Wisconsin Lawyer
Vol. 79, No. 4, April
2006
New identity theft law is a landmine for real estate lawyers
A new law enacted by the Wisconsin Legislature prohibits the
recording of documents with the register of deeds that display a
person's Social Security number. The law is intended to prevent one of
the means of stealing a person's identity. If a document is recorded
that contains a Social Security number, the person who drafted it may
face a damage claim with no cap. All attorneys who deal with real estate
should change their practices, and recommend that their clients change
their practices, immediately to comply with this new law. 2005 Wisconsin
Act 139 became effective as law on March 31, 2006, and applies to all
documents presented for recording on or after that date. The law amends
Wis. Stat. Section 59.43 and provides that:
- Wisconsin registers of deeds are prohibited from recording documents
containing an individual's Social Security number; and
- if a register of deeds records a document that contains an
individual's Social Security number, the drafter of the document can be
liable for any actual damages that occur as a result of recording.
Currently, many lenders' mortgage forms include the borrowers' Social
Security numbers. 2005 Wisconsin Act 139 is targeted to stop this
practice. However, the law applies to all recorded documents.
If a person's Social Security number appears on an instrument
submitted for recording, it will likely be rejected by the register of
deeds. This rejection may include all documents accompanying the
instrument displaying the Social Security number. Most Wisconsin
registers of deeds will return all documents for a transaction (deed,
purchase money mortgage, easements or restrictions) if any one document
is not considered recordable. As a result, the inclusion of a Social
Security number on a mortgage may delay the recording of not only the
mortgage, but also the borrower's deed, in a purchase transaction. This
delay could range from a few days to several months.
Even a short delay in recording may create significant problems for
attorneys, lenders, and borrowers. If a deed or mortgage is not recorded
immediately, liens or encumbrances may be recorded against the property
before it is recorded. In addition, if a borrower declares bankruptcy
within 90 days of a loan closing and the mortgage is not recorded within
30 days of closing, the trustee has the power to have the mortgage
declared void as a preferential transfer. Cases involving the failure to
record a mortgage within 30 days are relatively common now, and are
likely to become more so now that this law is effective.
The law also provides that, if a register of deeds records a document
containing an individual's Social Security number, the drafter of the
instrument can incur liability for actual damages due to identity theft
resulting from the recording of the document. It is not yet clear how
this provision will operate. However, while the law allows a victim of
identity theft to recover damages from a drafter, it does not give the
drafter any right to pursue the perpetrator of the theft. Attorneys
drafting recordable documents could become the sole source of recovery
for the total actual damages attributable to identity theft arising from
the recording of a document containing a Social Security number. There
is no damage cap under the law.
If a person has his or her identity stolen and recorded documents
disclose the person's Social Security number, the attorney who drafted
the documents could well face either a malpractice or a damage claim. To
avoid this result, attorneys dealing with real estate should institute
practices that ensure that documents they draft do not contain Social
Security numbers. Attorneys also may wish to notify their clients that
Social Security numbers are not permitted on recorded documents in
Wisconsin.
Contributing writer Robert W. Habich,
Marquette 2004 cum laude, is an associate in the Real Estate Department
of Reinhart Boerner Van Deuren S.C. and practices in the firm's Waukesha
office.
Wisconsin Lawyer