Proving a Real Signature in a Surreal World: Notarization Concerns in a Pandemic

April 6, 2020

For an update on additional and expanded state executive orders issued and legislation passed between March 31, 2020 and April 10, 2020, please see our April 15 alert.

While a majority of state governors have issued executive orders mandating closure of all non-essential businesses, life does go on, and for many, that means conducting business and taking care of essential personal planning matters. However, most documents executed in connection with business transactions and personal estate planning must be notarized. Notarization is essential to prevent fraud and protect both the person executing the document and third parties relying on the statements and information in the document presented. Trusts, creditor agreements, loans, real estate contracts, mortgages, deeds, bills of sale, and affidavits are just a few examples of documents that often require notarization.

The roots of notaries can be traced to the Roman Empire, and unfortunately, some state laws governing notarization requirements have not evolved much since then. While the world has become increasingly digital and electronic, notaries generally are required to be physically present to witness the signature of the person whose signature they are being asked to attest. In many circumstances, this requirement is an inconvenience, but in the midst of a global pandemic, it can be life-threatening.

States, whose laws govern the commission of notaries and the requirements for notarial acts, and attorneys have been trying to determine how to address this critical issue. Some have resorted to creative, yet extreme, solutions, such as having the signatory execute the document wearing protective gear (gloves and mask) while the notary stands the recommended six feet away, then leave the area so the notary can retrieve the document to affix the notary seal and attestation. In the estate planning context, for states that recognize holographic wills, which do not require witnesses or notarization, attorneys have provided guidance to clients to handwrite their will. But these solutions are not available or realistic in every situation.

This alert generally summarizes several responses by states during this critical time, including legislative developments and relevant executive orders issued as of March 31, 2020, related solely to notarization procedures, and does not address any specific legislative or executive orders related to execution formalities of any specific documents (such as deeds, wills, etc.).

A. State Laws

While historically a notary must personally witness a person executing a document in order to notarize the due execution of the document, many states have adapted to the increased use of technology and permit remote online notarization (RON). Additionally, in response to the pandemic, several states have suspended in-person notary requirements to address the concerns associated with the transmission of COVID-19. Unfortunately, however, not all states have responded to the health concerns of requiring in-person observation by a notary. While it may be possible for a person in a state that has not relaxed its laws or requirements to take advantage of the services of a remote notary, doing so has its own challenges – it requires internet technology, including the ability to upload a document to a shared platform, and comes at a price (in the range of $25 for standard documents to $130 for loan documents depending on the state). Thus, it is not a viable solution for every situation or person.

Additionally, relaxation of the in-person requirements for notarization may be a convenience, but it may come at a cost. Third parties may not be willing to accept a document notarized through RON. Estate planning documents notarized through RON may be subject to increased risk of challenge or litigation – as the notary may not be able to attest to everyone who was present when the principal executed the document. These are just a few of the issues to consider in determining the best alternative.

i. Remote Notarization

For some states with RON statutes, a commissioned notary may perform notarial acts if the notary is physically located in such state when the services are performed, generally regardless of where the signer is located. What this means is that a person who needs to execute a document before a notary public, but is physically located in a state that does not permit RON, may seek the services of a notary in a RON jurisdiction in order to have the executed document notarized. For example, the RON statutes in both Texas (referenced below) and Wisconsin (set to become effective May 1, 2020, but in the interim, effectively available through executive order, discussed below) do not require the signatory to be present in the same state as the notary to have a document notarized remotely by a Texas or Wisconsin notary. Similarly, New Hampshire allows for the remote signatory to be located outside its state borders so long as the record relates to a matter, transaction or property substantially connected to New Hampshire. Further, numerous states are moving forward to implement RON legislation, and it is expected that a majority of the states will have RON statutes shortly.

The following states have adopted and allow commissioned notaries to perform services by RON: Florida, Idaho, Michigan, Minnesota, Montana, Nevada, Ohio, Oklahoma, South Dakota, Tennessee, Texas, Utah and Virginia, many of which have done so for years. Vermont, Indiana and North Dakota have effective RON statutes, but RON may not be performed in these states because the required regulations have not been promulgated. Similarly, Kentucky has implemented a RON statute, but at present no technology provider has completed the required registration process. For details, see this explanation by the National Notary Association. Arizona, Maryland, Iowa, Nebraska and Wisconsin have enacted permanent RON laws, although they have not yet gone into effect, and some of these states are operating under temporary guidance in the meantime.

North Dakota, Wyoming (Wyoming Guidance) Iowa (Iowa Guidance), Maryland (Guidance on Temporary Waiver) and Wisconsin (Wisconsin Guidance) have offered guidance on RON options during COVID-19. Recently, and in direct response to COVID-19, Alabama (AL Executive Order), Arkansas (EO 20-12), Colorado (Executive Order D 2020 019), Connecticut (Executive Order No. 7k), Illinois (Executive Order 2020-14), New York (Executive Order No. 202.7), New Hampshire (Executive Order 2020-04), New Mexico (Executive Order No. 2020-015), Washington (20-27), and Wyoming (Executive Order Wyoming Supreme Court) have implemented executive orders or legislation to permit RON. It should be noted that each of these executive orders has state-specific requirements, such as identity verifications and residence limitations, and should be reviewed thoroughly to ensure compliance with same. For example, Wisconsin’s soon-to-be-enacted legislation does not allow RON to be used for the creation and execution of wills, trusts or non-business powers of attorney. See Wis. Stat. Section 140.145(10). Further, Alabama’s executive order permitting RON applies to only attorney-notaries or notaries working under the supervision of an attorney. Colorado’s executive order does not permit election-related documents to be notarized using RON. (See Adopted Rule Amendments 8 CCR 15015-11.) Lawmakers in New Jersey, Pennsylvania and Massachusetts are quickly working to pass legislation to allow for remote notarization in their respective jurisdictions as COVID-19 progresses. Both New Jersey and Pennsylvania’s proposed legislation would require the notary to make a video of the notarial recording and retain it for 10 years.

ii. Potential Issues and Considerations

RON is a new development in the notarization field, and several issues will likely arise as the use of RON evolves, especially in the midst of COVID-19. As one example, online notarization has been authorized in Texas since 2017 (Chapter 406: Notary Public). As written, the Texas statute allows an online notary to remotely acknowledge the signature of the “principal,” which is defined as “an individual whose electronic signature is notarized in an online notarization.” Accordingly, the Texas statute may not permit a notary to remotely acknowledge a “wet” or “penned” signature of a principal. There are similar nuances in many states’ RON statutory schemes, and use of the process, particularly for a document governed by the laws of a state that does not permit RON, may not be accepted.

Additionally, many liability insurance policies, specifically errors and omissions (E&O) products, may not extend to notarial acts performed pursuant to RON. Many E&O policies exclude claims, damages, claim expenses, disciplinary proceedings or subpoena costs, where the notarized certification or signature is performed without the physical presence of the person whose signature is notarized.

B. Possible Nationwide Solution

On March 18, 2020, Sens. Kevin Kramer (R-N.D.) and Mark Warner (D-Va.) introduced legislation that would allow immediate nationwide use of RON in response to the COVID-19 outbreak. The Securing and Enabling Commerce Using Remote and Electronic Notarization Act of 2020 (SECURE) would authorize every notary in the United State to perform RONs, require tamper-evident technology in electronic notarizations and provide fraud prevention through the use of multifactor authentication. Under Senate rules, the bill would most likely be referred to the Senate Banking Committee, which must approve the bill before sending it to the Senate floor. As of March 23, 2020, U.S. Rep. Guy Reschenthaler (R-Penn.) introduced a new bill to the House, H.R. 6364, to authorize and establish minimum standards for electronic and remote notarizations. Along with these efforts, national trade associations such as American Land Title Association (ALTA) and Mortgage Bankers Association (MBA) are pushing for a federal RON provision to be attached to COVID-19 stimulus bill(s). At this time, McGuireWoods is closely monitoring the future developments of the bills.

McGuireWoods has published additional thought leadership analyzing how companies across industries can address crucial business and legal issues related to COVID-19.