CLIENT ALERT
By: JP Harris
March, 25 2020 (updated March 26,2020)
As many companies attempt to do business with a largely remote workforce, many transactions are coming together with electronic signatures. Fortunately, laws already in place facilitate the electronic signing process. One aspect of signing documents that has not “gone digital,” though, is the formality of notarizing signatures. The applicable laws require the document to be signed in the presence of the notary, which is problematic in this time of social distancing. Emergency Order #11, signed by Governor Sununu on March 23, 2020, addresses the notarial requirements during the existing state of emergency. EO #11 creates some additional procedural steps that need to be followed, however.
There are two main bodies of law that govern electronic signature. The first is a federal law that preempts many states’ laws. The second is a uniform law that has been adopted in most states. The good news is that signing documents electronically is generally acceptable.
The applicable federal law is called the Electronic Signatures in Global and National Commerce (ESIGN) Act. In general terms, if the parties agree, an electronic signature will be deemed the same as a “wet ink” signature. To benefit from ESIGN, the parties must use a system that captures the transaction and keeps a record of how it was digitally signed so there is proof that all parties in fact manifested their assent to the agreement’s terms. There are several commercially available products that perform these functions and thereby allow companies, even with a remote workforce, to keep doing business.
The second body of law is called the Uniform Electronic Transactions Act (UETA). Almost every state has adopted this uniform law. One purpose of this uniform law is to standardize the states’ approaches to electronic transactions. For those states that have adopted the uniform law, electronic signatures can be as effective as wet ink signatures. As with ESIGN, there are exceptions and nuances to the UETA, so companies should take care to ensure the statutes are followed closely.
One aspect of commerce that has not moved into the 21st century is the notarization of documents. In 2006, New Hampshire the Uniform Law on Notarial Acts which, relevant for the current environment, requires that the document be signed in the presence of the notary. The statute repeatedly uses the phrase “person appearing before the” notary. The literal application of this phrase requires that the signer be present with the notary when the document is signed.
At the same time the N.H. Legislature adopted the Uniform Law on Notarial Acts, it also passed legislation to define and indeed criminalize failing to follow the notarial requirements. RSA 455:16, I (d) imposes a civil penalty of $1,000 if the notary or justice of the peace “negligently or recklessly makes a notarial act purporting to have witnessed the maker’s signing of the document or purporting to have received the oath or affirmation of the person, when the notary did not actually witness the maker’s signing of the document or did not actually receive the oath or affirmation of the person.” (emphasis added). Under RSA 455:15, II, it is a class A misdemeanor to knowingly notarize a document without actually witnessing the signature. This again reinforces the requirement that the notary and signer be together when the document is signed.
It goes without saying that a notary or justice of the peace cannot acknowledge or affirm his/her own signature, so there must be at least two people involved. Therefore, if a business is trying to keep all of its employees apart in the interest of social distancing, the signer and the notary or justice of the peace will need to get face-to-face at least at the time of signing. The risks of non-compliance with existing laws include signing a document that is later deemed unenforceable because one party failed to properly obtain a notarial certificate and personal liability for the notary or justice of the peace who completed the notarial certificate improperly.
EO #11 allows for a type of electronic notarization, a process that does not require the signer and the notary or justice of the peace to be present in the same room. Under EO #11, the notarial act may be performed, without being in the same room, if the notary or justice of the peace can communicate simultaneously by sight and sound through electronic means at the time of notarization. This most likely translates into the use of video conference technology whereby the notary/justice of the peace and the signer can see and hear each other. The notarial officer can observe the signing via the video conference system.
If the person signing the document is outside the State of New Hampshire, the remote notarization process can be used only for documents that are intended for filing with or relate to a matter before a court, agency or official in New Hampshire. A notary or justice of the peace can remotely notarize real estate documents signed by a person outside of New Hampshire so long as the property at issue is located in New Hampshire or the transaction has a substantial connection to New Hampshire.
There are additional procedural requirements, though, for an effective remote notarization. The notary/justice of the peace must create and maintain a recording of the signing, which essentially means keeping a digital recording of the video conference at which the document was signed. The signer must, after signing the document, send it to the notary who will sign and affix his/her seal to it. The effective date of the signature, however, is the date on which it was signed during the video conference. Note that EO #11 applies only to documents signed after EO #11 was adopted, March 23, 2020.
With respect to real estate transactions, it is vital that you check with the title company to see if it will insure titles conveyed in accordance with EO #11. We are aware of at least one major title company that WILL NOT insure titles notarized following the EO #11 procedure. Rather, that title company has its own standards for remote notarization and requires the use of an online notarization platform as opposed to the video conference process contemplated by EO #11. If you will be involved in real estate transactions during the state of emergency, please be sure to confirm with the title company the remote notarization process that is required.
If a document requires notarization during the state of emergency created by COVID-19, companies can work around the former requirement that the document be signed in the presence of a notary, but they must comply with additional steps to ensure compliance.