How do I keep an inherited brownstone out of the hands of predatory investors?

Inheriting property is a windfall for any New Yorker, but can quickly turn into a headache when it comes to dealing with your other co-owners and any outside investors. But thanks to recent changes to New York state law, you now have additional protections against losing a jointly inherited residential property to an investor.

For starters, you must be notified when an investor plans to purchase a stake in a property you jointly inherited with your relatives. If one of your relatives plans to sell to an investor, you and the remaining heirs have a right to buy their share for the same price, thanks to changes to the law that went into effect on July 19th. 

Even if an investor does purchase a stake in your brownstone, they can no longer go to court to force a sale of the property through a partition action, which is when a court decides if a property can be physically split or should be sold to distribute the proceeds to the co-owners. Instead, only those who inherited the property can do so.

These changes to New York’s 2019 Uniform Partition of Heirs Property Act give you a chance to purchase your brownstone, rather than lose it to an outside investor. The tweaks should also make it more difficult for predatory real estate investors to snag valuable property on the cheap, said K. Scott Kohanowski, general counsel for the affordable housing nonprofit the Center for NYC Neighborhoods. 

Reach out to your relatives

Before diving into the law, it's important to note that a relationship with your relatives will be crucial if you plan to buy their shares. Other inheritors of the brownstone can still force a sale of the building through the partition process, so it’s worth getting in touch with your relatives if you want to make a deal.

Disagreements can make working out a will difficult, and can slow down a sale if you do decide to part ways with the property. It’s best to try to establish a friendly relationship from the get-go, said Deanna Kory, a broker at the Corcoran Group.

“I’ve been through so many different situations and it's not one-size-fits-all, but the most successful ones are where people are friendly enough to trust the executors and or get along well enough to have a process that’s inclusive,” Kory said.

New rules on inheriting property

Real estate speculators have long targeted unwitting heirs, particularly in NYC’s Black and Latino neighborhoods, to snag an interest in valuable properties and then force a sale to take the rest, a problem that The City covered in an investigative series. But changes to state law now limit those tactics.

Previously, anyone who owned a stake in a property could force it to be sold during a partition sale, Kohanowski said. That process could be useful for families who couldn’t decide what to do with a building, but also allowed predatory investors to purchase a small stake in a property— such as a brownstone—and then force a family to sell it.

You “couldn't just divide the property and give each person half of the property, they had to sell the property and divide the proceeds,” Kohanowski said. Partition sales “were really meant to facilitate disagreements between family members who own a property jointly, but it could be used as a tactic to strip equities from homes.”

Now, only the heirs of a property can initiate a partition sale. Even if an investor purchases one of your relative’s stakes in your brownstone, you and the other inheritors have a right to buy that stake on those same terms within 180 days of being notified of the offer. If that investor fails to notify you of a deal, you’ll still have a right to buy whatever share they acquired within 180 days of being notified of the sale.

In other words, an investor can’t just swoop in, buy a small stake in the property on the cheap, and force a sale to buy the entire building. Instead, you’ll have time to figure out if you (or your other relatives) want to purchase that interest in your brownstone. 

“The heir has the right of first refusal,” Kohanowski said. “They can buy the property from the other heir on the same terms and conditions” as an investor offered. 

Deed theft is now a crime

If you’ve recently inherited your brownstone, you may be worried about deed theft, the practice of using falsified or forged documents to unlawfully transfer a property to someone else. 

These scammers often target older owners, those in financial trouble, and those in gentrifying neighborhoods with fake offers of a mortgage or way to refinance debt on their home. If you’re concerned this may happen to you, you can get help from a network of 89 nonprofits that offer free counseling through the state’s Homeowner Protection Program online or by calling 1-855-466-3456.

The changes to the state law criminalize deed theft, making it easier for the Office of the New York State Attorney General to prosecute bad actors, who can now face up to 25 years in prison for severe scams. You can report deed theft to the attorney general’s office online or by calling 1-800-771-7755.

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