Client Alert – Real Estate in the Wake of COVID-19 Vol. 2 – Executing and Recording Real Estate Documents

Many industries have been upended by the Coronavirus epidemic and the local, state and national government response. Because of the fundamental role Real Estate plays in our economy and the broad umbrella of activity that falls under the category of “Real Estate Development”, developers, property owners and tenants have been particularly impacted. Landlords, tenants, contractors, lenders, buyers and sellers of real estate, and all others who participate in the acquisition, development, leasing or sale of real property are all being impacted in different ways. This series of client alerts takes an in-depth look at specific questions, sectors or issues related to Real Estate Development against the backdrop of COVID-19 and the nation’s response to it. In this alert, we focus on the steps many local and state governments have taken to modify execution formalities and typical closing requirements in order to limit the spread of the Coronavirus.

Recording

With the closure of numerous registries of deeds (sometimes called offices of land evidence records) in multiple states, the recording of closing documents has become much more challenging. More and more states and their registries are allowing for electronic recording, recording by mail, or in some cases, recording by appointment at the appropriate location. The growing list of such states presently includes Connecticut, Florida, Maine, Massachusetts, New Hampshire, Mississippi, New Jersey and New York.

However, recording documents and performing title searches remains a challenge in many places due to widespread closures. In New York, for example, most recording offices allow for necessary closing documents to be recorded electronically, but unique filing requirements related to construction loans and mechanics liens typically necessitate in-person searches and filings. There remains widespread uncertainty over what measures title companies, construction lenders and the government will adopt in order to address these issues.

As always, DarrowEverett is closely monitoring the ever-changing situation in New York and elsewhere to make sure we can advise our clients appropriately, and arrange for non-traditional recordings where permitted.

Execution of Documents, Notarization

Many real estate documents, including loan documents, deeds and other documents that need to be recorded must be notarized. Some states (such as New York) have previously allowed electronic notarization but with Covid-19, more states are considering making changes. There is currently legislation that is pending in Massachusetts that would allow electronic notarization retroactively however the pending bill explicitly excludes documents to be recorded in the Registry of Deeds from the retroactive provision.

We have also noted a trend where banks are easing their signature requirements. Several banks have notified our office and its customers that certain loan documents can be executed electronically with electronic notarization. Certain documents are exempt from this, such as Promissory Notes and documents that need to be recorded given that many cities, towns, counties and states do not yet recognize e-recordings.

Due Diligence Impact

With the closure of municipal agencies and offices, several of the documents traditionally obtained for diligence and closing purposes are now unattainable. However, some states are beginning to make accommodations in light of COVID-19, and DarrowEverett is closely monitoring these developments. For example, both Massachusetts and Rhode Island are providing for alternatives to smoke detector/carbon monoxide detector certificates given that towns and cities have stopped conducting such inspections.

Even where the applicable state has not yet provided a state wide alternative, DarrowEverett is working with municipal authorities on a case-by-case basis to address the handling of matters such as final utility readings, obtaining municipal lien certificates (which show the status of all real estate taxes to date), and certificates of occupancy, all of which have been affected by the closing of municipal offices.

New, Required Addendum to Real Estate Documents in Rhode Island

In Rhode Island, the Governor has now mandated that all leases, rental agreements, and deeds must attach an addendum informing “hotel guests, short-term occupants, residential renters, and homebuyers” that persons entering Rhode Island from another state, territory or location outside the United States must self-quarantine for fourteen (14) days. Although the target audience for the addendum is clearly hotel guests and residential renters/buyers, technically speaking the State is requiring that such addendum be applied to all leases, rental agreements, and deeds, whether they be for commercial or residential purposes. It should also be noted that the requirements appear to apply only to new real estate documents; that is to say, that there is no requirement to amend existing real estate documents. DarrowEverett has the applicable forms mandated by the State and can work with clients to make sure that they comply with these new requirements.