Remote Online Notarization: More States, Including New Jersey, Join the Crowd

At least 43 states have now, by statute or executive order, authorized notaries in their states to conduct remote online notarizations (RONs) on either a permanent or a temporary/emergency basis, with a substantial number of those states having done so only recently, spurred by the COVID-19 crisis. This Holland & Knight alert will explain what RONs are and how they differ from traditional notarizations, describe how RONs are conducted, offer views concerning their safety, provide background concerning the state-by-state movement to authorize RONs and highlight one of the most recent legislative actions in that regard, which was taken by the state of New Jersey on April 14, 2020.

This article is a follow-up to a previous Holland & Knight alert (see "Remote Online Notarization: A Critical Tool to Ensure Business Continuity During COVID-19," March 17, 2020).

What Are RONs and How Do They Differ from Traditional Notarizations (and e-Notarizations)?

For decades, states commissioned notaries to conduct traditional notarial acts, where 1) the notary and the signer are face-to-face, 2) the notary verifies the signer's identity by checking an official identification document (ID) presented by the signer (typically a state-issued driver's license or passport), 3) the notary confirms the signer's awareness of the document and that the signer is executing the document of his/her own free will, 4) the signer physically signs the document (a "wet signature"), and 5) the notary attaches his/her official notarial seal to the document evidencing that each of these events took place. Typically, the notary keeps a physical journal to account for the acts conducted.

Beginning in the early 1980s, many states began to allow notaries to conduct electronic or "e-Notarizations" while adhering to a process similar to that used in traditional notarizations. In e-Notarizations, exactly as in traditional notarizations, notaries and signers meet face-to-face, and the notaries verify the signers' identity and confirm the signers' awareness of what they are signing and that they are signing it willfully. Unlike in traditional notarizations, however, the documents being executed in e-Notarizations are electronic rather than paper documents, and are executed by the signers electronically (by means of an e-Signature) and acknowledged by the notaries electronically, using their electronic seals.

RONs take notarizations one step further. They allow notarizations to be conducted remotely, meaning the notaries and the signers may be at different locations. For example, under the recently enacted New Jersey law, discussed below, the notary could be in his/her New Jersey office or home and the signer (the "Remote Individual") could be in his/her home or place of employment in a different town, state or even country (subject to certain conditions). At this critical time, when everyone is being ordered to "shelter at home" or practice social distancing, it is easy to see why the movement toward allowing RONs has been accelerating.

How Are RONs Conducted?

RONs are conducted through the use of "communication technology," which is essentially an electronic device or process by which the notary and the Remote Individual can see and hear each other in real time. Think Skype or Zoom, or even "FaceTime" on your smartphone. They also make use of various types of "identity proofing" to verify that the Remote Individuals are who they say they are. "Identity proofing" is a process or service by which a third person provides a notary with a means to verify the identity of a Remote Individual by a review of personal information about the individual obtained from public or private data sources. The two types of identity proofing most commonly used in RONs are "credential analysis" and "knowledge-based authentication" (KBA).

"Credential analysis" is a process by which a third party 1) uses technology to confirm the security features of the ID presented by the signer and that it is not fraudulent, 2) uses information from the issuing source or other authoritative source to confirm the details on the ID, and 3) provides its authenticity findings to the notary and enables the notary to visually compare the ID with the signer who appears before the notary via the audio-visual transmission.

KBA is basically a test used to establish that signers are who they say they are. For a signer to successfully establish his/her identity, the signer must answer, typically, four out of five dynamic personal questions that only he/she can be expected to know and must do so within a relatively short period of time, for example, two minutes. The questions are derived from a review of personal information about the signer that are obtained by the KBA provider from public or private data sources. The combination of personal questions only the signer would know and the short time frame to answer them makes KBA a fairly reliable verification tool.

Are They Safe?

This is still an open question, although there are at least two reasons to believe that RONs are at least as effective in preventing fraud as traditional notarizations. First, it seems logical to think that people are less likely to use RONS as a way to commit fraud when they are being recorded doing so, and second, the KBA and credential analysis identity proofing processes used in RONs to authenticate the Remote Individual's identity seem significantly more robust than the process used in traditional notarizations, which is simply to check the person's ID. On the other hand, there is a belief in some circles that a notary's ability to judge whether Remote Individuals understand the significance of the documents they are signing and are signing them of their own free will is compromised when the notary is observing the Remote Individual only on a computer screen rather than in-person across a desk or table.

How Has the Movement to Authorize RONs Progressed?

The first state to authorize RONs was Virginia in 2010. Montana followed in 2015, and Texas and Nevada did so in 2017. The movement accelerated beginning in 2018, and by the end of 2019, the number of states having enacted laws authorizing RONs had risen to 22. Six states joined the pack in 2018 (Indiana, Ohio, Michigan, Minnesota, Tennessee, and Vermont), and 12 more joined in 2019 (Arizona, Florida, Idaho, Iowa, Kentucky, Maryland, Nebraska, North Dakota, Oklahoma, South Dakota, Utah, and Washington). On March 3, 2020, Wisconsin became the 23rd state when it enacted a law authorizing RONs.

Then the COVID-19 crisis hit and the world changed. Ensuing state and local "shelter at home" decrees and "social distancing" protocols dramatically increased the importance of being able to have legal documents notarized without notaries and signers having to meet face-to-face. Realizing this, states began passing emergency bills or issuing emergency/executive orders allowing RONs (or in some cases, what could be called hybrid RONs, where the notary and the signer are at different locations but the document being signed is a paper document to which the signer affixes his/her wet signature) to be conducted immediately by notaries in those states. As of April 15, 2020, a total of 20 additional states have authorized RONs in this manner – Alabama, Arkansas, Colorado, Connecticut, Delaware, Georgia, Hawaii, Illinois, Kansas, Louisiana, Maine, Missouri, New Hampshire, New Jersey, New York, New Mexico, Pennsylvania, Rhode Island, West Virginia and Wyoming – bringing the total number of states with laws or executive orders authorizing RONs on the books up to 43.

Additionally, many state RON laws had either not yet become effective or required implementing regulations that had not yet been adopted when the COVID-19 crisis hit their state. At least seven of those states – Arizona, Iowa, Maryland, Nebraska, Vermont, Washington and Wisconsin – have recently issued emergency executive orders declaring their RON statutes to be effective immediately (in some cases, however, only for a specified period of time or until the crisis is declared ended).

Moreover, because many state RON laws specifically exclude from coverage notarizations of certain documents, including, in particular, wills and codicils, some states – Pennsylvania and Texas being two – have issued emergency orders allowing for the use of RONs on a temporary basis to notarize those types of documents. One suspects such emergency orders may have been prompted by the prospect of individuals with the coronavirus suddenly becoming worse and having to be admitted to a hospital with no visitors allowed, and not being able to effectively make or revise a will for lack of a notarization.

Finally, while California has not yet authorized its notaries to conduct RONs, the California Secretary of State recently issued a COVID-19 "FAQ" list indicating that RONs conducted in any other state in compliance with that state's law will be recognized as valid under California law, thereby eliminating a potential (although largely speculative) hurdle to the legal recognition of documents notarized using RONs conducted by out-of-state notaries.

The New Jersey Act

Spurred by the COVID-19 crisis, New Jersey Gov. Phil Murphy signed Assembly Bill 3903 on April 14, 2020, immediately but only temporarily authorizing the conduct of RONs by New Jersey notaries (the Act). The Act is a stripped-down version of a prior bill, S-3147, which was discussed in a previous Holland & Knight alert (see "Remote E-Notarization: Are New Jersey and Pennsylvania About to Join the Club?", Feb. 14, 2019). It also is very similar to another bill, A-3864, which was passed by the legislature on March 19, 2020, and had been on Gov. Murphy's desk since.

A-3864 and the Act differ only in that A-3864 would have provided permanent authority to conduct RONs beginning 90 days following enactment, whereas the authority provided by the Act is immediate but only temporary (i.e., it expires as soon as Gov. Murphy rescinds his emergency order declaring the COVID-19 pandemic a public health emergency in the state). One can only speculate why Gov. Murphy took the action he did, but one possibility at least, in view of the rapidly worsening COVID-19 situation in New Jersey in the days and weeks following passage of A-3864, is that he thought a temporary and immediate measure was more prudent than a permanent (and perhaps rushed) measure that would not become effective for 90 days.

What Does the New Law Do? The Act allows a notary located in New Jersey, using "communication technology," to notarize the signing of a document or perform any other notarial act for an individual who is not at the same physical location as the notary (a "Remote Individual"), provided that:

• the notary has personal knowledge of the identity of the Remote Individual or has obtained satisfactory evidence of his/her identity either by 1) oath or affirmation from a credible witness appearing before the notary, or 2) using at least two different types of "identity proofing"
• the notary is reasonably able to confirm that a record before him/her is the same record the Remote Individual signed or in which the Remote Individual made a statement
• the notary, or a third party on his/her behalf, creates an audio-visual recording of the performance of the notarial act

If the Remote Individual is located outside of the United States, two additional conditions must be met:

1. the record is to be filed with or must relate to a matter before a public official or court, governmental entity or other entity subject to U.S. jurisdiction, involve property located in the territorial jurisdiction of the U.S. or involve a transaction substantially connected with the U.S.
2. the act of making the statement or signing the record must not be prohibited by the foreign state in which the Remote Individual is located

Are There Any Other Requirements? Yes. The required notarial acknowledgment or seal must indicate that the notarial act was performed using communication technology, and the notary, or a third party on his/her behalf, must retain that recording for at least 10 years.

Exclusions. The Act does not authorize the use of RONs in connection with the notarization of records governed by the Uniform Commercial Code (with certain exceptions) or any statute, regulation or other rule of law governing adoption, divorce or other matters of family law.

Required Actions Needed Before Notaries May Conduct RONs. As indicated above, the Act requires notaries 1) to use "communication technology" capable of recording each RON they conduct, 2) to maintain (or have a third party maintain on their behalf) copies of such recordings for at least 10 years, and 3) to verify the identity of any Remote Individual (whom the notary or a credible witness appearing before the notary personally knows) by means of at least two different types of "identity proofing." Before notaries may begin to conduct RONs, they must therefore obtain the necessary communication technology and "identity proofing" systems from a vendor, and make arrangements (with a third party, if desired) to obtain and store the recordings produced by the communication technology. Note that the Act neither identifies approved vendors of communication technology or identity proofing systems nor prescribes standards that those technologies must meet. It does, however, authorize the State Treasurer to establish such standards and, if such standards are established, requires the technologies that notaries use to conform to those standards.

Must Regulations Be Adopted by the State Treasurer Before New Jersey Notaries May Begin Conducting RONs? No. Unlike many other states' laws that authorize RONs, and no doubt because of the urgency presented by the COVID-19 crisis, although the Act gives the State Treasurer the authority to adopt implementing regulations, it does not require the Treasurer to do so.

The Future of RONs

Because of the social distancing imperatives in place to combat the COVID-19 pandemic, more and more states in which RONS are not yet authorized are recognizing the utility of RONs in terms of eliminating the usual face-to-face interaction normally associated with having a document notarized. It can be expected that many of these states, including ones that are currently experimenting with RONs or hybrid RONs authorized by emergency orders, will adopt their own laws to permanently authorize RONS, and that the use of RONs will dramatically increase.

While the recent movement and adoption of RON processes throughout much of the country is promising in terms of increased acceptance of RONs as an important and critical tool, this excitement should be tempered with the understanding that although RON laws have existed since 2011, the process has only recently begun more widespread implementation. Accordingly, documents notarized using RONs may be subject to challenge based on this new notarization method, may not be accepted in all states and for all document types, and there may be long-term implications for enforcement given that documents notarized using this process largely remain untested.

At some point, however, assuming there is sufficient data to demonstrate that RONs entail no more (or even less) risk than traditional notarizations, RONs seem likely to become the norm, as opposed to an interesting but seldom-used curiosity.

DISCLAIMER: Please note that the situation surrounding COVID-19 is evolving and that the subject matter discussed in these publications may change on a daily basis. Please contact your responsible Holland & Knight lawyer or the author of this alert for timely advice.

Information contained in this alert is for the general education and knowledge of our readers. It is not designed to be, and should not be used as, the sole source of information when analyzing and resolving a legal problem. Moreover, the laws of each jurisdiction are different and are constantly changing. If you have specific questions regarding a particular fact situation, we urge you to consult competent legal counsel.