DEED THEFT HITS CLOSE TO HOME

DEED THEFT HITS CLOSE TO HOME

The Problem

Imagine being told that the house you own is no longer yours. “What? But I didn’t sell my home,” would likely be your first response.

This story is becoming all too common in Brooklyn, New York where rapidly gentrifying neighborhoods have caused property values to soar, making deed theft increasingly attractive to criminals.1

Deed theft can be divided into two categories: (1) forged deeds and (2) fraudulently transferred deeds.2

In the case of forged deeds, criminals forge signatures on real property deeds, signing the document as both seller and buyer.3 This type of theft typically affects properties in which ownership has recently passed through inheritance.4 Newly inherited properties are easy targets because the previous owners are deceased and the current owners (beneficiaries of the property) have not yet taken possession.5 In these cases, deed thieves can file the forged deed and take possession of the premises relatively easily.6

In the case of fraudulently transferred deeds, homeowners sign over their deeds, either knowingly or unknowingly, under the false pretenses proffered by deed thieves. Thieves tend to target homes in or nearing foreclosure by approaching homeowners with the promise of refinancing their mortgage, preventing foreclosure or some other financial relief.7 Some thieves have even convinced homeowners to do a short-sale, by which thieves promise to pay homeowners a sum of money (well below the property value), satisfy the outstanding mortgage, and assist with their relocation. Unwitting homeowners are often left without a home and still owing on their mortgages.8

Elderly and less sophisticated homeowners facing financial difficulties are prime targets,9 with deed thieves trolling neighborhoods offering unsolicited help, running low-budget advertisements on local television channels or acting as telemarketers.10

After the theft has occurred, deed thieves will often prevent access to the premises by adding padlocks before renting the home to tenants or selling the property to third parties.11 With property records reflecting a seemingly valid deed transferring ownership of the premises, victims of fraudulently transferred deeds have difficulty proving their rights to the property.12

Prosecution

Criminals have stolen the deed to your home…now what?

Unsurprisingly, most deed thieves use aliases in their fraudulent dealings, leaving victims with little information to give to authorities.13 The deeds themselves also offer little guidance, as thieves increasingly name limited liability companies (LLCs) as the “buyers” of stolen deeds.14

Deed thieves hide behind LLCs that act as shell companies often used for nothing more than transferring properties.15 The companies’ formation documents often list members that are untraceable and provide fake business addresses.16

The New York City Sheriff’s Office, the enforcement division of the New York City Department of Finance, has over 900 possible cases of deed fraud, most of them in Brooklyn.17 Between July 2014 and November 2015, the Sheriff’s Office investigated 120 cases of fraudulent deed transfers, resulting in 17 arrests and 12 indictments.18 Another 167 suspicious deed transfers are scheduled for investigation.19 To date, the Sheriff’s Office has closed over 100 cases where deed fraud likely occurred, because the Office was unable to pin the crime on anyone.20

In response to this widespread problem, the Department of Finance has implemented a few measures to help thwart deed fraud. One such measure is referring suspicious or faulty deeds to the Sheriff’s Office for further investigation, replacing the previous method of sending deeds back to the filer with instructions on how to correct defects.21
The Department has also implemented a new “Notice of Recorded Document System,” which alerts deed holders to any new filing that takes place concerning their property.22 New deed holders are automatically signed up for email and telephone notifications upon filing, and current deed holders may sign up for the free service at any time.23

Restoring Ownership Rights in the Property

While the City’s agencies investigate and prosecute criminal fraud, it is up to rightful homeowners to initiate legal actions in civil court to have stolen deeds deemed fraudulent in order to restore their rights to the property.24 Absent a criminal conviction, it can be very difficult for homeowners to prove that fraud occurred, so homeowners are encouraged to retain counsel to help them navigate what will inevitably be a lengthy legal battle.25

The statute of limitations for bringing fraud claims in the State of New York is the greater of six years from the date the fraud occurred or two years from the time the plaintiff (the victim) discovered the fraud, or could have discovered the fraud with reasonable diligence.26 The statute of limitations applies to cases in which homeowners signed their deeds to thieves, but either did not know what they were signing or were induced into signing because they were promised a benefit that was never received.

However, regarding forged deeds, the New York Court of Appeals recently held that these cases are not subject to a statute of limitations.27 The Court held that forged deeds were void ab initio, meaning they are invalid from the outset, and void documents cannot be subject to a statute of limitations.28

The Court went on to explain that a forged deed containing a fraudulent signature is distinguished from a deed where the signature and authority for conveyance are acquired by fraudulent means.29 The latter is voidable and has the effect of transferring title until it is set aside, compared to the former which is a legal nullity and cannot grant title under any circumstance.30

The Court also discussed the nature of statutes of limitations in that their function is to bar stale claims.31 Statutes of limitations, however, cannot grant legal significance to a document expressly rejected under the law.32 In other words, a statute of limitations cannot validate what the law has never recognized.33

Tips for Prevention

While the City continues to work toward solutions to help prevent deed theft, it is ultimately up to homeowners to be vigilant and protect their homes.

It is imperative that homeowners maintain the appearance of their premises, especially those that do not serve as primary residences or are in foreclosure. Homes that are abandoned or in a state of disrepair are prime targets for deed thieves.

Homeowners are also encouraged to sign up for the Recorded Document Notification Program34 through the Department of Finance to be notified of any filings made in connection with their properties.35

In the case of foreclosure prevention or loan modification scams, homeowners should be wary of any companies that guarantee results, ask for a fee upfront or offer quick cash.

The New York Attorney General’s Mortgage Scam Help website36 offers a wealth of information for financially-troubled homeowners, including a list of government-vetted mortgage assistance companies and a list of nearby counseling partners.37

If you suspect that you are a victim of deed theft, an experienced real estate attorney can help nullify the fraudulent deed and reinstate your rights to the property.

1 Virginia K. Smith, Owner Beware: Deed Theft Scams are Still Booming in NYC, BRICK UNDERGROUND, Nov. 9, 2015, http://www.brickunderground.com/blog/2015/11/deed_scams_are_back. 2 See Matthew Taub, Talking Deed Fraud with the City Sheriff and Finance Commissioner, BROOKLYN BRIEF, Nov. 6, 2014, http://brooklynbrief.com/talking-deed-fraud-city-sheriff-finance-commissioner/. 3 Id. 4 Id. 5 Id. 6 Id. 7 Stephanie Saul, Real Estate Shell Companies Scheme to Defraud Owners Out of Their Homes, NEW YORK TIMES, November 7, 2015, http://www.nytimes.com/2015/11/08/nyregion/real-estate-shell-companies-scheme-to-defraud-owners-out-of-their-homes.html?_r=0. 8 Id. 9 Id. 10 Id. 11 Id. 12 Id. 13 Id. 14 Id. 15 Id. 16 Id. 17 Catherine Curan, How a Homeowner’s Foreclosure Deal Turned into a Scam Horror Story, NEW YORK POST, Oct. 24, 2015, http://nypost.com/2015/10/24/how-a-homeowners-foreclosure-deal-turned-into-a-scam-horror-story/. 18 Matthew Taub, supra. 19 Catherine Curan, supra. 20 Catherine Curan, supra. 21 Matthew Taub, supra. 22 Matthew Taub, supra. 23 Matthew Taub, supra. 24 Stephanie Saul, supra. 25 Stephanie Saul, supra. 26 New York Civil Practice Law and Rules § 213(8). 27 See Faison v. Lewis, 25 N.Y.3d 220, 32 N.E.3d 400 (2015). 28 Id. 29 Id. 30 Id. 31 Id. 32 Id. 33 Id. 34 A link to the Recorded Document Notification Program can be found on the New York City Department of Finance website at http://www1.nyc.gov/site/finance/taxes/property-recording-documents.page. 35 Matthew Taub, supra. 36 The New York Attorney General’s Mortgage Scam Help website can be found at http://www.AGScamHelp.com. 37 Id.

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