Note the New Notary Requirements

Effective June 1, 2009, the Illinois Notary Act (the Act) has been revised to impose additional identification and record-keeping requirements to which notaries, and their employers, must adhere. In particular, a "Notarial Record form" must be executed when title to residential property located within Cook County, Illinois, is transferred by deed (with certain exceptions discussed below), and must retain such forms for seven years through proper record-keeping procedures.

The notarial record-keeping is meant to help minimize mortgage fraud that has gone rampant in Illinois, and Chicago in particular. Cook County is the "test pilot" for the initiative, and if successful, the rules will be expanded to other counties. Nonetheless, the Act's revisions have immediate and wide-reaching scope for all notaries and their employers.

SUBJECT CONVEYANCES

The new requirements affect conveyances of "Residential Real Estate," located in Cook County, Illinois, with certain "Exceptions." Applicability, therefore, depends on the definition of these terms:

"Residential Real Estate" means a building(s) that contains one-to-four dwelling units, or an individual residential condominium unit. In other words, the new rules apply to transfers of single-family homes, condos/townhomes, and apartment buildings with up to four units, but only if such properties are located within Cook County.

"Exceptions" were created for certain conveyances that do not pose as great a risk for mortgage fraud. For example, deeds prepared merely to transfer title from the grantors as joint tenants, to the same grantors as tenants by the entirety (tenancy available only to husbands and wives), are exempt from the new requirements. Thus, no Notarial Record form must be created upon notarizing such a deed. Other "Exceptions" include, without limitation: deeds prepared pursuant to a court-ordered conveyance (e.g., pursuant to a divorce decree or marriage settlement agreement);
judicial sales and deeds executed in lieu of foreclosure; and
deeds transferring title from the grantor to a trust of which the grantor is a beneficiary.

NOTARIAL RECORD FORM and RECORD-KEEPING

The Form: The Notarial Record form itself consists of a single-page document (a copy of which is available here) that requires information about: (1) the property; (2) the notary; and (3) the grantor(s). Required information for each includes:

Property: the type of deed, permanent identification number (PIN), address, date
of notarization, and fee for notarization (if any).

Notary: name, phone number, commission expiration date, address, name of
employer (if any), and signature.

Grantor: name, address, signature, means of identification presented to the notary
to confirm identity, and right thumbprint. Yes—a thumbprint for each grantor must
be obtained by the notary.

Record-keeping: In general, for all applicable conveyances, a Notarial Record form must not only be completed, but also must be retained for seven years thereafter. The purpose of retention is that the documents should be available in the event they are subpoenaed as part of a lawsuit. Responsibility for such document-retention depends on the notary's employment.

Notary's EMPLOYER is responsible if: the employer is a title insurance
company/agent, financial institution, or attorney. The notary must deliver the
completed Notarial Record form to his/her employer within 14 days, and the
employer must then keep the forms with his/her business records for seven years.

NOTARY is responsible if: he/she is employed by anyone else, or self-employed.
Then, the notary must deliver original Notarial Record forms within 14 days to the
Recorder of Deeds of Cook County, Illinois, and pay a fee of $5. The recorder's
office is then responsible for retaining the forms for the requisite seven years. Note,
a notary is allowed to charge up to $25 per notarial act subject to the new
requirements, which charge may be used to offset the filing fee.

FAILURE TO COMPLY

Any person who fails to comply with the new requirements will be guilty of a Class A misdemeanor for a first offense, and a Class 3 felony for subsequent offenses committed within five years of a previous conviction.

HEIGHTENED DUTY OF EMPLOYERS

It is extremely important to note that notaries' employers are responsible for training and supervising their notaries as to proper procedure. In a recent Illinois Appellate Court case (Vancura v. Katris), the court ruled that an employer had direct liability for damages resulting from its notary notarizing a forged signature on a mortgage assessment.

The court specifically stated that an inadequately trained or supervised notary poses the type of danger or risk of harm to third parties from which an employer has a duty to protect.

EFFECT ON RECORDATION OF DEEDS

The Notarial Record form is separate and apart from the actual deed of conveyance. In fact, when a deed is presented for recordation at the Recorder's office, the Notarial Record form does not need to be presented with the deed. The Recorder's office will not examine, review, or record the Notarial Record form. Execution requirements for deeds themselves are unaffected by the new provisions in the Act.

What should you do if you have a deed fully executed prior to June 1, 2009, but it has not yet been recorded? Record the deed—there is no need to re-execute. But, where possible, complete the Notarial Record form with regard to the conveyances. It is not an issue that the form will be completed at a different date than the actual notarial act, and as always, it is better to be safe than sorry.

BOTTOM LINE

The new requirements under the Act are generally basic—essentially, completion of a single-page form. However, they nonetheless call for record-keeping systems to be implemented and maintained for a significant period of time. Further, Illinois' governing bodies are showing that they are serious about curtailing mortgage fraud, starting with simple acts of notarization. Not only should notaries be conscious of their duties to obtain adequate identification, but employers must be aware of their responsibility to ensure all obligations are satisfied.