The New York legislature recently passed a bill (S6577/ A6656) which makes deed theft in the state a civil crime. The passing of this bill will provide significantly more protection to those targeted by deed thieves and equip prosecutors with the necessary tools to stop or slow a deed theft before it has been actualized.
What is Deed Theft?
Deed theft occurs when someone uses fraud or forgery to wrongfully take the title of another person’s property without the legitimate homeowner’s knowledge or consent. In essence, the scammer is able to acquire the rights or ownership to the property without the financial obligations attached to it, such as a mortgage. Taking the property through forgery occurs when a scammer fakes the real homeowner’s signature and files it with the country clerk to make it appear as though they bought the property legitimately, whereas taking the property through fraud occurs when a scammer tricks the homeowner into unknowingly signing over their home to the scammer. The scammer is then able to rent out the property or sell the home for a profit, without having to bear the financial burdens associated with homeowning such as a mortgage.
Deed theft has become an increasingly pressing concern in New York State. From 2014 to present, the NYC sheriff’s office counted nearly 3,500 complaints of deed theft in New York City alone. People of color and elderly persons are especially vulnerable to deed theft, especially those in gentrifying neighborhoods.
Prosecutors can now raise a “red flag” on suspect properties.
Previously, deed theft was not a crime in the state of New York, therefore there were no protections in place to slow down or stop a theft in progress. Once a scammer had obtained the deed through forgery or fraud, there were few legal remedies available to homeowners and prosecutors to reverse the fraud.
The new bill will enable prosecutors to file a legal action on properties where deed theft has taken place or is suspected to have taken place by putting a “red flag” on the property’s records. These flags swill serve to alert banks or title insurance companies if a scammer attempts to take out a loan against the property.
Deed theft victims now have opportunities to recover their property.
Previously, good-faith-purchaser protections stopped a victim of deed theft from recovering their property when the scammer had already sold the home to an innocent third party who was unaware of the same. Therefore, even if the scammer as found guilty of deed theft, the homeowner could not recover their property back from the innocent third-party purchaser.
The new legislation includes a provision that voids innocent purchaser protections. In cases where a third party purchased a property, and the mortgage was neither transferred to the buyer nor paid off by the original homeowner, the legislation would void the buyer’s claim on the property, even if they purchased the property in good faith from the scammer.
Victims may stay eviction proceedings.
Previously, there was no such protection when a scammer had stolen the deed and attempted to evict the rightful homeowner, because the housing court was unable to determine whether or not the evictor was actually the rightful owner of the property based on the facts presented. This resulted in many victims of deed theft being forced out of their homes illegitimately.
This legislation will make it possible for New Yorkers to remain in their homes and stay an eviction proceeding in housing court, so long as the rightful homeowner can show reasonable evidence that there is an issue with the title of the property or a potential deed theft in progress. This protection will allow homeowners to pause their evictions until the suspected deed theft case has been litigated.
Existing HETPA protections have been expanded.
The Homeowner Equity Theft Prevention Act (HETPA) allows homeowners in distress to cancel any contract to sell their property, whether they signed it knowingly or a scammer took advantage of them. Previously, these protections were only provided for homeowners whose properties were either in foreclosure or on the tax lien sale list. The new legislature will also include homeowners whose properties are on the utility lien sale list.
The passage of this legislation aims to protect New York’s most vulnerable homeowners from deed theft by equipping local officials with the tools necessary to better address this heartless crime.
Not yet passed is another bill (S6569), which was introduced to create new criminal provisions for deed theft in the state of New York. If passed, this bill would establish a crime of deed theft, grant the Office of Attorney General (OAG) criminal jurisdiction to prosecute criminal deed theft alongside district attorneys, and extend the statute of limitations for felony criminal prosecution of deed theft from five years to eight years.