What happened July 1, 2020, when the Indiana Senate tweaked Indiana Code § 32-21-2-3?
Previously, that provision of Indiana law said any conveyance, mortgage or other document to be recorded must simply have the signer acknowledge the document with a notary. Or the document could be proved with a notary and an additional witness. The key term is or — you needed either one or the other. Now, that section of the code has the word and instead of or.
Little words, big problems.
It was “an unintentional drafting error,” wrote Bill Anderson, Government Affairs VP for the National Notary Association, “with potential consequences for notaries in every U.S. jurisdiction.”
So, two different notarizations — an acknowledgement and a proof with a witness — must accompany any paper or electronic instrument submitted for recording. You can see samples of both notarial formats here.
As Indiana senators will henceforth never forget, the tiniest word change in a law’s language matters. The statute is slated to be amended and corrected when Indiana’s General Assembly reconvenes in 2021.
What Do These Two Notarizations Involve?
Indiana notaries must now perform two notarizations on documents to be submitted to any Indiana county recorder:
- An acknowledgment with the signer. This is always done on real estate documents before recording. It’s the assurance that the signer was of sound mind, that the instrument was freely and voluntarily executed, and that the signature is authentic.
- A proof. This is the extra step the change in the law is requiring. It means having a witness at the notarization, 18 or older, who is not anyone involved in the transaction, or a relative, agent, or lender to any of those people. The notary must identify the witness by personal knowledge, a credible witness, or acceptable identification. This witness may be called the “subscribing witness”; subscribing means signing the document. The proof produces a notarial certificate affirming that the witness, under oath, affirmed the signer to be the person named on the document, was present and watched the instrument being signed, and also signed, as witness.
Proofs of execution are outdated in Indiana. Before the digital era, they were useful for a person who needed to sign a document for a transaction, but couldn’t get to a notary. In those years, a disinterested witness would observe the signing and take the document to the notary’s office. There, a certificate would be attached, as proof of execution, to the loan or mortgage and any other documents to be recorded.
Who’s Directly Affected?
And it’s not just Indiana notaries. All notaries need to know about the issue, because sometimes a signer is outside the state when finalizing an Indiana home sale or a refinanced mortgage loan.
So, this tiny word change will be a thorn in the side of anyone working with instruments to be notarized for recording in any Indiana county. Here are a few salient examples:
Construction firms. Because Indiana lien instruments now must be notarized in two different ways, any Indiana construction company that wants to record a mechanic’s lien must handle its lien and notice procedures according to the new provision.
Title insurers. Indiana’s loan signing agents, licensed to issue title insurance, will be adhering to their insurance companies’ guidance on meeting current requirements for two notarizations.
Underwriters. If a deed or mortgage instrument recorded after July 1, 2020 without the witness and proof, an underwriter might not be able to insure it. Any instrument in the chain of title may have problems standing up to the next underwriter’s Mutual Indemnity Agreement (MIA), which allow clean titles to be issued for sales.
Consumer loan providers. Documents for consumer loans will be similarly impacted.
Out-of-state loan signing agents. Rules governing proofs vary by state. Depending on the state, it’s possible that:
- An attorney must be the witness.
- Two witnesses could be necessary.
- Notaries might need have to apply credible witness criteria.
Before asking whether any of these things are required, though, out-of-state notaries acting as signing agents for Indiana documents must find out if they are allowed to perform a proof at all.
RON notarial officers. Remote online notarization (RON) eClosings can still be done. The witness must give their physical location to the RON notarial officer, observe the execution of the recordable instrument electronically, and also sign the document electronically. The RON notarial officer will then attach the notarial certificate to the witnessed instrument. Refer to Indiana’s electronic notarial certificate provisions here.
Can Documents Be Invalidated if They Don’t Comply?
At the time of this writing, it’s unclear whether instruments signed and notarized without proofs from July 1, 2020 on will be acceptable to Indiana recorders. And if a deed is acknowledged before a notary and recorded without the proof, can it be held null and void for failing to comply with the current version of Indiana Code § 32-21-2-3? We don’t know. This is an untested question of law.
It would be bizarre if county recorders stopped accepting liens, deeds and mortgages on the grounds that a document has no notarized signature from a witness. Still, it’s possible to imagine bankruptcy trustees taking a shot at nullifying debts on this basis.
We’ll be watching the Notary Bulletin for further developments.
Key source of information: Indiana Land Title Association
Photo credit: Alex E. Proimos, via Flickr, licensed under CC by 2.0.