BILL NUMBER: S605
SPONSOR: BRISPORT
 
TITLE OF BILL:
An act to amend the real property law, in relation to prohibiting the
recording of conveyances suspected to be fraudulent
 
SUMMARY OF PROVISIONS:
Section one amends Section 291 of the real property law, to provide that
a county registrar shall not record a conveyance if the county registrar
has reason to believe that the conveyance is false or fraudulent in any
manner.
Section two sets forth the effective date.
 
JUSTIFICATION:
"Deed theft" is the tactic of using fraudulent or misleading tactics to
take the title, or deed, to another person's home without the homeown-
er's knowledge or approval. As real estate capital has flooded into
rapidly gentrifying neighborhoods of New York, this tactic has been
increasingly used to separate elderly homeowners and homeowners of
color---especially Black and Brown homeowners---from their homes. In
furtherance of these schemes, our county clerks can act as an important
check against these fraudulent attempts. However, under current law,
they are legally constrained when it comes to conducting even a reason-
able investigation of a suspicious transfer. This legislation seeks to
correct this problem under current law, and enlist the assistance of
county clerks in combatting deed theft.
On October 27, 2022, the New York State Senate held a public hearing to
examine the practice of deed theft in New York State, to hear from New
Yorkers who have been victims of deed theft, to examine the failures and
loopholes in New York's existing laws, and to come up with solutions to
these ongoing problems. At that hearing, Yolande Nicholson---a co-found-
er of the New York State Foreclosure Defense Bar---explained the context
surrounding deed forgery, as follows:
Let's call a spade a spade; it's ongoing in Black communities in Brook-
lyn. What is going on is not merely stealing of title, but the illicit
transfer of the monetary value of the equity to private equity inves-
tors, masked limited liability companies and shell corporations, inves-
tors who are from outside of the community, with the aim of aggressively
evicting and displacing Black families, utilizing forged and fraudulent
deeds.
Ms. Nicholson urged the Legislature to "take away" the "welcome mat"
that fraudsters currently have under New York law, where fraudulent and
forged deeds are too easily accepted by local administrators. Likewise,
Scott Kohanowski---the Director of the Homeowner Stability Project at
the City Bar Justice Center---testified at the same hearing that "the
city registrar or other local recording officer needs statutory authori-
ty to reject the, recording" of fraudulent, forged, and suspicious docu-
ments. This legislation would implement this important and common-sense
recommendation.
As discussed at the public hearing, and as noted by practitioners, there
are several examples of suspicious conveyances that may warrant further
investigation in appropriate circumstances. For instance, transfers of a
residential property (containing four dwelling units or fewer, condomin-
ium units, or cooperative apartment units) by a natural person or an
estate to a limited liability company, corporation, or legal partner-
ship, may raise suspicion. This is particularly the case when the entity
taking title was created within the last six months, or the person(s)
transferring the residential property (and/or their decedent) previously
owned the property for many years, or the registered address of the
entity taking title is the same as the property itself, or only nominal
consideration is provided (or the consideration is otherwise much lower
than the apparent value of the property), or one of the beneficial
owners of the entity is the prior owner themselves, or if a lis pendens
and/or tax lien has been recorded against the property. Similarly, it
may raise suspicion when there is any non-conveyance of a real property
interest that does not by its terms expire within 120 days (e.g., a
"memoranda of sale," as discussed more fully at the public hearing as an
example of an "executory contract" that appears to, but does not actual-
ly, obligate the homeowner to some future sale of the home), or a nega-
tive covenant purporting to restrict disposition and encumbrance of the
property.
This legislation provides that a county clerk or city registrar will not
register any conveyance for real property if the clerk or registrar has
reason to believe that the conveyance is false or fraudulent in any
manner. Instead, the local official shall conduct a reasonable investi-
gation, and alert law enforcement in proper circumstances.
 
PRIOR LEGISLATIVE HISTORY:
2023-24: S8399
 
FISCAL IMPLICATIONS FOR STATE AND LOCAL GOVERNMENTS:
None.
 
EFFECTIVE DATE:
This act shall take effect on the ninetieth day after it shall have
become a law.

Statutes affected:
S605: 291 real property law