Indiana Law Error Will Impact Notarizing Real Property Documents Nationwide
In what can only be described as an unintentional drafting error with potential consequences for Notaries in every U.S. jurisdiction, a new Indiana law requires Notaries to perform two notarial acts — an acknowledgment and a proof of execution by subscribing witness — on every document that will be recorded in an Indiana county beginning July 1, 2020.
- Prior to July 1, 2020, the statute read that a conveyance, a mortgage or an instrument of writing to be recorded must be acknowledged by the grantor or “proved” before one of several listed officials, including a Notary Public.
- The new law, however, changed the word or to and, which substantially changed the meaning of the statute.
- While the prior law required a document to have an acknowledgment or a proof of execution, the new law requires both.
The consequences of SEA 340 went undetected until about a month ago. Since then, the Indiana State Bar, Indiana Land Title Association and several title underwriters have issued advisories on the new law and plan to fix the error with an amendment to the statute when the General Assembly convenes next year.
How The Indiana Law Change Affects Notaries And Signing Agents
Until then, any Notary — in or outside Indiana — must perform two notarial acts on any document that will be recorded in an Indiana county.
The first, an acknowledgment, is the typical notarial act performed on a real estate document. Most Notaries are familiar with performing acknowledgments. The second, a proof of execution by subscribing witness, is a less known and archaic notarial act that requires an additional disinterested witness to be present for the notarization.
Normally, proofs are performed when a document signer cannot make it to a Notary to acknowledge their signature on the document. The signer would have a witness watch them sign and then take the document to the Notary for them. The witness, who cannot be a party to the transaction, is identified by the Notary, watches the document signer affix their signature on the document, signs the document as a witness, and takes an oath from the Notary. The Notary then completes a certificate for the proof of execution.
Requirements and Best Practices for Performing Proofs
Proofs are authorized notarial acts in several, but not all, states and in some states the rules for proofs are carefully prescribed. For example, in California, a Notary cannot perform a proof of execution on a real estate document. In Pennsylvania, the witness must be an attorney licensed in Pennsylvania. In Tennessee and Virginia, two witnesses are required. Some states only allow Notaries to identify a witness by personal knowledge or a credible witness.
And herein lies the rub. While Indiana Notaries are authorized to perform a proof for a signer appearing before them in Indiana, sometimes a signer is outside the state when they are finalizing the sale or refinance of their home. Notaries of all other states must consult their state laws to determine if they can perform the proof in addition to the acknowledgment.
If a proof is not an authorized notarial act (or in the case of California, prohibited on real estate documents), the Notary must refuse to perform the proof. If state law provides rules for performing a proof, Notaries must follow those rules.
A Notary who is a Signing Agent assigned to an Indiana consumer loan signing is most likely to encounter this issue. Indiana Signing Agents, who must also be licensed as a title insurance producer, should follow all rules from the title company insuring the transaction. Signing Agents outside Indiana should be aware if they are authorized to perform a proof and carefully follow their state law in doing so.
Before the appointment, the Notary should inquire if the additional witness will be present at the loan signing assignment and ensure that the Notary can identify the witness as required by state law. The Notary should confirm that a notarial certificate for the proof is included on the mortgage or security instrument and any other recordable documents in the loan package. If not, the Notary will need to contact the Notary’s contracting company or the closing agent for the transaction to confirm a proof is required and provide the appropriate certificate wording. If the Notary is commissioned in a state where proofs are not allowed, the Notary should inform the contracting company immediately.
The Notary Bulletin will be providing updates on developments related to SEA 340 when they occur.
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