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.

Items reported here and in the ABA publications are for general information purposes only and should not be relied upon in the course of representation or in the forming of decisions in legal matters. The same is true of all commentary provided by contributors to the DIRT list. Accuracy of data and opinions expressed are the sole responsibility of the DIRT editor and are in no sense the publication of the ABA.

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