to a deed. An agreement under hand requires at least two parties (because you cannot agree with yourself to do something).
- You have 12 years in which to enforce the breach of a term in a deed. It is six years in an agreement under hand.
Because a witness adds certainty to signature and date, every "instrument" creating, conferring or transferring an interest in real property must be a deed. That has been the case for centuries, but it is stronger than ever now because any such interest must be registered and the Land Registry will not register an interest conferred by an instrument signed under hand.
Many foreign jurisdictions still work in the Dark Ages, so you are less at risk from nasty surprises if you use a deed - or at least have witnesses to the signatures on your agreement.
For example, if you set up a trust.
For example, when the consideration has already been given or exchanged and is therefore "past consideration".
A chose in action, for simplicity, is "an intangible, property right, enforceable at law". An example is an insurance policy. The only way to transfer every legal right in a debt to someone else would be by a novation. That means an agreement signed by the original parties and the new assignee.
A novation agreement is often impractical, because it requires the transferring parties to find the other party and obtain their consent and signature. For example, insurance companies have no desire to run up and down the country signing novation agreements with everyone who ever wants to transfer a policy. So instead they accept notice of the deal provided the document of transfer is a deed. So a "deed of assignment" must assign either real property or a chose in action where the use of a deed has become generally accepted and usual.
Less consistently than insurance companies, a bank may accept a document to which it is not a party, only if it is a deed. The reason is that they feel more comfortable with the additional security provided by a witness.
Because the only way to transfer every legal right is by a novation agreement, that is what you should use whenever it is possible to do so. That means use it whenever all three parties can get together and agree. By now you will have gathered that a novation need never be by deed. No witness can improve on the security provided by all three parties signing the document to confirm their agreement. You cannot be much safer in accepting a document than when it has been signed by three unconnected people, so it is strange that one of the only agreements that cannot be improved by using the deed form, is often referred to as a "deed of novation".
In practice, the following are good rules of thumb.
- Use a deed to evidence a gift because the donor (the giver) and the donee (the receiver) may be connected.
- When you assign an interest in a lease, use the three-sided "consent to assignment", which is a novation by another name.
- If you sign an agreement, it may not be effective until you exchange for a copy signed by the other side, or until he signs the same document. Not so a deed: it binds you immediately, even if there other side has not yet signed or there remains an unfulfilled obligation by him.
- If you assign without the express consent of the third party, the third party learns of the assignment and continues to act as before, he thereby confirms acceptance. (Example: sale of a block of telephone contracts, where the customers make payment to the assignee, who continues to provide the service).
- In an agreement under hand, "past consideration is no consideration". The "value" transferred in any contract must be current or future. The agreement is otherwise void. But in a deed, consideration is not relevant.
- An instrument transferring an interest in land (meaning real estate) must be a deed. Although many simple agreements may be registrable as a notice or low level charge, you will always be safer if you use a deed whenever you may need Land Registry registration.
- By Section 44(5) of the Companies Act 2006, in favour of a "purchaser" (in good faith for valuable consideration), a document signed on behalf of a company by two authorised signatories, or by a director in the presence of an attesting witness, is deemed to have been duly executed by the company even if the signatory had no authority to sign or enter into the transaction concerned.
- Your will is different. The rules on signing and witnessing (attestation) are precise, strong and different.
More information and useful legal documents
If you are interested in transferring property, you may be interested in this document to assign a lease or this document, which transfers a life insurance or endowment policy.
We also stock a number of novation agreements.
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- Does not provide a complete or authoritative statement of the law;
- Does not constitute legal advice by Net Lawman;
- Does not create a contractual relationship;
- Does not form part of any other advice, whether paid or free.
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