North Carolina needs its own permanent Remote Online Notarization (“RON”) legislation. By implementing carefully drafted RON legislation, similar to what was contained in the original House Bill 776 (H776) with suggested critical modifications by a stakeholder group (more below)[2], North Carolina will not only meet current demands in an increasingly technology-based world but also allow North Carolina attorneys in multiple practice areas to maintain control over their transactions without having to resort to or be at the mercy of outside notary service providers.

For over three years, a group of over forty stakeholders from various industries have worked to draft proposed North Carolina-focused RON legislation. The group includes attorneys, lenders, REALTORS®, North Carolina-based international businesses, medical and elder care providers, information technology professionals, and other professionals that have discussed the best practices of the thirty-nine other states who have already passed RON legislation. The provisions of H776, with suggested modifications represent most, but not all, of the language agreed upon by such stakeholders. These proposed robust North Carolina RON provisions should include:

Identification verification requirements through multiple methods, such as multifactor authentication, questions gleaned from public sources and flexible enough to adapt to more secure methods as available such as biometrics.
Credential analysis – Is that old driver’s license or passport real and current?
Video interaction, journal and recording of the notarial act (only) for later verification.
Ability to provide services to your clients whenever needed and wherever they are without any transboundary limitations.
UPL provisions regarding compliance with North Carolina practice of law statutes (in fact, the stakeholder draft would even include in the legislation the current North Carolina State Bar APAO 2002-1 regarding residential closings).

This is not new technology. These e-notary platforms have been very much in use for years now and tested extensively during the recent COVID pandemic. And they have been approved after much consideration by national entities including major GSE’s (such as Fannie, Freddie, VA), MERS, MISMO, ALTA; major lenders (such as Bank of America, Wells Fargo); and thirty-nine 39 other states.

What is RON?

Remote online notarization involves the notarization of documents by licensed electronic notaries via a secure video platform when the principal and notary are in different locations.[3]

Why RON is Needed Now

North Carolina is one of only eleven (11) states currently without permanent RON legislation. Consumers and industries are shifting from paper-based transactions to technology-based communications and documents that are more consumer friendly. By not having its own RON legislation, North Carolina requires that all notarizations in North Carolina take place in person, which often serves as an impediment to completion of a transaction, even more so as consumers are frequently located in locations different than the situs of the transaction. However, notarizations by RON notaries in other states are not so limited.

Make no mistake: the need for a North Carolina RON statute is not just to keep pace with other states, though that is important to maintain a competitive advantage when dealing with national companies. Without our own legislation, we risk losing control over our transactions by having to rely on out of state or national notary groups for RON notarizations. This reliance can create future legal issues in all practice areas since the attorney would be relying upon an out of state notary to comply with their state’s laws. Without knowing such laws, a North Carolina attorney would be unable to confirm the RON notarization was legally performed, which can lead to title problems in recorded documents, invalid estate planning documents, and voidable corporate transactions.

Were permanent RON legislation enacted, North Carolina attorneys will be able to supervise the discussion, review, and execution of documents in a transaction. Attorneys would not have to travel or rely on out-of-state notary laws to obtain notarized signatures. Additionally, the shift to electronic documents is well underway in many industries, including but not limited to real property transactions. By having permanent RON legislation, North Carolina will be able to keep pace with this trend and serve clients in different locations.

In addition to the domestic implications, a robust North Carolina RON legislation would allow North Carolina attorneys to assist clients who are abroad. As the situation in Ukraine has shown, embassies and consulates may not always be available. Were permanent RON legislation similar to the stakeholder version of H776 enacted, North Carolina practitioners could safely and securely assist clients located internationally without requiring the client to locate a notary in a foreign country or for the client to make an appointment with and travel to the most convenient U.S. Embassy or Consulate (many times causing weeks of delay and hours of travel time or even plane flights and away). Competent RON legislation should require any remote online notarization performed in North Carolina, regardless of where the principal is located, to be performed with secure identity authentication and credential analysis, giving assurances to all involved that no matter what may be happening in the client’s location, the notarial act is not compromised.

It is important to note that to be effective and consistent with other RON laws, the principal need not be located within North Carolina at the time of the notarial act. To be sure, the North Carolina notary, as is currently required, must be within our boundaries. However, at present, we know of no way for a North Carolina notary to clearly verify where their principal is located. If you are notarizing your neighbor’s or regular client’s execution of documents, are you any less sure who they are if they are next door or in France on vacation? Similarly, if you have the required identification verification and credential analysis, does it matter where that client or seller is physically located – whether in route to their new home you are closing or in an unexpected business meeting or caught in an airport abroad? Further, a major purpose of RON is to allow North Carolina notaries and attorneys to control their transactions without reliance on out of state actors. This purpose is defeated should any limitation on location of the principal (the so-called “transboundary limitation”) be included in RON legislation.

Is RON Secure?

Any RON legislation must address how to maintain the security of the notarial act. With the security provisions proposed by the stakeholder group, RON could be just as or even more secure than an in-person notarial act.

The proposed language would require any notarization under North Carolina RON to include two (2) steps of identity verification. The first is providing sufficient identification of the principal. This is not accomplished solely by the principal holding their photo identification in front of the computer camera. Rather, the principal could go through a multifactor authentication process, or other developing technologies to prove identity – all provided and easily accessible through the e-notary vendor.

The proposed language would also require credential analysis. Not only would this include inspection of the photographic identification of the principal via measures approved by the North Carolina Secretary of State, but additional information provided by the principal. While the electronic notary would have a duty to examine the provided identification of the principal, such examination would be supplemented by the principal answering questions to which only the intended person would know.

In addition, the electronic notarization should require the e-notary to maintain an encrypted journal of all RON acts. When combined with the video recording of the notarial act and the measures referenced above, the RON transaction is secured by advancing technology, the requirements of the Secretary of State, and the requirements imposed upon the North Carolina notary.

What about the Unauthorized Practice of Law (UPL)?

This is important: the only change RON makes to the notarial act is that the principal does not have to be physically present during the notarial act. The language included in H776 addresses the concerns of many practitioners, especially the real property section, regarding the use of RON legislation by bad actors to practice law.

Specifically, H776 states that any RON legislation cannot supersede the provisions of Chapter 84 (the unauthorized practice of law), GS10B-20 (the notary act UPL provisions), GS 75-1.1 (unfair competition), and North Carolina State Bar Authorized Practice Advisory Opinion 2002-1 (which requires a North Carolina licensed attorney to supervise a residential real property transaction). These provisions legislate significant UPL standards within the specific context of RON.

The time is now for carefully crafted permanent RON legislation. We must adopt legislation that recognizes our increasingly-transient world and the particulars of North Carolina law. Inaction can and will lead to future legal problems over many practice areas.

[1] The author gratefully acknowledges the input and substantial assistance received from Nancy Ferguson at Chicago Title Insurance Company. The views expressed herein are personal to the author and are not on behalf of the North Carolina Bar Association or any section thereof.

[2] The most recent stakeholder version of changes to H776 can be seen here.

[3] All versions of RON legislation proposed by various stakeholders maintain the requirement that the notary is located within North Carolina during the notarial act.

March 31, 2022/by RealProperty