A MESSAGE TO DEAN & FULKERSON’S REAL ESTATE CLIENTS DURING THE COVID 19 ACTIVITY RESTRICTION PERIOD.

The entire state of Michigan, and over 90% of the US population, are under travel and activity restrictions which make it difficult to carry on ordinary business activities, or even conduct business, unless the business activity is deemed necessary for the critical infrastructure of the country, to preserve life health or safety. Executive Order 2020-42

Despite these difficulties, real estate transactions are still being completed. Our unscientific survey of title companies indicates that even large, 8 and 9 figure transactions are being closed – not without adjustments, however.

One such adjustment is Executive Order 2020-41, which relaxes the requirements for witnessing, notarizing, and recording documents, where the signatories, witnesses, notaries, and title companies are all at different locations, communicating by two-way audiovisual electronic technology (think “Zoom” or “Go to Meeting”). The specific requirements are quite detailed, and a careful review of the Executive Order is required.

Two specific changes to keep in mind, by way of example:

– An audiovisual recording of the signing, notarization, or witnessing must be created and maintained for three years (10 years for a notarization: MCL 55.286b(7));
– The time of signing in the audiovisual recording of the signature notarization is the legally effective time for that act (arguing for an audiovisual recording with an on-screen time and date clock).

Even though electronic “distance signing” can be very quick and efficient, the gap in time between the completion of transaction documents at a virtual closing, and the actual recording of such documents by County or municipal authorities is currently long, and getting longer during the period of travel and business activity restrictions (for a list of  “gap times” between receipt of signed documents and recording in Counties with restricted activities and access click here)

Among other things, it results in a greater risk to title companies which have traditionally insured good title during the “gap period” between a closing, and recording of the title documents from the closing. Many title companies are asking for additional assurances in the form of affidavits or indemnity agreements designed to discourage the seller in a transaction from taking any acts that might cloud title before a deed, mortgage, etc. can be recorded. An example of such a document can be viewed here.

These complications to normal real estate transactions can be expected to continue at least for the next month, and probably beyond that.

UPDATE:

In Executive Order 2020-70, issued May 1, 2020, Governor Whitmer determined that the State of Michigan “… will soon be positioned to allow another segment of previously suspended work to resume. This work is permitted to resume on May 7, 2020, and includes construction, real-estate activities, and work that is traditionally and primarily performed outdoors. This work, like the resumed activities allowed under Executive Order 2020-59, will be subject to stringent precautionary measures.”

The Executive Order goes on to specify the types of real estate activities that will be allowed starting on May 7, 2020: [10] …[workers who perform “resumed activities” will now include] “…(h) Effective at 12:01 am on May 7, 2020, workers in the real-estate industry, including agents, appraisers, brokers, inspectors, surveyors, and registers of deeds, provided that:

(1) Any showings, inspections, appraisals, photography or videography, or final walk-throughs must be performed by appointment and must be limited to no more than four people on the premises at any one time. No in-person open houses are permitted.

(2) Private showings may only be arranged for owner-occupied homes, vacant homes, vacant land, commercial property, and industrial property”

The Real Estate Practice Group at Dean and Fulkerson looks forward to the resumption of commercial and residential real estate transactions, and looks forward to addressing your questions, and assisting with your real estate transactions in the near future.

For more information or to contact a Dean & Fulkerson attorney click here.