[WSBARP] opposition to proposed legislation eliminating the requirement for lease notary acknolwedgments

[Rod Harmon]

I appreciate Erik Marks' comments of last Friday on this proposal before the board of governors.  I have a different take on it, as set out below.

Rod Harmon

RODNEY T. HARMON
       Attorney at Law
         P.O. Box 1066
      Bothell, WA   98041
     Tel:   (425) 402-7800
     Fax:  (425) 458-9096
    www.rodharmon.com<http://www.rodharmon.com/>
   rodharmon at msn.com<mailto:rodharmon at msn.com>

From: Rod Harmon
Sent: Wednesday, November 1, 2023 12:59 PM
To: barleaders at wsba.org
Subject: opposition to proposed legislation eliminating the requirement for lease notary acknolwedgments


On Nov. 3, one proposal before you is legislation to change one statute, RCW 64.04.010, that was first enacted by the Washington Territorial Legislature in 1854, and another statute, RCW 59.04.010, that was first enacted by the territorial Legislature in 1867.  The proposal is deficient.  It does not explain why the present law was enacted or what harm it has caused.  I urge the board to oppose this legislation.



The statutory background is as follows:

Conveyances may only be by deed.

RCW 64.04.010, first enacted by Laws of 1854, p 402 §1. (Every conveyance of real estate, or any interest therein, and every contract creating or evidencing any encumbrance upon real estate, shall be by deed").
Leases are conveyances.
Spokane Airport Bd. v. Experimental Aircraft Ass'n, 198 Wash. 2d 476, ¶ 15 (2021).
Deeds must be acknowledged.
RCW 64.04.020, first enacted by Laws of 1854, p 402 §2. ("Every deed shall be in writing, signed by the party bound thereby, and acknowledged by the party before some person authorized by this act to take acknowledgments of deeds").

There is an exception for leases not exceeding one year.

RCW 59.04.010, first enacted by Laws of 1867, p 101 (Leases may be in writing or print, or partly in writing and partly in print, and shall be legal and valid for any term or period not exceeding one year, without acknowledgment, witnesses or seals").



The proposal contains no discussion of the history of these statutes or the cases decided by the appellate courts interpreting and applying them.  These statutes have been in effect for more than 150 years.  Where is the proof of their harm?  If there is a problem that needs fixing, then surely there are reported cases that demonstrate the need.  What are those cases?



The proposal provides no justification for the change except a hypothetical: a business owner enters into an unacknowledged five-year lease.  Unstated is that the business owner is either so foolish as to sign a five-year lease without review by legal counsel, or legal counsel is so incompetent as to fail to notice the document's failure to comply with the real estate statute of frauds.  And there is little discussion of the tenant's equitable estoppel defense recognized by the supreme court since 1920.  See Tiegs v. Watts, 135 Wn.2d 1, 15-16 (1998).


Let me tell you of a recent case of potential fraud that was avoided because of the acknowledgement requirement for long-term leases.  That requirement saved my 92-year old client from being the victim of two fraudulent leases invented by a judgment debtor with the collusion of his close friend.

My client received a judgment for $1.4 million on an unpaid loan of most of her life savings to someone she should never have trusted.  The judgment debtor's single-member LLC granted her a mortgage on two properties worth $3.3 million to secure the judgment, pending appeal.  My client won the appeal, which increased her judgment to $2.8 million.  She bought the judgment debtor's membership interest in the LLC at a sheriff's sale.

Aha, the judgment debtor exclaimed, both properties are encumbered by written, signed, long-term leases that pre-dated the mortgage.  A 10-year term for one property, a 15-year term for the other property.  The rent was less than the real estate taxes.  The lessee was the judgment debtor's close personal friend.  But the leases were not acknowledged.  Why not?  Because they were almost certainly signed after the appeal came down and the judgment debtor began to frantically think of ways to avoid paying the judgment.  The leases were fraudulent and collusive.

I knew these leases were invented by these two scammers, who had conjured and back-dated them to frustrate collection of the judgment.  But how to defeat the leases as long as the two friends kept their stories straight?  The answer was simple:  without the acknowledgement, the term of the leases was period-to-period; in this case, monthly.  Summary judgment.  The scammers were evicted.

What would have happened if the proposed (improvident) amendment had been enacted?  I would have had to prove the leases were fraudulent, which would have meant a credibility brawl in a superior court trial, and probably an appeal since the judgment creditor is a high-conflict personality.  Think not only of the cost in attorney fees, but also in delay, for my 92-year old client.  This was avoided because of the elegant solution the legislature enacted in 1854.  Require the lease to be acknowledged before a reliable third party, a notary public.


The proposal argues that the acknowledgment requirement is burdensome "in our era of electronic signatures."  To the contrary, I think that makes the requirement of an acknowledgement more necessary. It is easy to type someone else's name to an electronic document.  I get many emails a day signed by people impersonating other people trying, ultimately, to steal money from me.  Don't you?  And if getting a notary to sign an acknowledgement in person is so burdensome, why not suggest a solution that makes it easier for a notary to sign remotely?

The board should ask itself what problem this legislation is supposed to solve.  And then, what problems might this legislation cause. The current law is designed to prevent disputes.  In my opinion, the proposed legislation would create disputes.  I urge the board to oppose this proposed legislation.

Rod Harmon
WSBA #11059

RODNEY T. HARMON
       Attorney at Law
         P.O. Box 1066
      Bothell, WA   98041
     Tel:   (425) 402-7800
     Fax:  (425) 458-9096
    www.rodharmon.com<http://www.rodharmon.com/>
   rodharmon at msn.com<mailto:rodharmon at msn.com>

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