Electronic Real Estate Recording Task Force

Legal Subject / Fee Subcommittee

Attendees: Julie Bergh, Mike Cunniff, Eileen Roberts, Chuck Parsons, Marty Henschel, John Jones (phone), Luci Botzek, John Richards (phone)

Chuck Parsons, introduced Julie Bergh, and she volunteered to become a member. Chuck Parsons states that she is too great a resource to pass up. Brief bio: Assistant examiner from both Hennepin and Ramsey. Worked for US Aid in Armenia and spent 3 years helping E-sign real estate recording models and write laws regarding e-recording. Knows MN law and has hands on experience.

Agenda: 2 major issues and a few general. 1. Eileen drafted a request for an opinion from the Attorney General (AG) to ask: is process exempt from E-Sign, and 2. After pilots are complete and legislation is in place can a county opt out still, or must all 87 offer it as an alternative. A review of draft took place.

The expectation is that the Legal Subcommittee will come up with complete draft of a letter to the (AG).

Hennepin volunteers to submit this to AG. It will be drafted for Hennepin to review and submit.

John Richards: thought this was more of a preemption analysis. Wouldn’t the question be whether MN exception under 325.3(b)(2) is preempted by section 102A of E-Sign? So does E-sign provide a legal basis for recognizing legal documents, and can county recorders opt out? What does it mean if it is pre-empted? Then there needs to be a change in MN law.

Chuck Parsons: We assume we have to amend our statute.

John Richards: I think we could solve the entire issue by fashioning an amendment the repeals 3(b)(2).

Mike Cunniff: I think the intent was to not permit E-recording in MN until this Task Force had gotten recommendations together to change MN law to make it work in a uniform fashion. So counties didn’t go off on their own or private interests didn’t dictate their own standards. Does E-sign preempt that? There has been a lot written on that but that is why MN acted this way.

John Richards: Even with a decision in place that E-sign doesn’t preempt this, we are going to recognize these documents that are E- recorded.

Chuck Parsons: The counties are looking to us to say explicitly what they can do.

Luci Botzek: We need to submit this in two questions: 1 What is the impact of MN law as it stands right now, and 2 if FannieMae says you have to file electronically, what is the county’s legal position there?

John Richards: Even on existing MN adoption, counties have the right to say no, we are not ready. Counties get to say when they are ready and what the rules are. Private actors could not require them to accept these. E-sign has a few wrinkles but takes the same approach.

Chuck Parsons: If we change the law what allows a county to still say no?

John Richards: Each governmental agency of the state will determine when it will accept documents sent electronically. 18b of UETA, if they decide, they can dictate format. If a signature is used, they can dictate the signature used.

Chuck Parsons: The Task Force initiative is to set those standards. That is the state wide system we will establish. We don’t want counties to establish their own standards, outside of state standard. Assuming we get statewide standards, can one opt out, assuming they don’t have funding?

John Richards: There is an alternative in sections 17 and 18 that would enable a central authority in a state to develop those standards for government agencies. But the other question is, whether each county recorder is required or can opt out. That is a question for a preexisting law according to what their budget looks like.

Chuck Parsons. We were thinking we should ask the AG for an opinion on that. Do either E-sign or UETA mandate that counties accept documents after the Task Force is complete? Do you have a suggestion on the pre-emption?

John Richards: As Lucy said, concentrate on the preemption issue with the AG.

Eileen Roberts: I did what I could (on AG letter) but John you should take a crack at it.

John Richards: My primary comment was to tee up the preemption comment for the AG.

Chuck Parsons: This letter will change many times over before complete. We would like Task Force to give us a blessing of this draft.

John Richards: I will work on it and get a copy to Beth and she can get it to the Task Force meeting.

Chuck Parsons: The next issue: Statutory reviews that everyone worked on. Chuck Hoyum emailed comments and said he found no changes in the laws he looked at.

Mike Cunniff: I have the first 80 or so sections and found a lot relating to banking and agriculture, but nothing I saw that impacts us. I didn’t get to tax issues yet, I need to still look at those. Nothing in 580’s that pertained to us.

John Richards: I had done some work on the various previsions and I too had fun with it, looking at wolf bounty certificates, I was looking at not just what could impede but also anything wedded in a paper paradigm. 83A, looks at an endorsement of a signature on a document. In 103I subd 1, signatures are required on the front and back of a deed. Now, in e-recording you have a signature that encrypts the entire document or you can digitally sign the bottom of the document. This could make things uncertain for e-signature.

Chuck Parsons: We may not find each and every of these instances. Should we have language that just states an overall argument that covers these all of these situations? It would be an overlay approach that applies to e-documents.

John Richards: So much of what I saw was predicated on the use of paper, "black ink" and "red ink" pens, etc. If there is a state requirement that a certain color needs to exist then we can cover this.

Chuck Parsons: Could you send these statements? If we had these in front of us we would do a better job of an overlay statement.

John Richards: A couple other things, I saw reference to "certified copy" and how those must be provide. In this context another authorized party can certify a document, but in the electronic realm you can get at authenticity that can be more efficient. UETA section 12 allows you to satisfy the requirement for an original document. You may want to address this as well. I also read where any documents that were created by a MN agency had to be stored in MN. This could be an issue if the Task Force saw it fit to use a data warehouse company that stores records out of state. There are advantages to using these vendors.

John Jones: A lot of government and privates archive documents in salt mines and other locations. It would be worth looking into this. Section 386.375 transfer and storage of abstracts.

Eileen Roberts: Have you looked at section 386?

John Richards: I had someone pull other sections for me. Since I had it all in a binder I took time and looked through all of this.

Marty H: I was surprised at how many times I saw the language "recorder" and not "registrar of title". Some documents like county documents that record timber growth rates, these are odd, rent restriction agreements should be recorded. Should we keep track of these? The ones that merit review: the tax lean section, 268.05A looks at electronic transmittion. How should this be integrated with our work? Certificate of real estate value, 272.115, mandates the use of multi-carbon.

Mike Cunniff: Why do we have all these copies? I have been told that with the SS#, Department of Revenue needs to track this and it is a private number that no one should have free access to.

Chuck Parsons: The page that those numbers appear on is a larger page, so everyone who handles the document sees that private number anyway.

Marty H: I thought 272.12 and 121 which talk about how real estate taxes must be paid to record a deed, somehow this will need to be incorporated into the county process. There is a provision that if you pay someone else’s taxes you need to file, tax lien 272.48. We will want to record this electronically and get it integrated, I made it through 281 and have not moved beyond that.

Chuck Parsons: There may be items in 282 that we want to make sure we pick up language in our overlay statement we will be working on.

Marty H: 256.263 subd2 talks about land acquired by the state because of old age assistance leans. The county auditor is involved but this may be rare, but it is the sort of thing that is buried and should be considered.

John Jones: Jack Seth has not completed the read and I don’t have Jack’s portion. I will know by tomorrow what the status is and should have it by this weekend.

Eileen Roberts: As John Richards noted, there were others like 383B.603, that seem tied to paper copies of plats being of record. We need to think of a global statute to deal with these. There is a lot of stuff tied to paper and this is as good a place to look for phrases. Look at 386 as a model of what to look for. There are a lot of county officer forms but I just ignored those.

Chuck Parsons: Chuck Hoyum didn’t have any changes

Mike Cunniff. In 507.4 and 507.401 the language of mortgage sats, the language consistently comes up…. how do you deal with the word "acknowledgement" and how do you deal with this term.

John Richards: There is in section 11 of UETA that squarely addresses that. Acknowledgements can be met by an electronic signature. The requirement with a stamp and seal would go away in this environment.

Chuck Parsons: And since we have no changes to that part of UETA we are ok.

Chuck Parsons: In 507.24 subd2 documents must have original signatures. We need to amend that for pilots. We should permanently amend it along with standards of the Task Force. UETA section 325L.03B needs to be amended also for the pilot. In 550-645 I didn’t find anything that needed changing.

John Jones: Original signatures come up all over. Is original signature defined in the statutes, on how you would determine that?

Chuck Parsons: We haven’t done a search for original signature.

John Jones: In the absence of proof in the electronic form, would there be a reason to reject it. If e-signature purports to be original, is that enough?

John Richards: Section 325L.07 of UETA covers this. Section (d), if a law requires a signature, an electronic signature satisfies the law.

Chuck Parsons: We should change language both in 507.24 and 325L to cover all of our bases. We should get paper copies of all of these. I will do that prior to the next meeting. Does anyone have other statutes they are aware of? No one. For the Task Force report on Thursday, we have almost completed our review, we waiting for just a few more. We need an overlay change and a change to UETA at a minimum.

Chuck Parsons; 2 items from the previous agenda: do we need to think about race notice issue when it comes to electronic docs as opposed to paper. Do recorders need help making judgment calls as they receive documents through the day.

Mike Cunniff: One of the thoughts we have had is to look at batch processing at the end of the day. These documents won’t get recorded ahead of mail or desk visits. If we did a pilot, we would use this process. We now get packages of documents for a closing, we may not be able to electronically manage all of them. It is going to create challenges. How do you electronically pull a filing number out of the air and assign them a manual number, it is a hard issue.

Marty H: If I need something recorded I will walk it in.

John Jones: If you know deeds and mortgages go to the back of the Q, that the adoption of this process a disadvantage.

Mike Cunniff: If you E- record you have the advantage to know you will get filed that same day in batch. Mail sometimes doesn’t get filed the day it comes in. So mail can be at a disadvantage.

Chuck Parsons: The risk of a race notice loss is slim.

John Jones: How many people at Hennepin are at the desk?

Mike Cunniff: 2 recording desks and six people can manage them at a max.

 

John Jones: The claims are rare for a race case. But electronic recording should just be another line at the counter.

Mike Cunniff: But you deal with mailed in documents that way. How do I balance or mesh the mail, the desk, the bulk packages, I could never service the next person in line cause I can’t manage what is in the mail vs what is electronically in Q.

John Jones: People make a decision on how they deliver something by how their document is received.

Chuck Parsons: I would guess that e-recordings will get a faster response than if they went through the mail. Should it be faster than people coming in personally? We just have a numbering scenario issue. A batch process is what we had in mind for a pilot.

John Jones: This will give us an opportunity to look at this issue and debate it to get consensus through as a result of what occurs in the pilot.

Chuck Parsons: Is there a statute in any other state that deals with this issue? No one aware.

John Richards: Virginia’s statutes have been in this area, they may have addressed this issue?

Mike Cunniff: What about California or salt lake?

John Jones: Sale Lake, is not huge volumes, they are almost all satisfactions. They get the next number as they come in Q.

Chuck Parsons: Lets keep this issue open and on the table. The other item on the parking lot: tract index. Grantor Grantee (GG) is the official index in MN and seems archaic. Should we make tract the official index? If there is no cost it is a no-brainer. That is how people search? Most counties have tract.

Lucy: Most counties have this but the quality is different between counties.

Mike Cunniff: I think everyone will agree and from a good public policy stand we tackle it.

Marty: We should definitely tackle this.

Mike Cunniff: This is the best time to address this.

Chuck Parsons: We have gone into a budget deficit so if it cost money it would be initiated for 2003

Mike Cunniff: This would minimize fiscal implications. It would put it publicly out on record and counties could start to prepare. It is less of a fiscal issue if they know ahead a time.

Chuck Parsons: Do we do away with GG index? Do people use it to search, will it be missed? Are there states where it is strictly tract indexing?

Eileen Roberts: Most are not tract

Marty: We rely almost solely on tract. But in a meets and bounds description having GG as a backup to do a separate search to confirm findings, it is a nice resource. We would be ok with tract as long as counties do a good job of indexing.

Mike Cunniff: I have used it to find documents that are in abstract and not torrens. We use GG in military discharges, etc. and there may be others. We would hear concerns from Marty’s researchers as a backup search tool. A computer handles this indexing; if you work manually then it would save costs to not record it.

Luci: Chuck should take this to MLTA and Mike Cunniff should take this to the recorders to look at.

Eileen Roberts: Bob Horton mentioned 104 of E-sign and wondered; does that apply to MN. Does anyone know more about this?

John Richards: That question has come up before. The overall intent there is that this does apply to local government agencies.

Eileen Roberts: Yes this covers counties, but does it add anything for counties that 102 does not? Does 104 give us something that 102 does not?

John Richards: It is an ability to set standards for records filed electronically. This is not set out neatly but that is the interpretation that makes most sense. If you adopt UETA, E-sign is out of the picture. In UETA – counties have the right to reject documents.

John Richards: You may want to look at 325L.17 and 18, they anticipate that each county recorder can at their own discretion accept and establish standards. There is an alternative that would provide for a central figure to set standards.

Chuck Parsons: That would be the Task Force’s responsibility. Counties want standards but not a single author to dictate or identify those. We will have MLTA and Marisa to look at it, I will go back to real property and look at it and Mike will have recorders look at it.

Chuck Parsons: We need to hear from Seth and Rich Little to see if there are other issues out there.

Next meeting will be: Jan 22^nd, 9:00, this building (William Mitchell), this room. An email reminder will go out to remind all members.

Meeting Adjourned.

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