During a hearing of the New York Senate Standing Committee on Housing, Construction and Community Development, Meghan Faux, chief deputy attorney general for social justice at the Office of the New York Attorney General, provided recommendations for steps the legislature could take to address deed theft.
The notice of the hearing noted that current law does not adequately protect homeowners who are caught up in these scams and the committee heard from victims of deed theft, government entities and community and legal service organizations assisting homeowners.
In her prepared testimony, Faux provided six legislative solutions to combat deed theft, the first of which was strengthening protection against unfair and deceptive business practices.
“Strengthening protections against unfair and deceptive business practices would provide our office with a valuable tool for combatting deed theft. New York law currently prohibits deceptive business practices; amending this law through the Consumer and Small Business Protection Act (S.6414-Comrie/A.2495- Niou) would enable the attorney general to also seek damages or enjoin business practices that are so unfair or abusive as to cause substantial injury to consumers. Predatory schemes take many forms and evolve in response to changing real estate markets. Strengthening our consumer protection laws will ensure that the attorney general has the necessary tools to protect homeowners and stamp out these abhorrent practices,” Faux stated.
She then stated, “In 2019, the legislature took an important step by passing the ‘Deed Theft Bill’ which provided new tools to fight deed theft. At that time, a new provision was added to the Criminal Procedure Law (420.45) setting out a process for DAs to void title when there are convictions or guilty pleas for the crime of offering a false instrument for filing. As noted earlier, because deed theft happens in a variety of ways and, the crimes enumerated in the law that allow a DA to void the false filings are too narrow. Our office could charge a number of different crimes other than filing of a false instrument including grand larceny, scheme to defraud, criminal possession of stolen property, and potentially others. We think the law should be expanded to include the other crimes that DAs or the AG are likely to charge for deed theft.”
Additionally, Faux recommended identifying ways to make it more difficult for scammers to transfer title when there are signs of potential deed fraud, similar to a lis pendens.
“Often when a victim of a deed theft files a complaint with our office, the first thing we recommend is that they retain a civil lawyer to file what is known as a ‘lis pendens’ on the property,” she stated. “A lis pendens, or a notice of pendency, is a notice that can be filed with a county clerk giving prospective purchasers of the stolen home notice that there is a pending legal action in court that would affect the title to that property. Practically, this may halt the sale of the stolen property because it is unlikely that a good faith purchaser would risk buying a home where they would be subject to the outcome of the litigation. In certain cases, if there is no lis pendens filed and the stolen property is sold to a bona fide purchaser, the victim has no recourse to get the property back and may only seek damages against the thieves.
“We would recommend establishing a parallel provision to allow prosecutors to file the equivalent of a lis pendens when a prosecutor receives a deed theft complaint and there is credible evidence that deed theft has occurred,” Faux continued. “This would help protect many vulnerable homeowners who might not have the capacity to take civil legal action.”
Faux also recommended changing the penal law to establish a new crime of deed theft.
“Establishing a specific crime of deed theft would serve two purposes,” she stated. “First, aggravating and mitigating factors can be based on the crime’s impact on the victim or the vulnerability of the victim. Under current law, the only factor that determines the severity of the crime is the value of the property. And although property value is important, there are other factors, such as whether the home was the victim’s primary residence, whether the victim was a vulnerable person which should decide the severity of the crime. Establishing a standalone crime of deed theft is also an important signaling device to demonstrate the legislature’s intent that this conduct be treated criminally and not hope that prosecutorial creativity will suffice.”
Faux also recommended strengthening the role notaries can play in preventing deed theft, highlighting existing bills in the legislature that would achieve this, SB 9404/AB 10516 and AB 4277-A
“Several of the changes that we recommend are included in these bills,” she stated. “We would encourage the legislature to create the same journal requirements for deed transfers that are required by the recently-enacted electronic notarization law under Executive Law 135-C. The notarial journal requirements would have a chilling effect on scammers reluctant to provide incriminating details. The journal requirements would also allow law enforcement and prosecutors to gather better evidence during their deed theft investigations.
“We also recommend amending the law to require a notary who is authenticating a signature on a deed to read a colloquy form to the homeowner or signer, much like an allocution by a judge, to make sure the homeowner understands that they are about to transfer their interest in a property,” Faux continued. “These requirements are enumerated in Sen. Myrie and Assemblymember Weinstein’s bill. The form read by the notary should be signed by both the homeowner and the notary and would be maintained as a record. We believe that providing this colloquy will ensure that the homeowner understands that they are selling their home.”
Lastly, Faux recommended changes to eviction/partition proceedings.
“In many of the cases that come before our office, we see fraudsters who quickly evict current tenants in the properties they steal, compounding the harm of their theft,” she stated. “Courts should be required to stay eviction or partition proceedings when there is a pending investigation or lawsuit by a relevant law enforcement office. Keeping current tenants, and even the rightful owners, in their homes must be a priority while ownership is in question. Doing so not only limits the potential damage of a deed theft, it also puts the homeowner in the better position to assert their rights and stay housed. With the homeowner and current tenants in place, the people attempting to steal the property would be unable to occupy the property, damage or remove the owner’s personal property, or collect rental income from a property they don’t rightfully own.”