Certain business documents must be notarized, including real property deeds, mortgages, affidavits, and powers of attorney. To facilitate notary services for small businesses, e-notarization is gaining traction. While it reduces the burden of locating a notary, the new technology is not yet universally accepted and could pose legal risks.

Notary Basics for Businesses

A notary is a person licensed to approve other's signatures. In essence, the notary attests that he or she witnessed the signature and confirmed the signer’s identity. Should someone contest the validity of a signature in court, a notarized signature confirms for the courts that the person whose signature appears on the document was truly the one who signed it. For instance, a contract party could not allege forgery if an agreement contained a properly notarized signature. Many banks and post offices provide notary services. Many large corporations also have a notary on staff. However, for start-ups and small businesses, it can be a burden to track down a licensed notary every time an agreement requires it.

Technology Provides Business Solution

Digital signatures are now readily accepted by contract parties and most courts. The next innovation could be e-notarization, according to a recent white paper by the National Notary Association.

As discussed in What Businesses Need to Know About eNotarization: Technology, Trends & Webcams, there are two forms of e-notarization that are gaining traction. The more common in-person electronic notarization is similar to the traditional notary process, except that the signer and notary sign the document electronically via a computer or mobile device. The more revolutionary remote notarization allows the notary and the signer to be in different locations. The notary verifies the signer’s identity using knowledge-based authentications and witnesses the signature via a recorded webcam teleconference.

The Uniform Electronic Transactions Act

With the exception of Illinois, New York and Washington, states have enacted the Uniform Electronic Transactions Act (UETA), which makes electronic transactions, signatures, and notarizations legal and binding. However, webcam e-notarization is only authorized in two states — Virginia and Montana. Earlier this year, Fannie Mae, Freddie Mac and Quicken Loans all expressed support for both e-notarization and webcam notarization systems.

While the financial services industry has been supportive of e-notarization, it will take time for all lenders, title closing agents, and recording officers throughout the country to accept and adopt the e-notarization concept. Furthermore, some states have enacted specific statutes and rules to regulate e-notarization, and such laws and regulations are not uniform. Moreover, because webcam e-notarization has achieved acceptance in only a handful of states, use of webcam e-notarization may lead to legal challenges.

Nevertheless, e-notarization presents certain obvious benefits to the business community. E-notarization is less costly, more convenient, and decreases the time needed to complete notarization tasks. It also has the potential to be more secure than paper-based notarizations. Use of e-notarization is likely to become more mainstream in the near future.

Are you a business owner considering implementing e-notarization? Do you have any questions regarding the matter? If so, please contact me, Robert Marsico, at 201-806-3364.