The Agent's Commission
Monica is a Kansas notary and a licensed real estate agent with a brokerage in Lawrence. She represents the seller in a residential closing scheduled for Friday. Her compensation is a 3% commission paid only if the sale closes. At the closing table, the title company asks Monica to notarize the seller's signature on the general warranty deed and the buyer's signature on the mortgage. The title company is short-staffed and says, 'You're already here, and you know the seller.' Monica has no ownership interest in the property and is not a party to the contract. She has a current Kansas commission and her seal. The seller asks her to hurry because the buyer's rate lock expires at 5 p.m. Monica wonders whether she can notarize just the buyer's mortgage, since the buyer is not her client and her commission does not depend on the buyer's signature-or so she thinks.
1. Does Monica have a disqualifying beneficial interest? Analyze the commission and the transaction.
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Yes. Kansas prohibits a notary from performing a notarial act if the notary is a party to or has a beneficial interest in the transaction. Monica's 3% commission is contingent on the sale closing. That is a direct financial interest in the transaction, even though she does not own the property and is not a party to the contract. The notarial act on the deed helps complete the sale that triggers her commission. The notary's conflict is not limited to the seller's signature. The transaction includes the deed, the mortgage, and the closing documents that must be executed for the sale to fund. Monica should treat herself as disqualified from notarizing any document in that transaction unless the facts clearly show her commission is not contingent on the closing, which is not the case here.
2. Could she notarize only the buyer's mortgage or only documents that do not mention her commission?
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No. The buyer's mortgage is part of the same closing transaction that produces Monica's commission. Even though the buyer is not her client, the mortgage is necessary to fund the purchase and close the sale. Notarizing the mortgage would help the transaction close, which benefits Monica financially. The conflict is transactional, not document-specific. She should not try to split the transaction into 'her' documents and 'other' documents. If she notarizes the buyer's mortgage, a court or regulator could later find that she had a beneficial interest in the transaction and that the notarization was improper. The safest and correct course is for Monica to decline all notarial acts in the closing and have an independent notary perform them.
3. What should she do at the closing table, and what are the consequences if she proceeds?
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Monica should disclose the conflict to the title company and the parties, decline to notarize, and ask the title company to provide another notary or reschedule the notarizations. She can still attend the closing as the real estate agent, but she should not act as notary. If the title company pressures her, she should explain that Kansas law prohibits a notary from acting when the notary has a beneficial interest in the transaction. If she proceeds anyway, the notarized documents may be challenged, the title company or recorder may reject them, and Monica could face discipline by the Secretary of State for a prohibited act. The fact that the rate lock expires at 5 p.m. does not create an exception. A short delay to obtain an independent notary is far better than an invalid or voidable closing document.