Daily Development for Monday, April 12, 2004
by: Patrick A. Randolph, Jr.
Elmer F. Pierson Professor of Law
UMKC School of Law
Of Counsel: Blackwell Sanders Peper Martin Kansas City, Missouri dirt@umkc.edu
RECORDING; ELECTRONIC RECORDING; UNIFORM ACT: NCCUSL Committee completes work on
draft of Uniform Real Property Electronic Recording Act.
(No current cite available)
DIRT has had access to information about the latest draft resulting from the
drafting committee for this legislation. It is anticipated that, after a review
by the NCCUSL style committee (which certainly will change the text, but likely
not the substance), the proposed statute will advance to the floor of the
Conference this August. It is possible that there will be some amendments from
the Conference floor or from a negotiation session during the conference, but
more likely the substance of the Act will not hereafter change, and we can
project what the likely product will be.
The current draft is dramatically shorter than any earlier version, particularly
the first version, which had been an attempt to address comprehensively the
myriad issues that an electronic recording regime will create - such as priority
between instantly filed and indexed electronic documents and paper filings that
do not appear in the index until days or weeks after delivery to the recorder’s
office. Unfortunately, the climate surrounding the very notion of a NCCUSL
proposal in this area was so supercharged that the committee had enough on its
plate dealing only with the most fundamental questions, and most of Reporter Art
Gaudio’s aspirational language was left on the cutting room floor.
The current draft does only the minimum. It authorizes, but does not require,
state and local entities to receive electronic documents and to provide
electronic access to them. Currently, of course, many local recorders receive
paper documents and then scan them, converting them to electronic information,
and keep only the electronic information in their files. But, with the exception
of a few places, notably Delaware and Orange County, California, most recorders
have not yet either collected documents electronically nor provided electronic
access. The Act does not provide any recorder to more to electronic filings or
access, but it authorizes them to do so and sets up a very sketchy means of
assuring quality control when this comes about.
In a DIRT posting a number of years ago, the Editor proposed that it was
possible to read the federally preemptive Esign legislation to mandate that
local recorders accept electronic records. The editor is thrilled that no court
has followed through on that reading, although he still believes that it is a
correct construction of the actual language of that Act. For every recorder to
be required to undertake immediately to move to electronic filing would be an
unmitigated disaster. Most local recorders are far from ready for all this.
The statute divides the recording function into two parts - the “storage
function” - receiving, indexing storing, archiving and transmitting electronic
documents; and the “access function” - providing electronic capacity to access
search and retrieve documents on file with the recorder. Recorders may provide
only on or both functions, but are not required to do either. If they do
undertake either or both functions, however, the local recorders must abide by a
set of statewide guidelines developed by a statewide commission mandated by the
Act. Even if the recorder elects to “go electronic,” the Act requires that the
recorder continue to accept paper filings as well.
The statewide Commission, which under the Act must consist of a majority of
recorders, has the responsibility to set uniform standards for local recorders
to follow in implementing either the storage function or the access function.
The Commission is charged with attempting to keep the standards and practices of
recording offices in each state in harmony with hose of other states that enact
the Act, and to maintain compatibility with the technology used in other states.
The commission is charged officially with considering the latest standards
promulgated by the Property Records Industry Association (PRIA) - a private
trade group purporting the represent all recorders nationwide. PRIA has very
much been at the table throughout the negotiations and, although it is
developing national standards, simultaneously had opposed attempts to establish
these standards as binding on local recorders. PRIA’s representatives at the
drafting committee made a dramatic eleventh hour compromise
proposal that led to the acceptance of statewide uniformity - the major goal of
the JEB and other industry groups.
In exchange for agreeing to uniformity, the recorders got not only language
directing the commission specifically to consider its’ own guidelines but also
got language mandating consideration of the needs of recording jurisdictions of
“varying size, population and resources.”
It had been thought that the Recorders would use this Act as a vehicle to
authorize funding of the new electronic recording activities through fees and
charges. All prior drafts of the Act had mentioned fees, and there had been
great wrangling about the issue. But all that language disappeared from the
present version. Unfortunately, this prevents the Act from being “revenue
neutral.” As it does not identify new sources of revenue to support the
activities of the Commission, the Commission may be something of a toothless
tiger. But likely in each jurisdiction there will be a simultaneous push to
authorize new recording charges to fund local electronic recording and
legislatures that are sensible about things will require a levy on the charges
made for electronic recordings sufficient to fund the activities of the
Commission in setting standards.
Comment 1: The efforts of the National Conference on Uniform State Laws to
develop an Electronic Real Property Transactions Recording Act was spurred by
the Joint Editorial Board on Uniform Real Property Acts, a small group of
lawyers and scholars appointed and funded by a variety of professional
organizations, including the ABA Section on Real Property, Probate & Trust Law
the American College of Real Estate Lawyers, the Community Associations
Institute (liason), the American College of Mortgage Attorneys (liason) and, of
course NCCUSL itself. The Board, called the JEB, among other activities, reviews
current developments affecting real estate and proposes useful subjects for
uniform legislation. In addition to proposing an Electronic Recording Act, the
JEB also has proposed a number of other uniform law projects that are not in the
works, including a Non-Judicial Foreclosure Act, an Environmental Covenants Act
(both now approved and circulating), an Access to Rents Act, and a Mortgage
Satisfaction Act (both in draft form still).
Comment 2: The editor unwittingly has been dragged before into apparent
confrontation with PRIA on the question of local control of electronic
recording. He always believed and said that the problem seemed to be one of
constituency. Although the PRIA leadership clearly recognized the need to
develop a system that included statewide, nationwide, and even international
interoperability, the local recorders in small towns seemed opposed to loss of
their special controls over the recording process. The Editor congratulates PRIA
leadership for achieving the political compromise that led to the drafting of
the present bill, and wishes that billl godspeed before NCCUSL and the state
legislatures nationwide.
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