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S06577 Summary:

S06577 Actions:

S06577 Committee Votes:

S06577 Floor Votes:

S06577 Text:

 
                STATE OF NEW YORK
        ________________________________________________________________________
 
                                          6577
 
                               2023-2024 Regular Sessions
 
                    IN SENATE
 
                                     April 27, 2023
                                       ___________
 
        Introduced  by Sen. KAVANAGH -- read twice and ordered printed, and when
          printed to be committed to the Committee on Housing, Construction  and
          Community Development
 
        AN  ACT to amend the real property actions and proceedings law, the real
          property law, the criminal procedure law, and the civil  practice  law
          and  rules,  in relation to the theft of real property and protections
          for victims of real property theft
 
          The People of the State of New York, represented in Senate and  Assem-
        bly, do enact as follows:
 
     1    Section 1. The real property actions and proceedings law is amended by
     2  adding a new section 756-a to read as follows:
     3    § 756-a. Stay of action or proceeding when a party's claim to title is
     4  in  dispute. 1. (a) A federal, state or local government agency may move
     5  for a stay of any proceeding to recover possession of or quiet title  to
     6  real property relating to a residential dwelling unit or property, based
     7  on  a  pending  good  faith investigation into the theft or fraud in the
     8  title to, or the financing of, the premises that is the subject  of  any
     9  proceeding.    Upon the agency's showing of the pendency of a good faith
    10  investigation, the court shall issue a stay of the proceeding, including
    11  staying execution of a warrant of eviction or enforcement of a  judgment
    12  so long as the investigation is ongoing.
    13    (b)  Every  six  months,  the court shall schedule a status conference
    14  with the government agency and any other parties to the action to review
    15  any stay and to determine if the investigation is  still  continuing  in
    16  good  faith  and  shall  continue  the  stay of the proceeding until the
    17  government investigation is closed.   If it  should  deem  necessary,  a
    18  court may review any supporting documents filed by the government agency
    19  in  camera and to be filed under seal if deemed necessary by the govern-
    20  ment agency.
    21    2. The court shall stay all proceedings to recover  possession  of  or
    22  quiet  title to real property relating to a residential dwelling unit or
 
         EXPLANATION--Matter in italics (underscored) is new; matter in brackets
                              [ ] is old law to be omitted.
                                                                   LBD10874-02-3
        S. 6577                             2
 
     1  property, where a charging instrument is filed against a party  to  such
     2  proceeding  for  deed  theft,  larceny,  offering a false instrument for
     3  filing, criminal possession of stolen property or any other law  assert-
     4  ing  theft  or  fraud  in  obtaining title to property and said charging
     5  instrument relates to the premises that are the subject of such proceed-
     6  ing. The stay shall remain in effect until resolution of  such  criminal
     7  action.
     8    3.  The  court  shall stay all proceedings to recover possession of or
     9  quiet title to real property relating to a residential dwelling unit  or
    10  property,  where  a  federal,  state  or  local  government  agency  has
    11  commenced a civil action or proceeding relating to the theft or fraud in
    12  the title to, or the financing of, the premises that are the subject  of
    13  such proceeding.
    14    4.  The  court  shall stay all proceedings under section seven hundred
    15  eleven or seven hundred thirteen of this  article  for  ninety  days  to
    16  allow  a  party  to  file  a complaint in the appropriate forum when the
    17  court makes a determination that there is a bona  fide  dispute  between
    18  parties  purporting  to  own  the  property  that  is the subject of the
    19  proceeding.
    20    (a) A rebuttable presumption that a bona fide dispute to title  exists
    21  shall  be  created  when the party disputing petitioner's title, owns or
    22  owned the property that is the subject of the  court  proceeding  during
    23  the  last  three  years,  or  is a person interested in the property, as
    24  defined by section one hundred three of the surrogate's court  procedure
    25  act.
    26    (b)  A  party may seek an additional stay of the proceeding beyond the
    27  initial ninety day stay by the court if  they  were  unable  to  file  a
    28  complaint or seek a stay from another forum.  In extending the stay, the
    29  court  shall  consider,  without limitation, the totality of the circum-
    30  stances including steps the parties have taken to resolve  the  dispute,
    31  the  harm  to  the  parties  of  a  further stay, and the ability of the
    32  parties to advocate for themselves or retain counsel.
    33    (c) This section shall not apply to any proceeding commenced  pursuant
    34  to subdivision ten of section seven hundred thirteen of this article.
    35    5.  Nothing  in this section shall diminish the court's own discretion
    36  to further stay a proceeding in the interests of justice.
    37    6. Nothing in this section shall limit a party  from  seeking  relief,
    38  including a stay of a proceeding under this article, in another court.
    39    7. For purposes of this section, a proceeding to recover possession of
    40  or  quiet  title  to  real  property  shall include any proceeding under
    41  section seven hundred eleven or seven hundred thirteen of this  article,
    42  an  ejectment  action  or  a  writ of assistance pursuant to section two
    43  hundred twenty-one of this chapter, a foreclosure action, an  action  to
    44  enforce  a  mortgage  note,  or  any  other action affecting title to or
    45  encumbrance upon real property, or any other judicial or  administrative
    46  proceeding to recover possession of or quiet title to real property.
    47    8. For purposes of this section, a party shall include:
    48    (a)  a  corporation,  limited  liability company, partnership or other
    49  entity where a charging instrument has been filed against an  individual
    50  who  has  a  financial  or controlling interest in the entity that holds
    51  title to the property; or
    52    (b) where a charging instrument has been filed against a seller of the
    53  property, including an  individual  or  corporation,  limited  liability
    54  company, partnership or other entity, or where a charging instrument has
    55  been  filed  against  an  individual  who has a financial or controlling
    56  interest in the entity that sold the property.
        S. 6577                             3
 
     1    § 2. Section 1501 of the real property actions and proceedings law  is
     2  amended by adding a new subdivision 6 to read as follows:
     3    6. Where a person, as defined in subdivision seven of section 10.00 of
     4  the  penal  law,  has been convicted of a criminal offense in connection
     5  with a deed theft or fraudulent transaction involving real property, the
     6  conviction creates a rebuttable presumption that such deed transfer  was
     7  fraudulent.    This section also applies where a grantee of a fraudulent
     8  deed is an entity that is beneficially owned by such convicted person. A
     9  defendant may in such action produce proof to establish by a  preponder-
    10  ance of the evidence that such deed was not procured through fraud.
    11    § 3. Paragraph (g) of subdivision 2 of section 265-a of the real prop-
    12  erty  law,  as  added  by chapter 308 of the laws of 2006, is amended to
    13  read as follows:
    14    (g) "Foreclosure" means that there is an active [lis  pendens]  notice
    15  of  pendency  filed  in  court  pursuant to article thirteen of the real
    16  property actions and proceedings law, or a foreclosure  action  pursuant
    17  to  article  eleven  or  thirteen  of  the  real  property  actions  and
    18  proceedings law has been commenced against the subject property,  or  an
    19  action to enforce a mortgage note has been commenced against the borrow-
    20  er whose property is secured by a mortgage loan, or the subject property
    21  is on an active property tax or utility lien sale list.
    22    § 4. Paragraph (d) of subdivision 1 of section 265-b of the real prop-
    23  erty  law,  as  added  by chapter 472 of the laws of 2008, is amended to
    24  read as follows:
    25    (d) "Distressed home loan" means a home loan [that  is  in  danger  of
    26  being  foreclosed  because  the homeowner has one or more defaults under
    27  the mortgage that entitle the lender to accelerate full payment  of  the
    28  mortgage and repossess the property] for which an installment payment is
    29  more  than  sixty  days  past  due,  or a home loan where the lender has
    30  commenced a foreclosure action. For purposes of this paragraph, a  "home
    31  loan" is a loan in which the debt is incurred by the homeowner primarily
    32  for personal, family or household purposes, and the loan is secured by a
    33  mortgage  or  deed  of  trust on property upon which there is located or
    34  there is to be located a structure or  structures  intended  principally
    35  for  occupancy of from one to four families which is or will be occupied
    36  by the homeowner as the homeowner's principal dwelling.
    37    § 5. Section 266 of the real  property  law  is  amended  to  read  as
    38  follows:
    39    §  266. Rights of purchaser or incumbrancer for valuable consideration
    40  protected. This article does not in any  manner  affect  or  impair  the
    41  title  of  a  purchaser  or  incumbrancer  for a valuable consideration,
    42  unless it appears that [he] such purchaser or incumbrancer had  previous
    43  notice,  whether actual or constructive, of the fraudulent intent of his
    44  immediate grantor, or of the fraud rendering  void  the  title  of  such
    45  grantor.    There  shall be a rebuttable presumption that a purchaser or
    46  incumbrancer had notice of fraud or fraudulent intent in the case  of  a
    47  transfer  of mortgaged real property, between a purchaser and seller who
    48  are not associated parties, that is not  accompanied  by  the  recording
    49  with  the clerk of the county or with the commissioner of deeds in which
    50  the property is located, of a statement, executed by the mortgagee,  and
    51  duly  acknowledged, stating, substantially, that (a) a party is assuming
    52  the seller's indebtedness secured by  the  mortgage;  or  (b)  that  the
    53  indebtedness secured by the mortgage has been satisfied.
    54    For  the purposes of this section, "associated parties" means spouses,
    55  ex-spouses, parents and children, siblings, a homeowner and  that  home-
        S. 6577                             4
 
     1  owner's  family  trust, or a homeowner and that homeowner's wholly-owned
     2  limited liability company.
     3    §  6.  Section 420.45 of the criminal procedure law, as added by chap-
     4  ter 167 of the laws of 2019, is amended to read as follows:
     5  § 420.45 Post-trial motion relating  to  certain  instruments  affecting
     6             residential real property.
     7    1. When a defendant has been convicted after a trial or pled guilty to
     8  [violating  either  section  175.30  or  175.35  of  the  penal  law  in
     9  connection to] any crime that affects the title to, encumbrance  of,  or
    10  the  possession  of, real property and where there is an instrument that
    11  is material to [the] such encumbrance, transfer or purchase of [residen-
    12  tial] said real property, the district attorney, the  attorney  general,
    13  or  any law enforcement agency may file a motion in the supreme court in
    14  the county where the property that is the subject [to] of the instrument
    15  is located or the prosecution occurred on behalf of the victim  to  void
    16  [the]  said instrument [that is the subject of such criminal information
    17  or indictment]. Such motion must be in writing and  [provide  reasonable
    18  notice  to  all persons who have an interest in the property affected by
    19  such instrument. The motion papers must] state the county or borough, if
    20  in the city of New York, and block, lot, street address of such  proper-
    21  ty,  and  a  description of such property[. The motion papers must state
    22  the grounds of the  motion,  must  contain  sworn  allegations  of  fact
    23  supporting  such grounds], and include a copy of the [guilty disposition
    24  attached to the document] judgment of conviction. Notice must  be  given
    25  to all persons who have an interest in the property.
    26    2.  Within  ten days after filing a motion pursuant to subdivision one
    27  of this section, the [district attorney] agency filing the motion  shall
    28  record  a copy of the notice of motion in the office of the clerk of the
    29  county in which the property is situated. The notice shall be indexed by
    30  the clerk in the manner prescribed by subdivision (c) of rule sixty-five
    31  hundred eleven of the civil practice law  and  rules  for  a  notice  of
    32  pendency of action and shall have the same effect as such notice.
    33    3.  The supreme court must conduct a hearing and make findings of fact
    34  essential  to  the  determination  whether  to  declare  the  instrument
    35  described  in  subdivision  one  of  this  section  void ab initio. [All
    36  persons providing factual information at such hearing must testify under
    37  oath.] There will be a rebuttable presumption  that  where  a  party  is
    38  convicted  after a trial [in criminal court] or a guilty plea to [either
    39  section 175.30 or section 175.35 of the penal law  in  connection  with]
    40  any  crime  that affects the title to, encumbrance of, or the possession
    41  of, real property and where there is an instrument that encumbers or  is
    42  material  to  the  transfer or sale of [residential] real property, that
    43  such instrument is void ab initio.
    44    4. Upon the defendant's conviction  of  or  guilty  plea  [to  section
    45  175.30  or  section 175.35 of the penal law] as described in subdivision
    46  one of this section, and after conducting a hearing pursuant to subdivi-
    47  sion three of this section, a court shall make a  determination  and  if
    48  appropriate shall order that the instrument described in subdivision one
    49  of  this  section  be declared void ab initio or grant other appropriate
    50  relief to the victim.  The order of the court shall describe the  nature
    51  of  the  false  statement or false information contained in such instru-
    52  ment. A copy of such instrument shall be attached to the  order  of  the
    53  court.
    54    5.  If  the  order  relates to an instrument that has been filed with,
    55  registered, or recorded in a public office, [the district attorney shall
    56  record] a certified copy of such order shall be recorded in  the  office
        S. 6577                             5
 
     1  of  the  recording officer of the county in which such property is situ-
     2  ated[, in the same manner as a conveyance duly  acknowledged  or  proved
     3  and certified so as to entitle it to be recorded. Such recording officer
     4  shall record the same in his or her said office].
     5    6.  For purposes of this section, "all persons who have an interest in
     6  the property affected by such instrument" shall  mean  all  parties  who
     7  have  recorded  an  instrument  affecting  the real property that is the
     8  subject of the instrument described in subdivision one of this  section,
     9  [including]  any  last  record  owner and anyone in residence during the
    10  pendency of the prosecution and  any  party  [or  entity]  with  a  lien
    11  against  the  property  that is unsatisfied, or any other party that may
    12  claim to have liens [of interest on] or an interest in the property, and
    13  any current residents of the property, as of the date of the  filing  of
    14  the criminal information or indictment.
    15    7.  Nothing  in this section shall be deemed to inhibit or prevent (a)
    16  relief otherwise provided by law, or (b) a party's right to appeal  such
    17  order.
    18    §  7.  Section 6501 of the civil practice law and rules, as amended by
    19  chapter 657 of the laws of 1993, is amended to read as follows:
    20    § 6501. Notice of pendency;  constructive  notice.  (a)  A  notice  of
    21  pendency  may  be  filed in any action in a court of the state or of the
    22  United States in which the judgment demanded would affect the title  to,
    23  incumbrance  of,  or the possession, use or enjoyment of, real property,
    24  except in a summary proceeding brought to recover the possession of real
    25  property.  The pendency of such an action is constructive  notice,  from
    26  the  time  of  filing of the notice only, to a purchaser from, or incum-
    27  brancer against, any defendant named in a notice of pendency indexed  in
    28  a  block index against a block in which property affected is situated or
    29  any defendant against whose name a notice  of  pendency  is  indexed.  A
    30  person  whose  conveyance or incumbrance is recorded after the filing of
    31  the notice is bound by all proceedings taken in the  action  after  such
    32  filing to the same extent as a party.
    33    (b)  Notwithstanding  any provision of subdivision (a) of this section
    34  to the contrary, a notice of pendency may be filed by a district  attor-
    35  ney's  office or the office of the attorney general upon a determination
    36  after investigation that there  is  probable  cause  that  a  crime  has
    37  occurred  that  affects  the  title to, incumbrance of, or possession of
    38  real property, in the county where the real property  is  located.  Such
    39  notice of pendency shall remain in effect for a period of six months but
    40  may be renewed twice.
    41    (c)  Notwithstanding  any provision of subdivision (a) of this section
    42  to the contrary, a notice of pendency may be filed by a district  attor-
    43  ney's  office or the office of the attorney general upon the filing of a
    44  criminal complaint or indictment that allege charges affecting the title
    45  to, incumbrance of or possession of real property, in the  county  where
    46  the real property is located.  A notice of pendency filed will remain in
    47  effect until the prosecution of a  criminal case is either dismissed, or
    48  otherwise  disposed  of at sentencing and is not subject to a three year
    49  period of expiration under section six thousand five hundred thirteen of
    50  this article.
    51    § 8. This act shall take effect on the thirtieth day  after  it  shall
    52  have become a law.