Alerts
With the recent wave of governmental “stay-at-home” and similar orders to dampen the likely effects of the novel coronavirus known as COVID-19, many businesses have been forced to press “pause” on certain ongoing transactions. Real estate transactions are among those being delayed. However, as the period of social distancing gets extended by weeks at a time, legislatures across the nation are beginning to implement various measures to ensure that both residential and commercial real estate transactions that parties wish to forge ahead with can in fact proceed. These measures include remote notarization, e-recording of documents in local registries, and relaxing requirements that require parties to close transactions in person. We look at a variety of these measures and still-emerging trends in this alert.
Notarization
Although enabling legislation for virtual notarization has been enacted in several jurisdictions, it has not been widely used, sometimes because additional steps were needed to make the enabling legislation useful. For example, states such as Florida, Nevada, and Ohio implemented additional training requirements not previously necessary, and South Dakota retained a requirement that signing parties could only be identified through the notary’s personal knowledge. However, we are now seeing that, like in so many other ways, the COVID-19 outbreak has accelerated changes to the notarial process. Namely, legislatures are implementing remote notarizations – which allow parties to sign and notarize documents remotely with the aid of online and video technology – so that parties and their notaries do not need to occupy the same room.
New York was an early proponent of this acceleration. In his March 19 executive order – which increased temporary suspensions in accordance with his March 7 declaration that New York is a disaster emergency – New York Governor Andrew Cuomo declared that notaries are temporarily allowed to authenticate documents by video conferences that physically occur in the state of New York.
Similarly, on March 31, Georgia Governor Brian Kemp issued an executive order altering the requirements for the attestation of a recordable instrument under Georgia’s Code Sections 44-2-1 et seq. and 45-17-1 et seq., which typically require the physical presence of the notary public for real estate transactions. As a result of Governor Kemp’s order, these usually stringent requirements may now be satisfied by the use of “real-time audio-visual communication technology or any similar real-time means of electronic video conferencing that allows the parties to communicate with each other simultaneously by sight and sound.” Similar executive action from Governor Kemp’s office on April 10 made clarifying revisions to the previous order, including expanded requirements: the notary must be either an attorney licensed to practice law in Georgia or supervised by an attorney licensed to practice law in Georgia, the notary must be located in Georgia, and the signer must transmit a copy of the signed document to the notary public on the date of execution.
On the heels of implementations in states like New York and Georgia, North Carolina may become one of the next states to move toward a remote notarization process. Although North Carolina remained one of approximately 20 states that had no remote authorization or bills regarding remote notaries proposed at the start of 2020 – a list that included New York, Georgia, Alabama, and others at the time – the state has suggested that it is considering at least a temporary change to implement new standards that would allow for a remote notarization process.
For certain other states, the implementation was less of an issue because legislation had been enacted allowing for remote notarial acts, even if it was seldom used. States such as Virginia – the first state to pass remote notarization legislation in 2011 – Michigan, Tennessee, and Texas, among others, had already passed legislation prior to the coronavirus outbreak that allowed for the full implementation of remote notarization when necessary. For these states, the foundation was already laid for remote notarial acts to assist ongoing operations during these uncertain times.
E-recording
In another effort to curtail difficulties with real estate transactions, certain states and counties which previously did not allow for electronically recorded deeds are accommodating the change while local offices are closed to the public. In the past year, for example, Kentucky passed Senate Bill 114, which reformed the state’s recording laws to facilitate the electronic recordation of real estate deeds, mortgages and other documents.
Although almost 2,000 jurisdictions nationwide were capable of electronic recordation as of 2019, the COVID-19 outbreak has accelerated the process for later stage holdouts. For example, Macon-Bibb County – located in middle Georgia – recently transitioned to e-recording for real estate documents to facilitate ongoing transactions during the pandemic. Your local jurisdiction may or may not have made this transition to e-recording at this time, however. Changes, for example, were not implemented statewide throughout Georgia.
Closing Processes
Judicial orders are also beginning to adopt and accelerate changes where legislative acts or executive orders have thus far remained silent. On March 27, the Supreme Court of Georgia clarified that attorneys in Georgia no longer have to participate in and supervise real estate closings by physical presence. Rather, lawyers may supervise closings via video conference, or a “remote conference of persons in different locations that is facilitated by technology that enables each of the participants in the closing … to see, hear, speak to, and display documents to each of the other participants in real time.”
Title Company Requirements
Even as legislatures, courts, and executive action ease restrictions at the state or local level on remote aspects of real estate transactions, there remain certain other limitations:
Title searching
In many locations, effectively searching title prior to recordation (even by e-recording) has been significantly hampered. This is having a disproportionate impact on jurisdictions that do not widely utilize gap closings or do not usually have significant gaps between title updates and recording closing documents. As a result, even though you may be able to continue e-recording in certain locations – and begin in others where you could not previously – closing may be hampered by the inability to check title fully prior to closing.
Title insurance
Title insurance companies are both creating processes and documentation to help “bridge the gap” in title searching and recording, and also imposing limits and additional restrictions on closings that do occur during this period of altered accessibility. In the event that a county’s online search platform does not allow certain records to be searched, or if sellers are unable to ensure that the record is complete, for example, some title insurance companies have provided gap indemnity forms – to be obtained from all purchasers, sellers, and borrowers – to insure the gap. Title insurance companies are not stopping at gap indemnities, however, and are often requiring additional affidavits that acknowledge COVID-19’s potential impacts on title and document recordation. As to closings, Chicago Title Insurance Company issued a bulletin on April 3 to its Georgia agencies that requires, among other things, that closings that utilize a video conference must be for residential property transactions with a sales price or loan amount of $1,000,000 or less. As a result, the video closing procedure cannot be used for commercial transactions in Georgia if insured by Chicago Title – an extreme limitation that practically voids Governor Kemp’s expansive order for notarial acts in commercial deals. First American Title Insurance Company implemented its own limitations as well, which include new certification forms for the signing parties and providing a demonstrated form of identification in compliance with the federal Real ID Act of 2005.
Bulletins from these and other title companies across the nation may provide unseen obstacles for the unwary. Your local counsel or title agent can assist in compliance with these additional restrictions as they may apply to your jurisdiction.
Given the fast pace of – and differences among jurisdictions in – changes to closing processes, attorneys and their clients will want to check the circumstances applicable in their jurisdiction when forging ahead with their real estate closings:
- Does my local jurisdiction allow for remote notarization? Will all parties be able to effectuate signatures and comply with stay-at-home orders?
- Will my jurisdiction record closing documents – such as the deed – if the recording office closed to the public? Is e-recording an option for me in my jurisdiction?
- How effectively can the title company or certifying attorney check title prior to recording closing documents?
- Does my attorney have to be present at the closing? Are we able to effectuate closing remotely without physical presence of all of the parties?
- What additional requirements does my title insurer require? Am I, and is the other party, in compliance with those additional forms, certifications, and steps?
The situation is fluid in many states and local jurisdictions, but these questions will serve as a starting point to additional inquiries that will be appropriate in the near term to keep forging forward in a time where certain activities have been forced to pause.
