This week, RHLS Senior Counsel Judy Berkman spoke to Philadelphia City Council about Fraudulent Conveyance, or Deed Fraud, Deed fraud is a big problem for Philadelphia homeowners, particularly seniors. Judy has years of experience working on this issue. She has previously advocated for funding from the City to address the problem of “Tangled Title”, where the direct heir of a property may not be properly listed on the deed. She is a current member of the Fraudulent Conveyance Task Force. Please read her testimony below.
Testimony Submitted by
Judy F. Berkman, Senior Counsel
Regional Housing Legal Services
for the Philadelphia City Council’s Committee on Intergenerational Affairs and Aging
March 24, 2021
Thank you, Councilmember Brooks and the Members of the City Council Committee on Intergenerational Affairs and Aging. This series of hearings on senior homeownership is an important step in addressing a variety of housing issues experienced by older Philadelphians.
I am Judy Berkman, Senior Counsel at Regional Housing Legal Services (“RHLS”). RHLS is a nonprofit law firm with unique expertise in affordable, sustainable housing and its related components — community and economic development, utility matters and preservation of home ownership. RHLS provides innovative project and policy solutions that help create sustainable communities offering decent, safe and affordable housing for lower-income Pennsylvanians.
I am here on behalf of the Fraudulent Conveyance Task Force, which operates under the auspices of the Philadelphia Bar Association. The Task Force brings together key stakeholders throughout the city and commonwealth who are dedicated to stopping this crime.
Members include the City of Philadelphia’s Department of Records, Law Department, District Attorney’s Office, Police Department, the Register of Wills, and other City Departments. Other stakeholders range from state and local elected representatives and government officials, to private and public interest attorneys, notaries, and representatives from title insurance companies and community organizations.
The Task Force is committed to ending deed fraud and providing information and guidance to those who are victims.
We have been focusing on three areas:
• Best Practices in Deed Recording Offices
• Notary Law Reform, and
• Criminal Law Reform and Enforcement
There is a lot of synergy in bringing together so many stakeholders to brainstorm ideas and share expertise. We hope to finalize our recommendations soon, but they will definitely include recommendations to strengthen criminal laws and penalties for deed and notary fraud. We will also summarize and acknowledge all the reforms that Commissioner Leonard has implemented at the Department of Records, as well as the outreach and pilot probate fee deferral program that the Register of Wills has established.
I would like to provide some legal background and some tips on how everyone can help eliminate deed fraud.
Deed fraud is an extreme example of “Tangled Title”. Over 20 years ago, I worked to establish a program funded by the City called Tangled Title. Tangled Title is when someone has a right to title in their name, but their name is not on the deed. The simplest case is when Mom dies and is survived by one adult child. That child has the right to title, but the deed is still in Mom’s name. The other extreme is when someone steals your house and records a deed saying you transferred ownership out of your name into their name.
We call the thieves “fraudulators!
There are two basic kinds of deed theft.
- The first kind of deed fraud is forgery. A typical case involves a vacant house, often in a gentrifying area. The owner died years ago, and the house is abandoned. Unfortunately, these cases often have multiple victims. Someone forges the name of the owner and the signature is notarized. The first victim is the owner’s heir. After recording the first forged deed, the fraudulator immediately flips the house to a second victim. The heir finds out about the deed theft later when someone starts living there or rehabbing it! What a mess! The first victim needs a lawyer to file a lawsuit and get a Court Order to “quiet title” and record a new deed. A forged deed is VOID from the outset. The second victim, meanwhile, may have put a lot of money into repairs, often thousands of dollars’ worth of repairs, and wants to be made whole! Another lawyer is hired. And they go to Court. The fraudulator is long gone, and victim one and victim two are suing each other. The heir owns the house, if the forgery can be proved. But if the heir gets the house, she is “unjustly enriched” because she gets the house back with victim 2’s improvements. What happens if the heir is low-income and cannot afford to pay the second victim for the improvements? As I said, deed fraud can be a mess.
- The other type of deed fraud involves the owner actually signing the deed. In this case, an elderly owner is living in the house and needs care. A family member or neighborly caregiver tricks or compels the elderly owner into signing some papers in front of a notary. The fraudulator has prepared a deed, an estate renunciation, or a power of attorney for the owner to sign, giving himself the property. This case is harder because the owner actually executed the document. The owner’s lawyer would have to prove that the owner was threatened, was the victim of duress or coercion, or did not have the capacity to understand what she signed.
All deed fraud cases require the victim to have legal representation to obtain Court Orders to reclaim ownership. That process happens in civil court. The Philadelphia Bar Association has a Lawyer Referral and Information Service, which can answer legal questions and refer people having any kind of legal problem to a lawyer. A 30-minute consultation costs $35. The information about this service and the organizations that provide free legal services to low-income Philadelphians is all on the Records Department’s deed fraud website.
All of these cases involve a notary public. This is yet another wrinkle.
- Some notaries are simply duped by clever fraudulators and others are in on the crime.
- Other fraudulators impersonate a real notary. They basically steal the identity of a real notary. In one situation, a notary was impersonated in over 50 deed thefts! And unfortunately, this notary is being sued in several of these cases, and she needs a lawyer, too!
- The issue of Notario fraud in the Latino community and other immigrant communities is especially sad. In other countries, a notary is a trained professional who acts more like an American lawyer for real estate transactions. In those communities, the presence of a notary appears to “bless” the transaction legally, when in fact the notary is simply verifying that the person executing the deed is the person showing a driver’s license to prove their identity to the notary.
The Records Department’s initiative to enter the Notary’s name into Philadox should help deter and prevent notary fraud and prosecute it!
Sometimes the fraudulator can be identified and is prosecuted in a criminal case. In some of these cases, the resolution of the criminal case involves the perpetrator voluntarily executing a deed to correct the fraud. The Task Force appreciates the District Attorney’s office hiring an elder justice attorney to pursue the challenging cases involving family fraud.
Most of this fraud can be prevented.
- Notaries in Philadelphia may be becoming more reluctant to notarize deeds. So, more vigilance by notaries would be very helpful.
- Vigilance by neighbors is helpful, too. People should watch out for their neighbors’ properties and report possible fraud to the City whenever observing something suspicious!
- And people should sign up for the Records Department’s Fraud Guard email alerts.
- Another way to prevent deed fraud is for families to administer the estates of deceased relatives and record new deeds. The Register of Wills pilot fee waiver program will be helpful to heirs who want to administer these estates and cannot afford the fees.
- Which brings me to estate planning. People should not do estate planning through deed changes! Many people think the simplest way to transfer title to their house is by adding a family member’s name to the deed. Please do not do this! I cannot tell you how many people I have met at senior center outreach workshops who come up to me to ask how to get someone’s name OFF their deed. It often turns out that the family member is no longer helping care for the senior as promised or has become abusive.
- The best way to prevent deed theft is for anyone buying real estate to get title insurance. The title company does a thorough title search, not just a lien and judgment search. There are over 70 “hidden hazards” of buying real estate. They range from old City water liens and judgments against the prior owner, to potential claims by other heirs, defective deeds in the chain of title, mental incompetence, or confusion due to similar or identical names.
- Title insurance is not required, but it definitely is a wise investment for anyone buying a house. The rates are regulated by state law, so there is no need to shop around for rates!
You will ask: what can City Council do to help prevent deed fraud?
The primary way City Council can help deter, prevent and prosecute deed fraud is to provide funding. The DA’s office and the police need funding to investigate and track down the facts to pursue these complicated cases. They need more funding for resources to locate and prosecute the fraudulators and notaries perpetrating these crimes.
Also, please provide on-going and new funding for the Department of Records to continue implementing Commissioner Leonard’s numerous new initiatives to deter and identify potential fraudulators, and to provide victims with tools to solve their deed fraud cases.
City Council should also provide funding for repairs to owner-occupied properties will preserve the City’s largest source of affordable housing—the homes seniors live in can be made more habitable for their lifetimes and can be preserved for their heirs.
And finally, the City should continue its robust support for the Tangled Title program administer by Philadelphia VIP, which provides funds for costs to resolve Tangled Title cases, as well as funding for the administration of the program.
You may also ask: What ordinances can City Council adopt to stop the recording of fraudulent deeds?
- I am sorry to inform you that City Council’s authority is limited, since the requirements regarding deed recording are governed by state law.
- The Department of Records handles thousands and thousands of documents every day and Pennsylvania law mandates that if they meet all the state requirements, they must be recorded in the order they are submitted. The Department staff simply do not have the expertise or authority to pull out one document that meets the state requirements in order to examine it more thoroughly.
While I am here, as a public interest lawyer concerned about deed fraud and affordable housing, I also want to acknowledge the City’s initiatives to keep people in their homes, improve the conditions in their homes, and develop new affordable housing.
Thank you again for your commitment to end deed fraud and for your support for so many innovative housing programs.