Some Do's, Do NOT's and Scary Sleepers in North Carolina remote notarization, for now!
by: Nancy Ferguson
As real estate professionals should know, notarization is more than just a clerical or ministerial task! A bad notarization can completely defeat an otherwise valid record title or hide a fraud -- even if the notary is not aware, just negligent in performing the notarization!
And unlike many types of documents that are notarized, in a real estate transaction, THESE WILL BE YOUR TITLE RECORDS FOREVERMORE, WHETHER YOU INSURE THE PARTICULAR REMOTELY NOTARIZED TRANSACTION TODAY OR ARE ASKED TO INSURE A LATER DEAL DOWN THE ROAD!
Though we are very excited about having a potential REMOTE ON-LINE NOTARIZATION (“RON”) solution in North Carolina, many misunderstandings and concerns remain to be addressed. Session Law 2022-54, H776, provides for extension of the Emergency Video Notarization enacted during COVID, G.S. 10B-25, and a new “Remote Electronic Notarization” statute, new Part 4A of Article 2 of Chapter 10B of the NC General Statutes. https://www.ncleg.gov/BillLookUp/2021/h776
So, for remote notarization in NC – UNDERWRITERS BE AWARE!! Below are just a few “hot” issues to watch in reviewing documents and working with closing attorneys. Every attorney, paralegal and underwriter should familiarize themselves with the details of this process, even if they are not themselves doing remote notarization, because this will affect titles for all of us into the future.
Emergency Video Notarization, G.S. 10B-25, extended through June 30, 2023.
Where are they? NC notary and the principal must be located in NC. (It is unclear how the notary will confirm that sufficiently for legal purposes.)
Is this an e-notary on-line closing, or “wet-ink” signing? Regular or “paper” notary can only notarize a paper, “wet-ink” execution. E-notary is notarizing a digital electronic document, with electronic signature and e-notarization, not using their wet-ink paper notarization. (See later discussion of “papering out” and limited uses.)
What ID works? The governmentally issued photo ID must now be current and must include a photographic image of the principal’s face, as well as both the principal’s signature and a physical description of the principal. So, passports will not comply.
Has the notary verified it is exactly the same document that was signed remotely? Again, it is unclear how to verify that since notaries typically do not review documents page by page. And there is not protective or curative provision.
How do you know? Notarial certificate must say it is done remotely, i.e. “I signed this notarial certificate on __________ (Date) according to the emergency video notarization requirements contained in G.S. 10B-25.”
When and what is “papering out” of your electronic document?
NC has just enacted a “papering out” provision to allow for e-notarized electronic / digital documents to be generated on paper with a notary’s certificate (G.S. 47-14(a3)) if that procedure is followed and only in limited circumstances. Simply printing out a copy of a digital document will NOT comply. And the applicable circumstances for documents to be recorded are even more narrow, i.e., when the register is not accepting e-recording, whether temporarily or regularly.
NC Remote Electronic Notarization (referred to as NC “RON”), coming July 1, 2023:
What is “REMOTE ON-LINE NOTARIZATION” OR “RON” or “Remote Electronic Notarization” under the NC statute? This is a totally digital “on-line” document, not wet-ink or paper, and will require a specialized RON notary commissioning, in addition to the notary’s commission for paper and for e-notarization. The commissioning requirements for RON notaries will include more education, journaling, and use of approved RON software vendors. And, again, the papering out provision discussed above will be required but limited under the new G.S. 47-14(a3) for use of a paper rather than purely electronic, e-signed and e-notarized document.
What will the Legislature do in the interim? Since the 2023 Legislature will re-convene in January, it is possible that other changes may be considered, given the variations between H776, the Secretary of State’s concerns and those of the stakeholder group that has been actively involved in the legislation. For example, many vendors may balk at the $5,000 fee for their approval.
What will the regulations from the NC Secretary of State look like? As with e-notaries, the Secretary of State will need to promulgate rules for the approval of vendors, their compliance with the NC RON statutory requirements, costs and fees, education, licensing and approval of NC RON notaries, and other matters covered by the statute.
Where in the world is the principal? The NC RON notary must be located in North Carolina. But the principal may be located in some limited additional locations, depending on the principal’s status. Some of these may be extremely difficult for the notary to verify, with or without geolocation software. G.S. 10B-134.1(10) limits location of the principal to the following:
a. Inside the United States.
b. Outside the United States and physically on the military installation or vessel named in the military orders assigning the member to active duty for more than 120 days, provided the remotely located principal is a member, spouse of a member, or dependent of a member of the Armed Forces of the United States.
c. Outside the United States at any of the following locations:
1. United States Embassy.
2. United States Consulate.
3. United States Diplomatic Mission.
What is “geolocation by communications technology” and how will the notary be able to actually verify the location of the principal? Many have questions about the ability of a notary to actually verify that location of the principal, given VPN and other technology issues. If a notary relies on an IP locator and it is inaccurate, does the entire notarization fail and thus the legitimacy of any recordation? How will closing attorneys and title insurers be able to address these potential defects?
What documents can, and which ones cannot, be used for a RON transaction? H776 provides that a power of attorney executed remotely cannot be used for a real estate transaction that is also notarized remotely (other than active Armed Forces personnel, spouses, and dependents, as specified above). In addition, several documents cannot be remotely notarized, including trusts.
What can the remote notary do, absent a NC licensed real estate attorney’s oversight? UPL is still very much or even more applicable to any real estate transaction affecting North Carolina property. New GS. 10B-134.25 reinforces this by providing:
"§ 10B-134.25. Real estate transactions.
(a) Nothing in this Part shall be construed to alter or supersede the law as set forth in Chapter 84 of the General Statutes, G.S. 10B-20(i) through (k), G.S. 75-1.1, or any opinion or ruling by a North Carolina court of competent jurisdiction or the North Carolina State Bar ruling pertaining to the unauthorized practice of law in this State, including the requirements that a licensed North Carolina attorney shall supervise a residential real estate closing under Authorized Practice Advisory Opinion 2002-1 issued by the North Carolina State Bar and perform all services defined as the practice of law for real property located in this State.
(b) A remote electronic notary who is not a licensed North Carolina attorney is prohibited from rendering services or advice that constitutes the practice of law in this State.
What if the notarization fails to comply or compliance cannot be verified? One savings provision may help. G.S. 10B-134.9(e) provides:
(e) Any non-material failure of the remote electronic notary to comply with the requirements of the remote electronic notarization does not invalidate the notarial act or the electronic record that was remotely notarized. An aggrieved person is not prevented from using failures in the remote electronic notarization process, along with other grounds, to challenge the validity or enforceability of the remote electronic notarization based on fraud, forgery, impersonation, duress, incapacity, undue influence, minority, illegality, unconscionability, or another basis not related to the remote electronic notarial act or constructive notice provided by recording of the electronic record.