New York Enacts New Fraud Protection Measure for Conveyances of Residential Real Property | Practical Law

New York Enacts New Fraud Protection Measure for Conveyances of Residential Real Property | Practical Law

New York recently enacted a new notice requirement for recording conveyances of residential real property. The change aims to alert homeowners to potential fraudulent transfers of their property.

New York Enacts New Fraud Protection Measure for Conveyances of Residential Real Property

by Practical Law Real Estate
Published on 05 Feb 2020 • New York
New York recently enacted a new notice requirement for recording conveyances of residential real property. The change aims to alert homeowners to potential fraudulent transfers of their property.
On December 12, 2019, the New York State legislature amended N.Y. Real Prop. § 291 to provide that when a conveyance of residential real property is recorded, the county clerk or city registrar must send a notice of the conveyance to the property's owner of record. The clerk or registrar:
  • Must use the form of notice specified in the amendment. This notice advises the owner of record to:
    • consult counsel if the record owner has questions about the transfer; and
    • contact law enforcement if the owner suspects a crime.
  • May charge the party seeking to record the conveyance a reasonable fee to cover mailing costs.
Importantly, the validity of the conveyance is not affected by any failure to mail the notice or by the record owner's failure to receive the notice. This amendment does not change New York's "race-notice" statutory recording scheme under N.Y. Real Prop. § 291.
In support of this amendment, the legislature noted a rise in fraudulent schemes to obtain title to residential property, which is then used to obtain home equity lines of credit (HELOCs). Properties most at risk include:
  • Vacant residential properties.
  • Houses owned by senior citizens that are fully paid for and are no longer subject to mortgages.
The new notice requirement, which is intended to protect homeowners from fraudulent transfers of their property, takes effect March 11, 2020.
New York City has a program in place that allows homeowners to register for the Recorded Document Notification Program online to get notified anytime a deed, mortgage, or related document is recorded against the homeowner’s single property located in the five boroughs. A homeowner can choose to have their notification sent via email or SMS text.

Practical Implications

Parties seeking to record the conveyance of residential real property in New York must pay the cost of the additional notice as part of the cost of recording the conveyance, which may require:
  • Confirmation of the cost with the relevant county clerk or city registrar.
  • An additional line item on settlement statements.
  • Updates to purchase and sale agreement forms and riders to allocate responsibility for this cost.
This amendment also serves as a reminder to attorneys for residential purchasers and HELOC lenders to:
  • Be diligent and confirm the purported seller actually owns the property.
  • Be wary of other closing fraud, including fraudulent wiring instructions.
For information on buying and selling residential real estate in New York, see Practice Note, Key Considerations in Buying and Selling Residential Real Estate (NY).