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 mjposner@warddamon.com
