Electronic signatures legal for purchase contracts beginning Sept. 22
By Anthony Gatto, Esq., NYSAR Legal Counsel
On September 23, 2011, Gov. Andrew Cuomo signed into law an amendment to the State Technology Law (STL) and Real Property Law (RPL) permitting electronic recording of instruments affecting real property. NYSAR supported the passage of the amendments as it clearly permits the use of electronic signatures on broker prepared real estate purchase contracts. By its own terms, the law is eff ective 365 days after being signed into law.
On September 22, 2012, electronic signatures will be permitted on all real estate documents utilized by a broker in real estate transactions.
Previously, NYSAR was of the opinion that electronic signatures were valid on all documents except for purchase contracts, mortgages and deeds. This decision was reached based upon current law, an opinion from the New York State Attorney General and a lack of case law directly on point.
State Technology Law (STL) §307(3) states that the use of electronic signatures on documents is not applicable if said document is “to any conveyance or other instrument recordable under article nine of the real property law.” Article 9 of the Real Property Law (RPL) identifi es purchase contracts, mortgages and deeds as being recordable documents.
Furthermore, the New York State Attorney General’s Office issued an opinion in 2001 stating there is substantial possibility that “E-SIGN" (Electronic Signatures in Global and National Commerce Act, 106 P.L. 229, 114 Stat. 464 (2000)) does not preempt RPL Article 9 or otherwise obligate county recording offi cers to accept for recordation [a] fi ling that contains only [an] electronic signature but lacks “original signature.”
Based upon the wording of the STL, Article 9 of the RPL, the opinion of the Attorney General and a lack of court decisions, NYSAR concluded that electronic signatures were not valid for purchase contracts. At the same time, NYSAR was supporting legislation to remove the exceptions set forth in State Technology Law §307(3) of those documents identifi ed in Article 9 of the RPL.
The new law gives county clerks the option of whether they want to accept recordable documents that are signed electronically. NYSAR has been informed that some county clerks will not be accepting documents that have electronic signatures. If you are in one of the counties that does not accept electronic signatures on recordable documents, you may still use electronic signatures on purchase contracts as long as they will not be recorded in the county clerk’s office. There is no provision in statute, code, rule or regulation that makes the use of electronic signatures on non-recordable documents a county-by-county decision.
Licensees should be aware that if documents are to be signed electronically, the requirements of 19 NYCRR§175.12 still apply. §175.12 states: “Delivering duplicate original of instrument: A real estate broker shall immediately deliver a duplicate original of any instrument to any party or parties executing the same, where such instrument has been prepared by such broker or under his supervision and where such instrument relates to the employment of the broker or to any matters pertaining to the consummation of a lease, or the purchase, sale or exchange of real property or any other type of real estate transaction in which he may participate as a broker.”
As can be seen by §175.12, licensees are required to provide a “duplicate original” of any document signed by a consumer relating to a real property transaction (or potential transaction). NYSAR has discussed this requirement with DOS in the past and what would qualify as a “duplicate original.” DOS is of the opinion that a copy of the signed document would meet the requirement. This led to further discussions as to whether electronic delivery of a signed document would also meet the requirements of §175.12. DOS agreed with NYSAR’s position that electronic delivery is the same as a copy and would, therefore, meet the requirements of §175.12.
Another concern is that pursuant to 19 NYCRR §175.23 brokers are required to retain certain documents for a period of three years. NYSAR also had discussions with DOS as to what medium must be used for the documents being retained. NYSAR advocated for the electronic storage of documents that are scanned or originate in electronic form. DOS agreed that the electronic retention of documents satisfi es the requirements of §175.23 as well.
It is NYSAR’s opinion that brokers who utilize electronic signatures will also be minimizing liability if the electronic signature system employed by the broker provides for delivery and storage of electronically signed documents. Licensees of the broker would have documents electronically signed by consumers, delivered to the consumer electronically and also retain a copy in the broker’s electronic fi ling system. By doing this, the broker no longer has to rely on their affiliated licensees to bring the paperwork into the office since all the signed documents will already be in the broker’s electronic storage system. Brokers should be aware that at a minimum, industry standard electronic security and file backup should be used.