COVID-19 has caused significant impacts on real estate transactions in New Hampshire resulting from Registry of Deeds closures, financing delays and challenges with notarizing documents. Due to the focus on safe practices of social distancing and avoiding crowd-gathering areas, many Registry of Deeds in New Hampshire have closed public access and allow only electronic recording. Some have apparently closed both public and electronic recording. Notarizing real estate conveyance documents also poses problems because notarial acknowledgements in New Hampshire require the person signing the document be in the presence of the notary. How do these challenges and limitations affect the time for performance, more commonly called, “the closing”?
Conveying title in New Hampshire is effective upon the proper execution and delivery of the deed to the grantee (buyer). While it does not have to be recorded at the Registry of Deeds, failure to do so places the grantee at risk that the property could be conveyed to a third party because mere delivery of the deed does not put the public on notice of the conveyance. In that case, the third party may have a paramount claim to title so long as the third party was unaware of the prior unrecorded conveyance.
To address a delay in the recording of the deed, title companies developed what is known as a “gap closing”. In a gap closing, the transaction closes, the deed is delivered and the buyer’s and lender’s (if a loan is involved) funds are released to be disbursed as agreed by the parties. This occurs despite a delay in recording the deed because a title insurance company has committed to issue title insurance to protect against intervening liens or defects that may arise between “delivery” and “recording”. The title company will assume this risk upon the seller executing an agreement agreeing to indemnify the title company for any “intervening liens or encumbrances”. A seller unwilling to perform under a “gap closing” will incur delay in receipt of funds until the deed is recorded. Sellers not willing to wait for the sale proceeds will agree to a “gap closing”.
Since most New Hampshire “closings” are completed the same day as the deed is delivered, “gap closings” are not as common as in other states. And because most purchase and sale agreements require “acceptance and recording” of the deed, the parties agree that the funds to close remain in escrow until title is confirmed to be free and clear of all intervening liens and encumbrances of record since the date title was searched. This common practice in New Hampshire typically avoids “gap closings”.
With the impact of COVID-19 on the Registries of Deed, delay in recording is inevitable. We should anticipate “gap closings” to become the temporary new normal.
With regard to notarial acts, there is proposed emergency legislation at the federal level that would allow for the use of remote online notary (“RON”). A bill has been drafted by the American Land Title Association (“ALTA”) and other industry partners called The Securing and Enabling Commerce Using Remote and Electronic Notarization Act of 2020 (SECURE Notarization Act), which would permit nationwide use of remote online notary with minimum standards and provide certainty for the interstate recognition of RON. New Hampshire has not passed legislation allowing RON and the federal legislation mentioned above is not yet passed. Until legislation is passed, notarizing documents should continue to operate as usual and RON or electronic signatures should not be allowed on transaction documents.
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