Title related items in the 2024 NYS Budget
Part “O” of the recently passed 2024 New York State Budget contains some items that are of interest to the title insurance community. Entitled “The Heirs Property Protection and Deed Theft Prevention Act of 2024”, these items are intended to address the increasingly publicized problems of theft of real property through either forgery or fraud, the protection of heirs to real property from partition actions by non-family members, and also would now permit “transfer on death” deeds in NYS.
“Deed Theft” is intended to be addressed by:
1) Changing the Criminal Procedure and Penal Laws to create the new crime of “Deed Theft”, and classifying it as Grand Larceny.
2) Adding Section 63 to the Executive Law to enable the NYS Attorney General to investigate any case of Deed Theft.
This portion of the bill does not appear to affect title insurance much, and some observers are skeptical that the provisions would even affect the frequency of deed theft.
The issue of “heirs property” has bubbled up as a national issue recently as homes that have been in families for generations have been bought up and sold under partition actions. In a typical case, low income homeowners die in possession of property without a Will, and their heirs may feel that they can’t afford to probate the estate. Especially with large families, this leaves the property divided up into many shares. Subsequent deaths of the original heirs may spread these interests exponentially. Real Estate speculators then buy one of more heir’s shares for a discounted cash value, then force a partition sale for the entire property. If the heirs are also low income, they often cannot afford to bid at the partition auction, and so are evicted from the house they may have lived in their whole lives.
The new law would give the other tenants in common a right of first refusal to purchase shares if an outside party makes an offer to one of the co-tenants. It also gives first priority to purchase those shares to any co-tenant actually occupying the property as their primary residence. it will become the duty of any outside party making the offer to identify any co-tenant and properly notify them of the offer. Failure of the outside co-tenant to comply with these rules would give the other co-tenants the right to purchase the shares of the non-relative co-tenant at the price paid by that co-tenant, for a period of 180 days after the become “aware of the sale”. There doesn’t appear to be any provision indicating the sales may be overturned if the notice provisions are violated.
The final portion of “Part O” concerns “Transfer on Death Deeds” (TOD Deeds). These have been permitted in other states, but up to now have not been used in New York. it’s a method of estate planning especially useful for low income homeowners whose potential estate of death consists primarly of their residence or other real property, as it can convey real property from a deceased person without probate proceedings. This new statute is an addition to Section 993 of the RPAPL, new sections 12 and 13, and new Section 424 of the RPL.
There are a few statutory requirements for such deeds. They should be in the form of regular deeds, but also have to be signed by at least two witnesses (similar to a Will, or the new Power of Attorney form). The deed has to explicitly state that transfer of the property to the designated beneficiary is to occur upon death of the transferor. Finally, it has to be dule acknowledged like a regular deed, and recorded PRIOR TO the death of the transferor. It’s effective without deliver of the property to the beneficiary, and no consideration is required. If a designated beneficiary dies prior to the death of the transferor, the interest of the beneficiary lapses. A TOD deed does not overrule the transfer to a joint tenant upon death of another joint tenant. A beneficiary may renounce all or party of the property in the same manner as if the interest was transferred in a Will. One factor to be ware of for these deeds is that if the transferor’s probated estate is insufficient to satisfy allowed claims on the estate OR a statutory allowance to a surviving spouse or child, the estate may enforce such liability against the property conveyed by the deed. Such enforcement must be commenced within 18 months of the transferor’s death. There is a suggested form for a TOD Deed in the statute, but if the other provisions of the law are complied with, alternative forms may be used.
The statute is silent as to whether a TOD Deed overrides a specific devise of property in a Will, but use in other states indicates that it will. While the intent for this statute may be for use by families for whom the cost or probate may be a burden, it’s not limited by income. Theoreticaly, it could be used by wealthy estates to remove real property from being taxes by Estate taxes. The NYS Department of Taxation and Finance has yet to address whether property conveyed by TOD deeds are subject to estate taxes. Theoritically, the new Transfer on Death provisions take effect 90 days after the governor signed this part of the budget; however any TOD deeds executed prior to the effective date are valid is the transferor dies AFTER the effective date of the law.
Bill Collins
Director of Title Insurance