For centuries, state fraud laws relied on paper documents and manual signatures to make real-estate transactions enforceable. Paper deeds were filed as public records to establish who had rightful title to any piece of land.
No paper, no enforcement.
Addressing real-estate documents' special demands is the next phase in developing law to support electronic transactions, according to the National Conference of Commissioners on Uniform State Laws (NCCUSL) -- the 113-year-old association that provides states with nonpartisan legislation designed to bring uniformity and stability to critical areas of state law.
As part of the drive to modernize how local governments across the country record real-estate documents, the NCCUSL's Uniform Real Property Electronic Recording Act (URPERA) was released in August 2004.
21st-Century Real-Estate Records
Utah, Delaware and Texas (pending the governor's signature at press time) have enacted legislation based on the act. Virginia also passed legislation with a reenactment clause, requiring the Legislature revisit the act before it goes into force. The NCCUSL also expects URPERA-based legislation to pass in North Carolina and the District of Columbia in the near future.
"The purpose of URPERA is to get states prepared to do real-estate recording and search functions electronically," explained John McCabe, legislative director of the NCCUSL. "The states are pretty much all still with paper -- with a few exceptions."
Some states already have a certain amount of electronic recording going on, McCabe continued, and at least a few states have authorized certain counties to record real-estate documents electronically -- which indicates preliminary activity.
"There must be an orderly conversion of every recording office in the United States for electronic recording to become universally accepted, and that will be a complex process," he said. "URPERA provides a starting point in the law for that to occur."
Just how complex the real-estate records transition will be is highlighted by some of the issues addressed in drafting URPERA -- a two-year deliberative process. Many of those issues were first considered when the NCCUSL drafted the 1999 Uniform Electronic Transactions Act (UETA).
The UETA adjusted statute of fraud provisions to include electronic records and signatures for all kinds of transactions, including basic real-estate transactions, such as sale contracts, promissory notes and mortgage instruments.
The success and widespread enactment of UETA, combined with the passing of the federal Electronic Signatures in Global and National Commerce Act (E-Sign), set the foundation for the next step -- dealing with real-estate recordation, McCabe said.
"Back when we did UETA, everybody understood there was a set of issues relating to real estate that were not and could not be addressed in a general transactional statute like UETA," he recalled. "Real-estate recordation simply presented too many special problems that were going to have to be addressed separately."
These issues stem from the fact that real-estate documents must be recorded as public records to be effective, which happens in most states in the county offices devoted to keeping these records.
Recording establishes who holds interests in real estate and the chain of title leading to the current titleholder, meaning the historic record of documents relating to transactions for a specific piece of real estate. State law governs these local recording offices, and those laws contain requirements relating to the originality and authenticity of paper documents that are presented for recording.
"URPERA does three fairly simple things that will have a large effect," explained McCabe.