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,(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.