For years, clerks of courts, lenders and Realtors® have talked about e-execution and e-recording, heralding the move from paper to purely electronic forms, but for the most part the industry has resisted, with many concerns regarding security, validity and fraud. Tests have been held, a few loans closed with electronic signatures, but for the most part closings are done the same way as always, a closing agent prepares and prints the seller and buyer documents and the bank prepares the much larger paper loan package. In fact, the only nod to modernity is that instead of mailing or overnighting the 50 to 100 page loan package, printed at the lender’s expense; it is now sent electronically to the closing agent so they can print at their expense.
Well another milestone has been reached as Palm Beach County has joined most other Florida clerks in moving toward e-recording. Traditional recording required bringing the original document to the Clerk of Court who would stamp the document with a Clerk’s File Number and an Official Records Book and Page Number, then review the document, enter the pertinent information into the Clerk’s grantor grantee index, scan (or in the old days, photograph for microfilm or microfiche), place online for viewing (except documents deemed impermissible for online viewing such as custody and divorce documents), and then mail back the originals to the party listed on the document.
Under the new system, a registered title company, attorney or closing agent will log in to their online account with a private approved vendor, fill out the grantor grantee index, scan the original document to be recorded, and upload the document to the vendor who will then transmit the document to the Clerk to be recorded. The Clerk’s office will review the incoming documents, and then record same in the Public Records. Unless the Clerk’s office is diligent in reviewing the uploads, I expect far more index errors arising, as untrained processors input party names with misspellings, backwards (first name last) or in the wrong location (buyers as sellers, etc.). Without a proper index, the Clerk’s own database becomes useless as a tool for searching.
The Palm Beach County Clerk’s office is touting this new system as both a money and time saver. They claim documents will be recorded faster, that courier fees paid to deliver documents to the Clerk will be eliminated and that less fraud due to gap issues will be obtained. The Clerk does not mention that they can also cut their budget by eliminating employees from their recording departments, but that is an issue for another day.
While in theory these claims are true, in practice they may not always pan out. First, while it is true that e-recording will eliminate courier fees, the cost is simply replaced with new private vendor recording fees of about $5.00 per document to record. So to record a more complex closing with a deceased seller, the e-recording fee will likely exceed the average courier cost of about $19.00 to $25.00 for one file to simply deliver the same documents to the Clerk. In addition, for larger closing agents, sending ten closings in one day by courier will be far cheaper than e-filing fees. Of course, these new costs will simply be passed onto the buyer and seller.
Gap issues have always been a risk that title companies assume. It is the window between the last available title search and the recording of the instrument that is being insured, when a title problem, defect or fraud can occur without notice. This window is usually five to ten days long depending on the county. While the clerk may update their records to within a few days, title agents do not rely on the Clerk’s online database to search and examine title. Instead, they use their title underwriter’s abstract plant to search and update title. Therefore, the alleged recording speed (by a few hours, at most) will not reduce gap issues.
Finally, we come to the million dollar question of original documents. With e-recording, it will be possible for less than scrupulous closing agents to record copies of executed documents without possession of the original. With time pressures to close, a closing agent waiting on the return of the originals may succumb and file a scanned copy to get the deal done. If the originals are different or never arrive (or are never sent), how valid will these recorded documents be without proper verification. This will likely lead too many cases being filed over disputed e-recorded “originals,” and more lost note/mortgage claims than ever before.
While I am all for technological advances, doing things just because we can is not always the best course, and touting systems without mentioning the risks and downside is always a dubious way to promote a new method of doing a traditional task. I for one hope they are more right than wrong.
Michael Posner, Esq., is a partner in Ward Damon a mid-sized real estate and business oriented law firm serving all of South Florida, with offices in Palm Beach County. They specialize in real estate law and business law, and can assist owners in buying and selling real property. They can be reached at 561.594.1452 or by e-mail at email@example.com