By David Thun on March 11, 2015
Updated 12-11-23. A Notary’s impartiality is a critical element of every notarization. Anything that suggests the Notary is biased or has an incentive to be dishonest undermines the public’s ability to trust your work.
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.
What if the Notary has an interest in the document?
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. Some states specify additional situations. For example, Pennsylvania Notaries may not take an acknowledgment on a power of attorney document if the Notary is named as an agent in the document or serves as a witness to the signing of the power of attorney.
However, some states make specific exceptions to this rule. 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.
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.
Nevada allows attorneys licensed to practice in the state 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.
New York permits attorneys admitted to practice in New York State to notarize for their clients.
Texas permits employees to notarize an acknowledgment or proof of a written instrument in which the employee's company has an interest. Texas also permits a shareholder in a corporation to notarize corporate documents unless the corporation has 1,000 or fewer shareholders or the Notary owns more than one-tenth of one percent of the corporation's issued and outstanding stock.
If you are unsure whether you have a beneficial interest in a notarization, always check your state’s laws before proceeding. If there is any uncertainty about whether you have an inappropriate interest in the document, have another Notary handle the notarization instead.
What if the Notary is related to the signer?
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, provided there is no other disqualifying conflict of interest. Others prohibit notarizing for specific relatives — Arizona prohibits notarizing for the Notary's spouse. While Arizona Notaries are not prohibited from notarizing for other family members, the state recommends against doing so.
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 the Assistant Managing Editor at the National Notary Association.