Michigan enacted the Uniform Real Property Electronic Recording Act (PA123 of 2010) that went into immediate effect on July 21, 2010. This Act was passed to clarify and expand upon the federal Electronic Signatures in Global and National Commerce (E-Sign) Act.
While a few counties in Michigan, namely Oakland, Kent and Macomb, have allowed some limited e-recording, it is expected that this will expand greatly in the future. Effective January 1, 2011, an Electronic Recording Commission will be set up to promulgate standards to be followed. The Act specifically states that any documents "recorded prior to uniform standards being adopted, would not invalidate documents recorded … before the establishment of standards under this act …”.
The new law provides that an electronic document would satisfy any requirement that a document be an original for the purpose of recording. An electronic signature would satisfy the requirement that a document be signed for the purpose of recording.
Michigan is known as a race/notice state. That is, whoever records a document first, has priority, unless they have notice of another (yet unrecorded) lien. By recording electronically, documents should get of record quicker, and therefore, maintain or elevate the title interest or lien priority that may occur by sending in original documents.
Until the final standards are promulgated next year, care must be taken to make sure documents are correct and would otherwise meet the recording rules. Errors in documents could lead to more challenges as to the validity of the recorded document. Challenges could be expected from Bankruptcy Trustees to other creditors who are arguing priority, to Borrowers/Grantors who claim forgery or other reason to invalidate the recorded document.
The Act expects costs to the Register of Deeds to be nominal to allow for electronic recording. However, it should be expected that some additional fee may be charged in the future to pay for this service.
The Act could assist in having documents recorded quicker, leading to faster receipt of final title policies and being able to complete files more quickly. With the possibility that no one will be reviewing the correctness of the documents, errors may not be discovered until much later, when it may be too late to fix them. If you are recording documents on your own, front end accuracy will be more important than ever.
As more standards are proposed or finalized, we will provide more updates on this matter.
If you have any questions on this information, please contact Michael I. Rich, Esq. Michael is an associate in the Real Estate Default Group of Weltman, Weinberg & Reis Co., L.P.A. (WWR) focused on foreclosure, title and REO closing services. He is located in the Detroit office and can be reached at 248-786-3137 or via email at mrich@weltman.com.