Purchasing a new home is often one of the biggest moments of a person’s life, whether it is a first home or a “forever home.” Over the past year, restrictions imposed by virtue of the COVID-19 pandemic have interfered with this dream of many. Initially, stay-at-home orders prohibited home showings and in-person closings. Later, low home inventory resulted in weaker purchaser negotiating power given the low supply and great demand triggered by the pandemic.
Despite these uncertain times, governmental restrictions loosened; home viewings resumed; parties negotiated transactions and entered into contracts (with the help of attorneys, of course). And due to these uncertain times, purchasers/borrowers went through the mortgage approval process and found lenders altering their closing requirements based on conditions which arose as a result of the pandemic. Title companies required sellers to execute additional affidavits and provide indemnities with respect to the lag in county office land departments’ ability to process documents and the title company’s ability to review and retrieve land and court records given reductions in office hours and of in-person staff.
Outside of New York, a closing in New York is generally referred to as a “New York style closing”, meaning a sit-down closing where all parties to the transaction are in a room to sign all documents and deliver all monies associated with completing a closing in accordance with the contract terms. Given the necessity of social distancing and minimizing in-person contact, it would make sense for the parties to be able to close in a manner which would limit such contact. However, not all parties to closings have been willing to embrace this concept.
Commercial transactions and out-of-state closings have long embraced the “escrow closing concept.” The process is easy, reliable, cost-effective and much safer these days by virtue of avoiding physical contact. There are several ways to conduct such closings but the general process is that required closing documents are signed by all parties and deposited with a trusted escrow agent, such as the title company, funds are wired and once all parties are satisfied, escrow is broken and documents are released to be recorded. There are many variations on this. Parties can be located in different locations and documents can be scanned, reviewed and approved with agreements (called undertakings) and requirements that original documents are delivered or all bets are off. It is important to note that while electronic signatures can be viewed and approved by parties to the transaction, electronic filings are still not yet permitted or processed in all county offices, so it is imperative that the original documents are sent and make it to their ultimate destination.
Many lenders, attorneys and even individuals have insisted on sit-down closings during the past year, even with the extraordinary health concerns raised by such sit-down closings. Some lenders have insisted their borrowers need to be seen in person to alleviate forgery concerns; some practitioners have insisted that a sit-down closing is necessary because “that’s the way it’s always been done”; some clients have stated they must attend a closing to get the money.
But things are different today. Facetime and Zoom make it easy to physically interact in a socially distant manner which comports with all legal requirements. Wiring of funds alleviates the need for presentation of physical checks (and often results in faster fund availability). Governor Cuomo’s implementation and continuing extension of virtual notarization of documents is further validation that compliance with legal requirements can be completed in a safe manner which effectuates the same end result. A key component at a closing is that parties present valid, non-expired photo identification, such as a driver’s license or passport. Given all the delays that have resulted in processing and receiving documents during the pandemic, Governor Cuomo’s Executive Order extends the expiration date of all NYS drivers’ licenses and permits so that any license which expired on or after March 1, 2020 remains valid at least through January 1, 2021.
Selling or purchasing any property is a huge endeavor under normal circumstances. It is important to have a trusted advisor who is familiar with current trends available to assist during such an important time. For assistance with your commercial and residential real estate transactions, please contact Leslie Feifer. Leslie is a member of the firm’s real estate practice group, representing individuals and businesses in a wide variety of commercial and residential real estate matters. Leslie can be reached at 516-393-8229 or lfeifer@jaspanllp.com.