New Chapter 10B went into effect on December 1, 2005 and with it has come a spate of concerns surrounding the validity of acknowledgments after that date. These concerns are significant since an invalid acknowledgment on a conveyance makes the conveyance void if patent and voidable if latent. Under the provisions of the former Chapter 10A, Chapter 47 and the Cases interpreting these acknowledgment requirements, the Legislature and the Courts promulgated a liberal construction with regard to substantial compliance. In fact, our courts have gone so far as to opine that a common jurat (“sworn to and subscribed before me this date”) meets the acknowledgment requirements of Chapter 50. The provisions of the new Chapter 10B are much more exacting and it may not be prudent to assume that substantial compliance will have the same treatment as previously accorded. Some of the areas of concern are discussed further in this article.

It should be noted that the Citations in this article may be incorrect with respect to the final published version of the statute due to revisions in numbering of the sections made by the office of the Revisor/Codifier of Statutes, NC Department of Justice. The act has some codification issues, so the actual act as it will be published will presumably have changed designations and comments set forth below. It will help to be alerted to discrepancies because these materials reference the S.L. 2005-0123 code section numbers listed at the North Carolina General Assembly web site and, presumably they will not be consistent with the published statutes when released.

Seals previously acceptable will be proscribed upon re-commissioning. The provisions for the seal under the new Act state:

10B-24. Seal image.

(a) Near the notary's official signature on the notarial certificate of a paper record, the notary shall place a sharp, legible, permanent, and photographically reproducible image of the official seal.

(b) A notary's official seal shall include only the following elements:

(1) The notary's name exactly as commissioned;

(2) The words "Notary Public";

(3) The county of commissioning, including the word "County" or the abbreviation "Co."; and

(4) The words "North Carolina " or the abbreviation "NC".

(c) The notary seal may be either circular or rectangular in shape. The circular seal shall not be less than 1 1/2 inches, nor more than 2 inches in diameter. The rectangular seal shall not be over 1 inch high and 2 1/2 inches long. The perimeter of the seal shall contain a border that is visible when impressed.

(d) A notarial seal may contain the notary's commission expiration date; however, a notarial act shall be invalid if the expiration date contained on the seal is incorrect at that time that the notarial act is performed.

The North Carolina Secretary of State’s position on the notary seal is that it is impermissible for the seal to contain any graphics other than a border. This will disqualify inner borders, stars, outline of the State’s borders and the like. The Secretary of State’s position with regard to the transition is stated as follows. “It is the position of the Department that a notary that has a seal that is not in compliance with the relevant section of the Chapter 10B is NOT required to get a new seal that is compliant UNTIL THE TIME OF RECOMMISSIONING. You will note at the end of the SB671, there is a section which specifically validates the commissions of those notaries who were commissioned under old Chapter 10A. Since these commissions have been specifically validated, the new requirements for the seal will only apply to those who are commissioned OR re-commissioned after December 1, 2005.”

Special note should be taken with regard to subsection (d). The requirement for a date of expiration is archaic and serves no real purpose. It does, however, create the real likelihood of invalidating conveyances unnecessarily. If the date is patently wrong, these provisions serve to make the conveyance void ab initio and the recorded instrument will not serve as notice, constructive or otherwise under the current common law.

Form has become much more significant. Former Chapter 10A had minimal provisions concerning the form of the acknowledgment. It contained a definition of what the act of acknowledgment was, but did not specify what the notarial certificate form itself required. “A notarial act in which a notary certifies that a signer, whose identity is personally known to the notary or proven on the basis of satisfactory evidence, has admitted, in the notary's presence, having signed a document voluntarily.” The statute specified the requirements for notarial act; signature, legible name including the signature itself or otherwise typed, written or near the signature, a seal and an expiration date.

The new Act, 10B is not only stricter, it contains detailed requirements for the notarial certificate in addition to specifying the process of notarization. Section 10B-25 set forth the requirements for notarial certificates in general.

“(b) A notarial certificate for the acknowledgment of a principal who is an individual acting in his or her own right or in a representative capacity taken by a notary is sufficient and shall be accepted in this State if it is substantially in the form set forth in G.S. 10B-26, if it is substantially in a form otherwise prescribed by the law of this State, or if it:

(1) Identifies the state and county in which the acknowledgment occurred;

(2) Names the principal who appeared in person before the notary;

(3) States that the notary has either

(i) personal knowledge of the identity of the principal or

(ii) satisfactory evidence of the principal's identity, indicating the nature of that satisfactory evidence;

(4) Indicates that the principal who appeared in person before the notary acknowledged that the signature on the record presented is his or her signature, that the principal voluntarily signed the record for the purpose stated therein;

(5) States the date of the acknowledgment;

(6) Contains the signature and seal or stamp of the notary who took the acknowledgment; and

(7) States the notary's commission expiration date.”

Unless mandated by statutes other than Chapters 10B or 47, attorneys should, either use the new 10B forms, or make sure that a statutory provision clearly requires or authorizes a specific form. This will require adding acknowledgment certificates to the North Carolina Bar Association forms for anything other than individual, husband and wife or corporate acknowledgments as the Bar forms use the statutory forms pursuant to N. C.G.S. Sections 47-38, 47-40 and 47-41.01.

Process. Section 10B-14 sets forth the requirements and limitations for a notarial act.

(a) A notary may perform any of the following notarial acts:

(1) Acknowledgments.

(2) Oaths and affirmations.

(3) Execute jurats.

(4) Verifications or proofs.

(b) A notarial act shall be attested by all of the following:

(1) The signature of the notary, exactly as shown on the notary's commission.

(2) The readable appearance of the notary's name, from the notary's typed or printed name near the signature.

(3) The clear and legible appearance of the notary's stamp or seal.

(4) A statement of the date the notary's commission expires.

(c) A notary is disqualified from performing a notarial act if any of the following apply:

(1) The principal or subscribing witness is not in the notary's presence at the time the notarial act is to be performed; however, nothing in this Chapter shall require a notary to complete the certificate in the presence of the principal or subscribing witness.

(2) The principal or subscribing witness is not personally known to the notary or identified by the notary through satisfactory evidence.

(3) The principal or subscribing witness shows a demeanor that causes the notary to have a compelling doubt about whether the principal knows the consequences of the transaction requiring a notarial act.

(4) The principal or subscribing witness, in the notary's judgment, is not acting of the principal's or the subscribing witness's own free will.

(5) The notary is a signer of or is named, other than as a trustee in a deed of trust, in the document that is to be notarized.

(6) The notary will receive directly from a transaction connected with the notarial act any commission, fee, advantage, right, title, interest, cash, property, or other consideration exceeding in value the fees specified in G.S. 10B-20, other than fees or other consideration paid for services rendered by a licensed attorney, a licensed real estate broker or salesperson, a motor vehicle dealer, or a banker.

(d) A notary may certify the affixation of a signature by mark on a record presented for notarization if:

(1) The mark is affixed in the presence of the notary;

(2) The notary writes below the mark: "Mark affixed by (name of signer by mark) in presence of undersigned notary"; and

(3) The notary notarizes the signature by performing an acknowledgment, oath or affirmation, jurat, or verification or proof.

(e) If a principal is physically unable to sign or make a mark on a record presented for notarization, that principal may designate another person as his or her designee, who shall be a disinterested party, to sign on the principal's behalf pursuant to the following procedure:

(1) The principal directs the designee to sign the record in the presence of the notary and two witnesses unaffected by the record;

(2) The designee signs the principal's name in the presence of the principal, the notary, and the two witnesses;

(3) Both witnesses sign their own names to the record near the principal's signature;

(4) The notary writes below the principal's signature: "Signature affixed by designee in the presence of (names and addresses of principal and witnesses)"; and

(5) The notary notarizes the signature through an acknowledgment, oath or affirmation, jurat, or verification or proof.

(f) A notarial act performed in another jurisdiction in compliance with the laws of that jurisdiction is valid to the same extent as if it had been performed by a notary commissioned under this Chapter if the notarial act is performed by a notary public of that jurisdiction or by any person authorized to perform notarial acts in that jurisdiction under the laws of that jurisdiction, the laws of this State, or federal law.

Note that this continuation of the expiration date would be an anachronism if the information were available on the Secretary of State’s Website. This provision is so troublesome with respect to conveyances that it has its own corrective provision that is regularly updated (see new Section 10B-36).

Subsection (c) contains the disqualification provisions and we would like to discuss some of them.

Subsection (1) of Subsection (c) clarifies the ‘presence’ issue. “The principal or subscribing witness is not in the notary's presence at the time the notarial act is to be performed; however, nothing in this Chapter shall require a notary to complete the certificate in the presence of the principal or subscribing witness.”

Subsection (3) and (4) of Subsection (c) add a level of discretion to the act of notarization that requires a judgment bordering on drawing a conclusion of law. We anticipate that these provisions could prove very troublesome due to the subjective nature of the judgments.

(3) The principal or subscribing witness shows a demeanor that causes the notary to have a compelling doubt about whether the principal knows the consequences of the transaction requiring a notarial act.

(4) The principal or subscribing witness, in the notary's judgment, is not acting of the principal's or the subscribing witness's own free will.

Subsection (6) of Subsection (c) will likely make it difficult for settlement companies to fashion compensation packages on a per closing basis. The notary is disqualified if the “notary will receive directly from a transaction connected with the notarial act any commission, fee, advantage, right, title, interest, cash, property, or other consideration exceeding in value the fees specified in G.S. 10B-20, other than fees or other consideration paid for services rendered by a licensed attorney, a licensed real estate broker or salesperson, a motor vehicle dealer, or a banker.”

Subsection (d) could be considered a clarification except that it adds a requirement that the maker execute the instrument in the presence of the notary. This is a change from the common law in that previously the law only required that the acknowledgment had to be performed in the notary’s presence. Subsection (e) may be considered to drastically alter the common law with regard to execution of instruments in that there is no legal requirement for witnesses nor is there a reason for a requirement for anyone other than the notary to be a non-interested party. This new provision requires the presence of four disinterested parties for the execution of an instrument by a designee. It should be noted that this requirement for execution is in direct conflict with case law as well as several provisions of the Uniform Commercial Code. The question of the proper execution instruments does not seem to be within the purview of the office of the Secretary of State.

Subsection (f) should be more beneficial than it is presently proving as currently construed. Some jurisdictions, in an unprecedented fit of common sense, do not require a notary to have a seal. It has been reported that some Registers of Deeds require a seal where acknowledgments have been performed in such jurisdictions. Reportedly, this requirement stems from the fact that it is not uncommon for notaries in some of those jurisdictions to have a seal anyway.

Subsection (f) states that a “ notarial act performed in another jurisdiction in compliance with the laws of that jurisdiction is valid to the same extent as if it had been performed by a notary commissioned under this Chapter if the notarial act is performed by a notary public of that jurisdiction…”. Since notary acts performed absent a seal are “performed…in compliance with the laws of that jurisdiction”, they are performed lawfully without the seal and should be accepted for recording here.

The North Carolina Secretary of State has proposed new rules concerning administration of the provisions of the act. "The Department proposes these temporary rules as permitted under G.S. 150B-21.1(a)(2). The proposed rules pertain to administration of the Department's notary regulation function as modified effective December 1, 2005 by S.L. 2005-391, entitled "AN ACT TO ENACT THE UNIFORM REAL PROPERTY ELECTRONIC RECORDING ACT, AS RECOMMENDED BY THE GENERAL STATUTES COMMISSION, TO REPEAL CHAPTER 10A OF THE GENERAL STATUTES REGARDING THE REGULATION OF NOTARIES PUBLIC, AND TO ENACT CHAPTER 10B RELATING TO NOTARIES". The rules may be found in the Secretary’s Website at the following URL.

http://www.oah.state.nc.us/rules/proposedtemp/18%20NCAC%2007A.doc

The comment period began December 9, 2005 and ends January 4, 2006. “Comments from the public shall be directed to: Joal Hall Broun, General Counsel, P.O. Box 29622, Raleigh, NC 27626-0622, and email jbroun@sosnc.com”

Special attention should be paid to Section .0200 APPOINTMENT OF NOTARIES PUBLIC. That section specifies the re-commissioning procedure including methods of testing. Section .0204 specifies that an “ applicant who fails to take the oath of office for notary public within 45 days of their effective date shall take a test administered on-line by the Department, take a paper test administered by an approved sponsor, or attend another notary class. After taking and successfully completing the on-line test, the paper test, or notary class, the applicant shall reapply for commissioning or re-commissioning, and submit another application fee.”

The following should be noted as well. Section .0410-(b) provides that “Offenses relating to a notary's failure to meet the statutory requirements of a complete and lawful notarial act may cause a notary's commission to be suspended or revoked. Offenses include, but are not limited to, the following:

(1) Incomplete attestation.

(2) Improper acknowledgment language.

(3) Incorrect signature.

(4) Incorrect expiration date.”

One would assume that an occasional error would not lead to draconian sanctions, but only time will tell to what extent a particular pattern of behavior will prove unacceptable.

There are 28 sample notary certificates promulgated by the North Carolina Secretary of State on the official website. These can be found at

http://www.secretary.state.nc.us/notary/samples.aspx

We recommend that these forms be carefully reviewed for statutory compliance prior to use. They should be in proper form, but until the dust that has arisen concerning the various questions has finally settled, one should not assume that any promulgated form is correct.