Effect of COVID-19 on Real Estate Transactions and the Title Insurance Industry
Our community of real estate professionals seem to share the understanding that since the start of the COVID-19 pandemic, the world of real estate fencing transactions has changed dramatically and is likely never to be the same again. This statement is undoubtedly true.
However, a review of these changes reveals that most of them were already inevitable and that the pandemic was an accelerator, rather than an initiator, of these changes. We will take a look.
Execution and recognition of documents: Even before COVID-19, many states enacted legislation allowing electronic signatures and / or remote recognition. In 2009, 49 states, including all New England states, passed the Uniform Electronic Transactions Act or similar laws.(1) Prior to COVID-19, 36 states, including two New England states (Rhode Island and Vermont) passed legislation allowing electronic notarization or remote notarization.(2) Forty-five states, including five of New England’s six states (Connecticut being the exception), have eliminated the requirement for witnesses on recognized documents.(3) Thus, modern enforcement, attestation, and recognition requirements were largely in place before the pandemic.
Shortly after the onset of the pandemic, the governors or other officials of 37 states (including the six New England states) issued executive orders authorizing or extending remote notarization and remote reconnaissance, subject of various conditions.(4)
Thus, the virus has accelerated, not created, the passage of laws allowing the electronic enforcement and / or recognition of instruments used to transfer real estate interests. Without the advent of the virus, the implementation of such measures would undoubtedly have been slower, but nonetheless inevitable.
Title search and recording: With the social isolation precautions imposed by COVID-19, registrars nationwide have found themselves in a dilemma. Would they stay open? What hours would they maintain? How could they allow searches in land registers? How could they properly and legally accept, order and register title deeds?
Some registration facilities were at least partially prepared to deal with these issues. Before the pandemic arrived, they set up electronic registration. In addition, many have made their land registers, to varying degrees, searchable online. They have adopted mechanisms to accept registrations by mail or courier. Those who took these steps still had to adapt to the unpredictable effects of COVID-19, but they were ahead of the game. Those who had not made similar progress then had to react under conditions of crisis, largely with measures already in place in other places. Again, COVID-19 was, in its own way, a catalyst, not a creator.
Closures: On the wall of the conference room in our office hangs a large framed print titled âThe Fenceâ. It represents a heavy table in a similar but larger conference room, surrounded by about twenty women and men, presumably lawyers and staff, each actively attending to their “part” of a large transaction. Having attended many such gatherings, I remember being comforted only by the fact that each of the other players’ stress levels were roughly equal to mine.
This embodiment of commercial transactions is now the exception rather than the rule. It largely disappeared with the advent of electronic mail technology, allowing not only immediate communication, but near instantaneous transmission of documents between parties. Video conferencing has provided another alternative to traditional fencing.
In-person business closures largely disappeared long before COVID-19, as advancements in technology and work culture allowed it. However, it took a pandemic to push residential transactions in the same direction. Reasons for the residential lag include the inexperience of some customers, who cling to the traditional notion of closure, and the fact that not all customers have the required technology. Nonetheless, these are factors that are fading over time, and the pandemic has now started to erase them. Of course, in-person residential closings are still largely the norm, but the continued presence of the virus and the possibility of a second wave, combined with increasing technological ease and government action, may over time diminish the burden. use of residential conference room as well. A process that began before COVID-19 has accelerated with the arrival of the pandemic.
Implications for the title insurance industry: The title insurance industry, like any other risk management company, is at its best when it shows foresight and preparation rather than reaction. We have known for a long time that changes in the transactional process were underway. Until recently, we had good reason to believe that there was ample time to anticipate and adapt to these changes as they were gradually implemented. Now, COVID-19 has brought many once-safely dormant issues to the boil. If it has taught us anything, it is that we no longer have the luxury of passive contemplation. We must anticipate and prepare now for issues such as:
1. The likelihood that remote notarization will become a permanent and ever-increasing part of real estate transactions of all kinds, including multi-state transactions;
2. The multiplication of rules, varying according to the jurisdictions, allowing electronic signature on deeds conferring rights on immovable property and allowing the registration of these deeds;
3. Title assurance challenges when instruments of competing priority are recorded on land registers using multiple methods; and
4. Changes to the closure process that will challenge our traditional notions of informed consent and consumer protection, while forcing us to be increasingly creative in defending the role of lawyers in the process.
We will be much better off dealing with these issues now rather than dealing with the consequences of delay.
Edward Rosenblatt is vice president and legal counsel for the Fidelity National Title Insurance Company subsidiary, East Hartford, Connecticut.