Hochul signs deed theft legislation

Law creates red flags for scams; “sham” LLCs might be next

Gov. Kathy Hochul Signs Deed Theft Protection Law

From left: Attorney General of New York Letitia James and Governor of New York Kathy Hochul (Getty)

Authorities now have more tools to halt bogus property transfers and create “legal red flags” to warn lenders and prospective buyers about stolen homes.

Gov. Kathy Hochul signed a bill today allowing prosecutors to intervene in suspected deed thefts. Such schemes can involve a deed being forged and filed with the state, or a homeowner unwittingly signing over property to someone pretending to help the homeowner avoid foreclosure.

The New York City Sheriff’s Office had received nearly 3,500 complaints of deed theft over the past 10 years.

“The idea that someone can steal your wealth at the stroke of a pen,” Hochul said during a press conference ahead of signing the bill. “It is unconscionable, and we will no longer stand for it.”

Under the new law, the state attorney general and local district attorneys can move to suspend eviction, foreclosure and similar proceedings if theft allegations are being investigated or the government has filed a criminal or civil complaint.

Authorities can also file a notice of pendency — basically an official red flag — to warn lenders and prospective buyers that ownership of the property is in dispute.

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Previously, if a scammer sold a stolen property to a third party, the buyer was protected as a “good faith purchaser,” even if the buyer were in on the scam, as is often the case. The new law voids these protections, stipulating that the new buyer needs to watch out for red flags.

The measure also states that the buyer should know the seller’s fraudulent intent in cases where the property’s previous mortgage is not paid off or transferred. In such cases, the new buyer is not entitled to hold onto the stolen property, because the outstanding mortgage counts as ample warning.

The law also gives the New York attorney general authority to void fraudulent deeds. Attorney General Letitia James, who initiated the legislation, indicted five members of a deed theft ring in late 2022, but the crime has been notoriously difficult to prosecute.

“Deed theft robs New Yorkers, especially older adults and people of color of their life-long investment, of building wealth in their homes,” James said. “The perpetrators of deed theft force their victims to endure humiliating and terrifying situations, and often the very real threat of eviction from their family home.”

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Lawmakers this year considered a separate bill that would make deed theft a standalone crime in New York. Sen. Brian Kavanagh, a sponsor, noted today that legislators are working with James to strengthen criminal charges against deed thieves.

The governor noted that such schemes are made possible by “sham LLCs.” When asked if Hochul’s comment signaled she would sign the LLC Transparency Act, a pending bill to create a public database naming owners of such entities, a spokesperson for the governor only said she is considering the measure.