What is property deed fraud and how to prevent it

Deed fraud

It’s a homeowner’s worst nightmare: someone steals your home through forging a deed or other means of illegally transferring ownership of your property. Think it would never happen to you? Just this week, Halle Berry was the victim of a forged deed that falsely and illegally appeared to give ownership of her house to someone else. The brazen criminal even had the locks changed!

If you are wondering what a deed even is, it’s the legal document that shows who owns any particular property. Whoever is listed on the deed is an owner. With an asset as large as a home, there’s unfortunately an incentive for criminals to target homeowners with deed fraud.

To find out how it happens, what you can do to prevent it from happening to you, and what to do if you or someone you know is a victim of deed fraud, weMarjory Cajoux turned to real estate legal expert, Marjory Cajoux. Marjory has weighed in before on real estate issues related to buying a home and real estate closings. The Law Offices of Marjory Cajoux is a full-service boutique law firm that specializes in providing personalized, client-focused care with skilled expertise and quality representation. She can be reached at (718) 237-0411 and marjorycajoux@macalaw.com.

How does deed fraud happen?

In order to change someone’s name on a deed in New York, one must sign and record the deed and the ACRIS forms at the county register in which the subject property is located (ACRIS is a system specific to New York City, but every municipality will have its equivalent).  That simple process has led to several homeowners becoming victims of deed frauds. There are several methods used by perpetrators to commit deed fraud resulting in a homeowner’s worst nightmares:

The first method used by perpetrators is forging their names on a deed and ACRIS forms, and then filing the new forged deed and ACRIS documents at the City Register.  The new owner of the property is the name of the person appearing on the last deed recorded. 

The other method used by the perpetrators, and that is more prevalent, is to approach the owner of a property, who might be in some sort of financial distress. The perpetrator would have already researched the property, already found that the property has a small loan on it, or no mortgage at all, making it an attractive property to own, repair and resell.  The perpetrator will approach the homeowner with a business proposition of some sort – repairs, or loans – and say “just sign these loan documents”. The documents presented by the perpetrator would in fact be the deed and ACRIS forms necessary to transfer ownership. The homeowners would, unknowingly, sign away their rights to the deed. The homeowners would not realize that they signed away their rights and interests and are no longer the owner of that property. They will later realize that someone else owns their property when they attempt to sell the property and find out that the property doesn’t belong to them! 

The third approach used by the perpetrators is to take ownership of the property of a deceased person with no apparent heirs, or heirs residing abroad or out of state.  The perpetrators might impersonate an heir and have the property transferred to their name, or their entity, forging their name. In the alternative, the perpetrators may use a middleman as “heir” of the estate and cause the middleman to transfer the property to them.  

How can a homeowner protect themselves against deed fraud?

First of all, do not ever sign any documents related to your home without an attorney! Fraudsters will say you don’t need an attorney, but you absolutely should in order to protect yourself.

Second of all, every property owner should check their deed regularly, just like they check their credit score. In New York we have a system, ACRIS, that is very easy and free for any property owner to search at any time. Other cities will have other ways to check your deed.

What can someone do if they are a victim of deed fraud?

If you are the victim of deed fraud, you will first want to have an attorney vacate the deed and any and all liens encumbering the property. Depending on what has occurred since the deed was fraudulently transferred, you may need to sue a number of entities, including the title company, if a title company was used to transfer the deed. Vacating a deed means asking a court to nullify and remove the fraudulent deed holder from city records. 

An attorney will file a summons against the fraudulent deed holder, but typically that person doesn’t respond because it’s a theft. If that person doesn’t respond, the attorney may vacate the deed by default, and record the default judgement at the City Register, resolving the issue. 

However, if the fraudulent deed holder sold the property to a third party, the third party will respond, but those people become victims as well.  If it was a forged deed or a transfer under false pretense, the transfer to the third party and all subsequent deeds are null and void.  

Have you noticed the incidence of deed fraud increasing?

Yes, absolutely. For the past four years it’s been rampant, particularly in Brooklyn, Harlem and Queens. The home values in these areas have increased dramatically, and the homeowners have a remarkable amount of equity in the homes with a small mortgage, or no mortgage at all.

In some cases, an elderly person has a reverse mortgage that they can’t pay, and a person comes along and says, “I can help you modify it”, and the homeowner agrees and signs some papers that transfer ownership to the fraudster, instead. 

These criminals prey on older people, minorities, people who are not educated and people who are not going to get a lawyer to review the documents. Also, we see this happening in places where people speak a second language, like in Asian communities, where the homeowner may be less familiar with the legal process and the English language.  

How on earth did the person who stole Halle Berry’s deed think they would get away with it?

It could be that her property is not in her name.  The property may be held in a trust or entity. Perhaps the person saw a house that did not appear to be lived in, if she was away, and did not know who it belonged to. 

The thing is, Halle Berry or someone like that is a particularly bad target as she certainly has no incentive to settle with the fraudster!

How do you go about resolving a fraudulent deed transfer when you are approached by a homeowner who has been a victim?

The first thing I do is to go on ACRIS, review all deeds and mortgages on the property. ACRIS will detail the history of the transfers and transactions on the property, and how long the victim has had the property. One of the red flags is a property transferred with no compensation. The transfer document appearing on ACRIS will have zero for taxes made to the city or the state, for example.

Then, I take the person’s story, put the pieces together and proceed from there.

The most complicated issue I had was with an elderly man in a nursing home. Some people had him transfer the property by falsely stating that they were going to repair the property. Instead, they had him sign a document that transferred ownership of the property to themselves.

What are some complications in resolving deed transfer issues?

It gets complicated when the deed is fraudulently transferred and then sold to a third party at Fair Market Value, otherwise known as Bona Fide Purchaser For Value, or BFP. If the fraudulent transfer is not a case of forgery or false pretense, the court has to weigh your interest vs. the interests of a BFP third party, who may be an innocent party. The court has to weigh two interests.

Some of the determining elements can be: Did you sign the documents knowingly, how long did you realize that your property deed had been fraudulently transferred? Have you ever gone to that property?

So, in every case, it’s best for homeowners to keep tabs on who is on their deed by regularly reviewing ACRIS.