Are RON closings now allowed in South Carolina?

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After a tease from our Supreme Court on Friday, the answer is still “no”

For about 15 minutes on Friday afternoon, May 1, those of us involved in real estate transactions in South Carolina got excited. An Order* from the South Carolina Supreme Court hit our in-boxes. The order was entitled “RE: Participation in Closings of Real Estate Transactions”. We collectively thought South Carolina may have moved into the 21st Century with an authorization for Remote Online Notarization (RON) closings.

Then we read the order.

You can read it here.

By way of preamble, the Court said, “we find that the public health emergency created by COVID-19 requires changes in the usual operation of the Rules of Professional Conduct in terms of the normal functioning of real estate transactions.”

Then the order stated that until August 1, lawyers may “participate in and supervise the closing of a real estate transaction by way of a video conference.”

Fair enough, but I think most South Carolina transactional lawyers believed they could already ethically handle closings via video conference.

Most lawyers definitely believed they can ethically handle “mail away closings.” Were we wrong? Ethics Advisory Opinion 05-16 states that an attorney may ethically conduct real estate closings by mail as long as it is done in a way that: (1) ensures that the attorney is providing competent representation to the client; (2) all aspects of the closing remain under the supervision of an attorney; and (3) the attorney complies with the duty to communicate with the client so as to maintain the attorney-client relationship and be in a position to explain and answer any questions about the documents sent to the client for signature.

To meet this test, according to the EAO, clients must have reasonable means to be in contact with the attorney, by telephone, facsimile, or electronic transmission. The EAO further states that there is no legal requirement that a client attend the closing, but that it must be the client’s decision not to attend the closing.

Ethics Advisory Opinions are, of course, not binding on the South Carolina Supreme Court. But if we rely on the EAO and handle mail-away closings, why can we not also handle closings via video conference, as long as we comply with all of our ethical obligations to properly represent our clients? Technology has changed since 2005!

Setting that issue aside, let’s look at the real problem. The primary obstacle to any closing that is not conducted strictly in the presence of the lawyer is the proper notarization of the recordable documents. According to South Carolina Code §26-1-5, the notary must be in the physical presence of the signatory. For this reason, clients and their lawyers must employ notaries in the client’s location when the client and the lawyer are not in the same location.

Did the May 1 Supreme Court order fix the notary problem at least temporarily? Lawyers who have spent the last four days debating this question via listserv and Facebook have decided that it does not. But did the Court try to help? Maybe.

The Order goes on to say, “necessary persons to a real estate transaction may, under the direction of the supervising attorney, similarly participate in the real estate closing by way of a video conference, provided any necessary person so consents; further, the supervising attorney shall ensure that the attestation of a recordable instrument is accomplished, which may be satisfied by use of real-time audio-visual communication technology, provided the identity of the necessary person is confirmed and a notary attests the signature of any necessary person.” (Emphasis added.)

Giving the Court the benefit of the doubt, perhaps the Justices did not attempt to fix the notary problem but, instead, believed they must address the professional responsibility aspects of the closing process to allow the legislature and governor address the statutory notary issue.

I think I am going to go with that interpretation. Otherwise the Order is useless.

And, I have another concern. Anyone of us who has read and struggled with the facts in the notorious Quicken** case knows that the Court by implication blessed dividing the various aspects of the closing that must be handled by an attorney among many attorneys. But the final sentence of this Order reads, “This order does not suspend any other provisions of the Rules of Professional Conduct, and nothing in this order is intended to relieve an attorney of his or her obligation to assume the full professional and direct responsibility for the entire transaction.” (Emphasis added.)

I am so confused!

 

*Order 2020-05-01-01, South Carolina Supreme Court.

**Boone v. Quicken Loans, Inc., 420 S.C. 452, 803 S.E.2d707 (2017).

2 thoughts on “Are RON closings now allowed in South Carolina?

  1. David Z

    I’m not sure the Supreme Court has the authority to amend the notary statute even if they wanted to. I think only the legislature, and perhaps the governor pursuant to his emergency powers, could amend the statute, even if just temporarily.

    Like

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