May 4, 2011 – Three years after Wisconsin counties began accepting instruments of conveyance (deeds) documents electronically for recording with the Register of Deeds, statistics show the practice is catching on. But Craig Haskins says it’s not catching on not fast enough.
Haskins, executive vice president of Knight-Barry Title Group and a member of the council that drafted Wisconsin’s e-recording rules, says lawyers and title companies that don’t file electronically take an unnecessary risk that other parties will win the race to record.
And since Wisconsin is a race-notice state, timely recording of real estate documents is good practice to protect against the claims of subsequent purchasers, mortgagees, and lienholders. Haskins says lawyers who use title companies should insist on e-recording, or make the small investment to e-record real estate documents themselves, which can save costs long-term.
“Given the minimal resources necessary to e-record and the potential to avoid claims, I always tell people, especially lawyers, that it would be crazy not to do it or require it,” Haskins said.
E-recording: What is it?
Approximately 23 Wisconsin counties currently allow parties to electronically submit land and property conveyance documents – as well as mortgage, lien, and other ownership interests – to be recorded with the Register of Deeds. Wis. Admin. Rule 70, effective in 2009, established uniform e-recording standards to promote improved service for e-recording.
In 2008, Milwaukee County became the first county in the state to accept a land conveyance document submitted electronically. Prior to that, some counties allowed electronic submissions for e-recording of non-conveyance (non-deed) documents.
Most closing documents – whether signed electronically under Wisconsin’s Uniform Electronic Transactions Act, or by hand – are compiled by lawyers or title companies and either mailed or personally delivered to the appropriate county Register of Deeds. At least that’s the case in Milwaukee County, which historically records the largest number of documents in the state.
In 2010, only 36 percent of all documents recorded were submitted electronically. That number is up from approximately 14 percent in 2008. In 2011, the numbers continue to grow.
John La Fave, the Milwaukee County’s elected Register of Deeds, took a one-day snapshot of mortgage filings on April 27, 2011. On that day, 53 of the 91 (58 percent) mortgage document filings were submitted electronically.
Haskins says lawyers and title companies not familiar with e-recording don’t realize how little it takes to use the service. So what does it take? “A scanner, a couple hundred dollars for the software setup and an account with a recording vendor, and you are in business,” Haskins said.
Recording fees are currently $30 per document in all counties plus $3 to $5 per document to record electronically, although some recording vendors have recently waived the e-recording fee to attract interest. But the process saves users mailing fees and labor costs. The Wisconsin Register of Deeds Association says e-recording “saves time and money for both customers and the Register of Deeds.” E-recording also ensures that documents are filed as soon as possible.
The race is on
Wis. Stat. section 706.08(1)(a) protects purchasers of real estate against prior adverse claims that are not recorded. Specifically, the statute provides that a conveyance not recorded is void against a subsequent bona fide purchaser whose conveyance is recorded first.
Although section 706.08(1)(a) specifically refers to “purchasers,” the term also includes mortgagees and other lienholders who may claim an ownership interest in property. Real estate practitioners advise that “lawyers should take great care to confirm that all conveyance documents are recorded as soon as practicable after delivery.”
Case in point: Bank of New Glarus v. Swartwood, 2006 WI App 224, 297 Wis.2d 458, 725 N.W.2d 944. Clarence and Kathy Swartwood obtained a loan from one lender secured by a mortgage on their property. But that lender didn’t record properly until a year had passed.
Subsequently, the Swartwoods took out a second loan from a different lender, which encumbered the same property. The second lender recorded the mortgage before the first lender. Upon foreclosure, the court concluded the second lender had priority.
Haskins says the best way to ensure priority is to e-record. For one, it is likely that e-recorded documents will take a fast track over in-person and postal-mail submissions. Second, errors can be corrected much quicker.
“There are plenty of situations in which someone got beat by someone who electronically recorded,” Haskins said.
Paper documents aren’t time-stamped upon receipt, at least not in Milwaukee County. Only the time of official recording is noted for paper documents. And Milwaukee doesn’t record documents received in-person immediately, like they used to.
La Fave says electronic recordings – often recorded within a few hours or even minutes of receipt – always get recorded faster than paper documents. Electronically submitted documents are on a separate track, so it’s entirely possible that documents submitted electronically are recorded before documents that arrive earlier in paper form.
In addition, the paper backlog can cause recording delays that aren’t present with e-recording. And submission errors can be corrected much quicker because the e-recording software can detect certain errors and the Register of Deeds can immediately return flawed documents electronically. Paper documents with errors take days or weeks to be corrected, Haskins said.
“With paper filings, by the time the problem is addressed, you could have a serious delay from the closing date to the recording date, which could impair the client’s lien or ownership position,” Haskins said. “With e-recording, if the document has errors you get a little red button on the screen, and you can fix the problem and resubmit the document in 10 seconds. That alone has probably helped lenders and buyers avoid numerous title problems.”
Conclusion: Submitting documents electronically is the timeliest way to record them with the Register of Deeds, and the way to avoid the Swartwood situation. Haskins says lawyers who use title companies should insist on e-recording to protect their clients’ interests.
“The attorney should state in the instruction letter to the title company that upon disbursement of the funds and exchange of the documents, the title company shall promptly record the documents, and shall do so electronically if available in the county,” Haskins said.
How to do it
The lawyer, law firm, or title company needs a scanner to scan any documents to be recorded electronically. The software, which facilitates the electronic submission, must be purchased. Haskins said there are three primary software companies servicing Wisconsin, Simplifile, Ingeo, and the eRecording Partners Network.
Since document fees must be included with the electronic submission of documents, Haskins recommends setting up a separate recording fee bank account to deduct the necessary fee when the submission is sent. Restrictions can be placed on the account.
Then visit the proper county Register of Deeds’ website, and follow the online instructions for submitting records electronically.
For more information
Haskins and real estate lawyer Andrew Schlidt of Whyte Hirschboeck Dudek S.C., Milwaukee, will talk about e-recording and other e-documentation issues in a presentation entitled “E-documentation of Business and Real Estate Transactions” on June 10 at the State Bar PINNACLE’s Real Estate and Business Law Institute.
The event will be held June 9-10 at the Kalahari Resort in Wisconsin Dells. Visit the Real Estate and Business Law Institute webpage to register and view the schedule of events.
By Joe Forward, Legal Writer, State Bar of Wisconsin