OLIVE JUDD GETS TO THE CLOSING TABLE DURING COVID-19 CRISIS

By Stephen Hoffman and Nicole Villarroel

Broward County issued a “shelter in place” Emergency Order effective March 27, 2020 due to the COVID-19 crisis resulting in a high level of uncertainty for buyers, sellers and lenders as to whether they can close their residential and commercial real estate transactions.  Parties to real estate transactions must close timely to prevent forfeiture of deposits, losing favorable financing terms and/or meet stringent deadlines to effectuate a 1031 tax deferred exchange.  The impact of COVID-19 crisis on real estate and mortgage loan closings changes almost daily. We have implemented policies and procedures to allow closings to take place timely despite the enormous roadblocks caused by the COVID-19 crisis and, most importantly, safely for our employees and the parties involved in the transaction.

THE “GAP”

In Florida it is customary for the parties to deposit keys, closing documents and the buyer’s and lender’s funds in escrow with the title insurance agent at closing.  After all the documents and funds have been received, the title insurance company then commits to insure the buyer has good and marketable title to the property. The title insurance agent proceeds to record the deed, mortgage and other documents necessary to insure marketable title to the property.  This process is called a “gap closing” because the title insurance company is insuring the “gap” between the date of the latest update to the title commitment and the date of recordation of the deed and mortgage.  In the current environment, recorder’s offices throughout the State are either closed or at risk of closing.  When the date of recordation is uncertain there is a greater risk of intervening liens as the gap period lengthens.  We have confirmed with our title underwriters that they will insure the gap even if the recorder’s office is temporarily closed.  Accordingly, our buyers are protected in the event of liens or defects recorded against the property following closing.

WORKING REMOTELY

While Broward County is under a “shelter in place” order, we have not stopped working for our clients.  Via robust technology our attorneys and staff are working remotely in compliance with the various “shelter in place” orders currently in effect in various municipalities throughout Broward County. While the realities of working remotely has raised significant logistical issues in conducting closings, we have cleared many of those hurdles using the following techniques:

Electronic Signatures: Electronic signatures can be utilized for the execution of many real estate documents, including contracts, addenda and riders.  Electronic signatures or documents executed electronically are enforceable as long as all parties agree to use electronic signatures. However, certain documents (including the creation and execution of deeds) cannot be signed electronically. We will determine what documents and  which electronic or digital signatures can be utilized in order to keep our clients’ transactions moving smoothly.

Remote Online Notarizations (RON):  As of January 1, 2020, Florida now permits parties to notarize a document without the notary and signer being physically present in the same place eliminating the challenges of notarizing documents in person while practicing social distancing. This process uses enhanced technology whereby the signer signs documents and the notary electronically notarizes the document via a recorded two-way audio and video conference. We have access to tamper-evident technology with multifactor authentication for electronic notarizations in order to prevent fraud.

Closings:  Sometimes, electronic signatures and remote online notarization are just not appropriate, available or permitted and we have to conduct in-person closings.  Currently, the best process for minimizing transmission of the COVID-19 virus is by minimizing social interaction. Accordingly, we strive to reduce the number of persons in contact at any one time.  To the extent possible, and when allowed by the lender, we suggest using powers of attorney (POA).  For example, each party’s respective attorney would be named as agent limiting the number of persons present at closing. We have also implemented the “drive by” closing concept whereby the signer comes to our parking lot, documents are handed to the signer who signs in their car while our staff stands by to witness, notarize and answer any questions from the signer.  We use enhanced hygiene protocols during this procedure consistent with CDC and state health department guidance aimed at keeping consumers and title company staff as safe as possible.

FRAUD ALERT:

This is perfect time for scammers and fraudsters to take advantage of unsuspecting persons. We verbally confirm with all clients about our wire procedures and specifically alert them about scam emails and to be extremely vigilant if they are asked to initiate a wire.

About the Authors:

Stephen V. Hoffman is a Partner at the Florida law firm of Olive Judd, P.A. heading the Firm’s Real Estate Practice Group.  Mr. Hoffman has 35 years of experience in assisting clients with land use and zoning matters, commercial and residential transactions, and drafting condominium and homeowner association documents.  Nicole Villarroel is an attorney at Olive Judd, P.A. representing clients in residential and sophisticated commercial transactions.  Please contact Stephen at (954) 334-3955 and Nicole at (954) 334-2258 with any questions.