Business documents registered online with the Secretary of State’s office are experiencing delays of up to a month before they are officially filed and time stamped, creating a headache for the office and real estate attorneys.

 

The situation is causing some grief and grumbling among business attorneys, especially those who file time-sensitive documents, such as certificates of organization for limited liability companies, in real estate deals.

 

Banks typically want to see evidence that the LLC really exists before closing on a loan to the entity, for example. Tenants would like to know they are paying rent to a bona fide owner.

 

Go to the Online Filing tab at the secretary of state’s website and click Business Entity Filings and this notice pops up:

 

“Important notice: Due to an unusually high volume of documents being received in our corporate processing center, we are currently experiencing delays in the filing process. Documents could take at least 15 business days to complete. Please do not send duplicate documents, as that will further delay the process. We apologize for any inconvenience this might cause and are working diligently to alleviate this problem as quickly as possible.”

 

The good news is that the backlog results in part from an increase in the number of business filings coming to the office, said Mark Snell, chief of staff for Secretary of State Paul Pate.

 

The bad news is that the office has neither the staff nor the technology to clear the bottleneck, he said.

 

If you’re a legal assistant in the office of a busy law office that specializes in organizing the entities that buy, develop and rent property, it helps to have ears of steel.

 

“The biggest problem is the heat my legal assistant takes from clients,” said Tim Hogan, who has been practicing real estate law in Greater Des Moines since the mid-1980s.

 

Snell said the business filings are being registered on a computer system that is at least 14 years old, when the office was handling about 10,000 new corporate filings, most of them sent in by mail or delivered in person. 

 

That number is now up to 20,000.

 

“The base platform we are using for new corporations dates back to 2001 … in some cases we don’t have the original code that was written for those systems,” he said.

 

In fact, the online interface is a bit deceiving. The assumption is that that documents are filled out online and automatically recorded. Not so, Snell said. Instead, the system produces a printout.

 

The other problem is that the office is shorthanded. Snell said there have been eight workers who have retired in recent years and they have not been replaced. The office is using three temporary workers to help process filings. In addition, the office is short $250,000 that was not used for personnel costs as a result of recent retirements. Those dollars reverted to the general fund, he said.

 

“Everyday we are trying to do at least 76 filings; we’re underwater right now,” Snell said.

 

Gov. Terry Branstad has included in his budget proposal to add an additional $450,000 to the appropriation to the secretary of state’s office to fund a review of the departments computer needs.

 

Fillings aren’t cheap and those funds would cover the cost of the study and the hiring of additional workers. The office doesn’t get any of that money, which amounts to about $5 million a year. The office gets a $3.1 million appropriation from the Iowa Legislature.

 

Documents can be dropped off at the Secretary of State’s office, but there typically is a two-hour wait for them to be filed, Snell said. As a result, the office encourages people to file documents in person only in “urgent” circumstances.

 

“You don’t get the feeling you can just walk up and walk away with a stamped version,” Hogan said.

 

In addition to working through the backlog, Snell said Pate and office workers are asking the question, “What is going on here? Why is the volume so much?

 

“We have seasoned processors, some working for 25 years, who haven’t seen (the rush of filings) last so long past January, and here it is April and we are still receiving the volume on a daily basis. Why? Who are these people? What’s going on?”