Earlier this month, top lawmakers in New York State gathered at a press conference in Albany to mark the signing of a new law aimed at protecting property owners from a growing number of deed theft schemes. Deed theft has become such a problem in New York City, especially in rapidly gentrifying outer-borough neighborhoods; the state’s attorney general created a task force in 2020 to address the issue. Deed theft and title fraud have flourished around the country since the pandemic. The combination of soaring home values, historically high-interest rates, and rising inflation have further exacerbated the country’s housing crisis. Although lawmakers are trying to curb deed theft and title fraud, these malicious acts result from a deeper problem in the property title system. While taskforces, protectionary laws, and educational programs can help, these problems will still exist. Only a large-scale change to the way we record property ownership, possibly mixed with some innovative technology solution, will help solve the root problem behind deed theft.
Deed theft is a broad term. It can take many forms and can be as straightforward as a forged signature on a deed or a complicated, multi-layer scheme that involves transfers, multiple shell entities, and, of course, lots of broken promises. For attorneys representing property owners who have been the victims of deed theft, cases can be measured in degrees of fraud, and deed theft cases are decided based on the extent of the deception. Scammers often prey on elderly homeowners who are behind on mortgage payments or property taxes, using publicly available information to tailor their schemes. A common strategy for deed thieves is to approach a property owner in distress, offering to help them obtain a mortgage modification in order to help stave off foreclosure. The mortgage application then comes with a hefty stack of papers to sign, one of which is the deed, and without realizing it, the property owner ends up signing their property away.
Other cases could involve a legitimate transfer of a deed. Property owners will sign over the title to a scammer with the understanding that after some time or after a loan is paid off, the deed will be transferred back, and the homeowner will regain ownership. That last part obviously doesn’t happen. Earlier this year, a disbarred lawyer named Sanford Solny was charged with defrauding homeowners in New York City for the third time in six years. In this most recent case, Solny was charged with possession of stolen property, grand larceny, and “scheme to defraud” in a case involving four homes from which he allegedly netted nearly $2.3 million.
Solny, like other title fraudsters, often targets minority communities. “Deed theft steals generational wealth from Black and Brown communities, and it’s gone on for too long,” said New York Attorney General Letitia James during the press conference announcing the new legislation. Over the past decade, at least 3,500 complaints of deed theft have been filed in New York City, almost half of which were in Brooklyn.
Burden of proof
Deed theft cases are difficult to prosecute because victims have often signed legally binding documents, making it hard to prove it wasn’t a legal business deal. Public officials have pointed fingers at actors that have enabled the fraud to happen, including court system workers, notary publics who sign on the deals, attorneys, and others. “Many people bear responsibility for what we have seen happen,” New York State Senator Zellnor Myrie said in a recent documentary that delved into the issue. Myrie represents neighborhoods in Brooklyn where many deed theft cases are taking place.
The issue is also challenged by a lack of funding and resources to pursue complicated cases like these. “Those are very difficult cases to prove in court because, quite frankly, it’s their word versus your word, and they have actual documents that you signed,” said Brooklyn District Attorney Eric Gonzalez at a recent press conference. Still, the borough has made progress in tackling deed theft, and numbers have been falling. In 2021, there were 154 complaints of deed fraud in Brooklyn, a drop from 665 in 2015, something Gonzalez’s office attributed to increased enforcement.
While New York has been tackling growing deed theft through a task force and beefed up legislation, other states are also grappling with the issue. Stealing a person’s identity is how many deed and title scammers in Florida operate, so it’s no surprise Florida ranked third in a recent report from the Federal Trade Commission for the highest number of identity theft cases. The Miami area has seen rampant title theft over the last few years, leading Broward County Property Appraiser Marty Kiar to call South Florida the “title fraud capital of the world.” Earlier this year, authorities arrested several people in Broward County after uncovering a $12 million property theft ring where the alleged scammers stole at least 14 properties through deed fraud and identity theft.
“I’ve seen it time and time again,” said Victor Petrescu, an attorney with the Miami-based law firm Levine Kellogg Lehman Schneider Grossman who has represented landowners who have been victims of title fraud. Targeting vacant lots of land, scammers using fake driver’s licenses and other forms of ID use the documents to obtain a loan to build on the property, then once they get the loan, disappear with it. When the mortgage eventually goes into default, the defrauded owner gets served with the defaulted loan, and that’s when they realize that fraud has taken place and report it.
In some cases, scammers target properties owned by recently deceased individuals, who claim the property was deeded to them before they died in order to squat in the home or get a loan on it. In 2018, Broward County officials busted a ring of scammers whose fraud was extensive, involving more than 40 properties stolen from people who had died. Florida law also allows real estate closings to happen virtually, which can further embolden scammers. “Now, with remote notarization, someone can just hold up an ID to the camera on Zoom,” Petrescu said. “These people kind of know that if they do a mail-away closing with a remote notary, there’s more of a chance they can pass as someone else.”
Scales of justice
New York’s recent deed theft legislation, which gives authorities more tools to stop fraudulent property transfers, among other things, is a great start. Still, advocates say much more is needed to prevent deed theft further and curb it altogether. What makes it difficult to stomp out deed theft with regulation alone is that scammers continue to concoct new schemes that can involve LLCs, several transfers, and other fraudulent means to get their hands on a deed. “Even if all these measures can be passed, the law can never keep up with the pace of innovation by bad actors. Just legislating by scam type is truly like the game Whac-A-Mole,” said Lisa Milas, Staff Attorney with the Empire Justice Center.
Recently, advocates have pushed a proposed bill in New York that would widen the scope of an existing law to include all scams. The Consumer and Small Business Protection Act (CSPA) is a bill currently in the New York State Senate that advocates are pushing to get passed in the next legislative session. CSPA would amend New York’s General Business Law, expanding conduct prohibited by the statute to include “unfair, unlawful, deceptive, or abusive” business acts and practices. Deed theft cases where a homeowner did, in fact, sign over a deed to another party with the expectation of getting it back would be covered under this bill, giving more protection to homeowners and making it easier to prove fraud in a civil case.
Though it isn’t very common, there have been arrests made for deed theft. Last December, New York Attorney General Letitia James indicted five members of an eight-person deed theft ring that targeted homes with absentee owners in Queens neighborhoods. The alleged scammers marketed the homes to investors at bargain prices in order to sell the properties fast. Legal documents in the transactions were forged, and members of the ring brought in people to impersonate the owners during closings. Brooklyn’s District Attorney has increased enforcement on deed theft cases, some of which resulted in prison sentences, sending the message to potential scammers that there could be harsh consequences for their actions.
While stronger enforcement on the criminal side is showing promising results in curbing deed theft cases, property owners must still go through civil court proceedings to regain property ownership. Bringing a civil lawsuit can be costly and time-consuming and may not ultimately end in a homeowner getting their home back. New York has several legal providers offering their services to low-income homeowners, but some states are lacking in affordable or free legal services.
In South Florida, the disturbing uptick in cases in Broward County led the County Appraiser’s office to partner with the county’s state attorney’s office in order to prosecute fraudsters. The County Appraiser also created an owner’s alert program that notifies residents within 24 hours if someone has filed a change of ownership on their property. The problem is also getting support on a statewide level. In June of this year, Florida Governor Ron DeSantis signed a bill into law that created a pilot program specifically for Lee County to tackle title fraud that focuses on identity verification. The property fraud prevention program requires those who file a deed with a county clerk’s office to present a government-issued photo ID before the deed is processed. Florida’s current state law requires clerks to accept and record a document as long as it meets the statutory requirements, regardless of whether the document appears fraudulent. And the process doesn’t include presenting any forms of ID to the clerk. “It should not be as easy now to steal property, and this program is a step in the right direction,” said Lee County Clerk Kevin Karnes.
Solving the deed theft problem isn’t easy. Municipalities don’t have the bandwidth or the budget to train their workers to spot questionable paperwork or signatures. The increased media attention on deed theft is helping bring more awareness of the crime to homeowners who may not have known about it, and many local officials have begun distributing literature and even going door-to-door to spread further awareness of deed theft and how homeowners can protect themselves. In New York City, where deed theft cases have been rising for years, legal services organizations, lawmakers, and law enforcement agencies have made the issue more of a priority. Scammers who have been arrested and charged with deed theft crimes have been well-publicized in the news media, a number of hearings on deed theft have taken place with local legislative bodies like the New York State Senate, and legislation to strengthen deed theft laws is currently in the works.
The idea that technology could stop title fraud full stop is something that has been floated around, too. Blockchain technology, in particular, has been identified as a way to maintain a secure and decentralized record of transactions. If a deed or title were put into a digital ledger like blockchain, no one could access the document without a token, keeping it secure from potential scammers. The problem is that currently, there is no centralized system for recording property titles, and how they are accessed can differ widely by municipality. At the county level, where most deeds and mortgages are documented and recorded, there’s little incentive to adopt blockchain technology and, in a lot of cases, a lack of funds to do so.
The idea that it could be used in protecting real estate documents like deeds is something that has certainly been explored, but it’s unlikely we’ll see any big movement on it anytime soon. “It won’t work until there’s mass adoption by municipalities and no one has figured out a way to do that,” said Joshua Stein, former CEO of Harbor, a digital securities platform acquired by BitGo in 2020. He compares the use of blockchain titles to email: unless everyone has it, it wouldn’t make sense. Adoption would need to be driven down by a high level of government, Stein argued, and while there have been experiments here and there in implementing the technology, they end up running into the same issues. “No one wants to bite the bullet and be the first one to get it going,” he said.
Deed theft has been around for a long time, and given the recent uptick in cases, it will continue to be an issue nationwide, especially in hotspots like Florida and New York. But the increased spotlight on the issue is helping to bring more awareness of the problem and it’s led to increased enforcement and prevention methods by authorities and lawmakers. The possibility of blockchain technology being implemented as a way to further protect titles and deeds from getting into the wrong hands has potential, but it’s unlikely it will happen without a top-down push from states or even the federal government. The good news is that efforts to crack down on bad actors committing deed fraud are working, as numbers are dropping in places like Brooklyn that have seen the worst of it. But as authorities and homeowners have seen, deed thieves continue to come up with new schemes and workarounds that will need to be constantly addressed. Until we can overhaul the entire way the property industry records titles, stopping title fraud will continue to be an endless game of whack-a-mole.