Beyond The Basics: Disqualifying Interest

Updated 2-16-16. A Notary’s impartiality is a critical element of every notarization. Anything that indicates a conflict of interest could undermine the public’s ability to trust that you are fulfilling your duties honestly and without any undue influence.
While not everything that “looks” like a conflict of interest is one, there are times when your connection to the signer or the transaction might inappropriately influence your conduct when completing the notarization. This is known as “disqualifying interest.”
What Is ‘Disqualifying Interest’?

But what constitutes “disqualifying interest”? Is it when the Notary would receive some kind of material benefit from the document being notarized? When the Notary is married to the signer? Or is it when the Notary is a sibling, child or other relative of the signer? Depending on state law, the answer may include any or all of the above. Check out the short video below to get a better understanding of what constitutes disqualifying interest.

Why Notaries Should Always Act Impartially

Why should Notaries always act impartially? Simply put, the legality of a document could be challenged if a party harmed by the notarization proves the Notary’s impartiality was compromised. Consider the following scenario. A property owner sells a home to a buyer and finances the loan. The buyer defaults on the loan and declares bankruptcy. The owner loses $19,000 in the bankruptcy because the deed of trust was invalidated. The Notary who notarized the deed of trust was named as trustee in the deed of trust. In this actual case, the West Virginia Supreme Court in Galloway v. Cinello ruled that the Notary negligently notarized the deed of trust. As a result, the Notary could be held liable for the owner’s losses.

Some cases of disqualifying interest are easy to spot. For example, a Notary must never notarize his or her own signature — there’s no way a Notary can be an impartial witness in such a situation.
As a general rule, it’s inappropriate to notarize a signature on any transaction in which the Notary is named in a document or would receive a direct benefit from the transaction. However, some states make specific exceptions to this rule. For example, Kansas and California broadly permit a Notary who is an agent, employee, insurer, attorney, escrow officer or lender for a person with a financial or beneficial interest in a document to notarize transactions involving the Notary’s client. Nevada is more restrictive, allowing only attorneys to notarize signatures on an instrument or pleading if the attorney has received a fee for legal services related to the instrument or pleading beyond the statutory Notary fee.
Florida permits employees to notarize an employer’s signature provided they do not receive any benefit other than their normal salary and any authorized Notary fee.
If you are unsure whether you have beneficial interest in a notarization, always check your state’s laws before proceeding. If there is any uncertainty whether you have an inappropriate interest in the document, have another Notary handle the notarization instead.
Relational Interest

If the Notary is related to the signer in some way, a disqualifying interest may exist. State laws vary widely on the issue of notarizing for family members. Most states are silent on the matter, thus permitting Notaries to notarize for any relative. Others make exceptions for specific relatives — Arizona allows Notaries to notarize for blood relatives, but not for relatives related by marriage (such as a brother-in-law or father-in-law) or for relatives by adoption.
Florida prohibits notarizing signatures of spouses, sons, daughters, mothers or fathers, but allows Notaries to conduct weddings for relatives. Nevada — arguably with the most restrictive statute — includes a prohibition against notarizing for relatives related by blood and marriage, and includes adopted children, half- and step-relatives as well as domestic partners.
Again, always check your state’s laws if you are not sure if your connection to a signer constitutes beneficial interest, and when in doubt, ask a different Notary with no interest to notarize instead.
David Thun is an Associate Editor at the National Notary Association.

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