Heirs Gain New Shield From Predatory Real Estate Speculators

Tweaks in a state law guiding how property gets divided after its owner dies stand to make a big difference for heirs whose family homes are targets for predatory real estate speculators.

The changes to New York’s 2019 Uniform Partition of Heirs Property Act went into effect Friday and were prompted by an investigative series from THE CITY that featured family members who found themselves dispossessed from their own homes after investors forced a sale.

One heir whose fate may be brighter thanks to the revamped law is Mae Lee Massey, who grew up in a two-story brick row home with a front porch in The Bronx. She remembered the neighborhood, Baychester, as quiet and filled with other children to play with. Massey moved out when she turned 19 and eventually settled down in Parkchester with her husband, but visited her parents often.

After her parents died, she inherited the house — so did a man she didn’t know well and who was not related to her. He had rented a bedroom in the house for over 20 years and eventually had a relationship with her mother, she said.

Massey, 67, said that her mother wanted the house to be sold upon her death, which was in 2001. She hired lawyers and tried to negotiate with the man so she could put the house on the market, but he did not agree to sell his share to her.

That man died in 2007. A dozen years later, a company called US Asset Partners 1 LLC purchased his share of the home, a 50% stake, from his daughter for $5,000.

Massey found out about this about three years later, when she looked into unpaid property tax and water bills on the house. At that point, she’d been living in the house for over a decade, having moved with her husband and sons from their rental in Parkchester. Her husband, the family’s breadwinner, was out of work and fighting cancer. She couldn’t afford the rent on her own.

“I would love to keep the house,” Massey said. “I would love to fix the house up from top to bottom and pay off the bills and things like that.”

But the future of her home is up in the air, since she only owns half of it. Hanging over her head — until Friday — was the possibility that the LLC could go to court to demand a forced sale of the house, a move that could have pushed out family members who still live there.

The LLC never went to court to demand a sale of the home, and now it won’t have the chance, thanks to the new amendments , which passed in April as part of the state budget.

The amendments aim to tamp down on a business model used by real estate speculators who hunt for vulnerable properties — owned by homeowners who died without wills, or with a scattered network of heirs. The speculators purchase shares — typically for well below market value — from heirs who inherited the property and may have no idea of the worth of the homes, which are often located in gentrifying, historically Black and Latino neighborhoods.

The speculators could then go to court and force a sale of the property, called a partition action, or insist on being paid handsomely in exchange for their shares.

But under the revamped law, only those who inherit property can initiate a partition action in court — and real estate investors who purchase shares of property from heirs cannot.

“We just want to discourage this predatory activity,” said K. Scott Kohanowski, general counsel at the Center for NYC Neighborhoods, who helped develop the law and its amendments. “This should put a huge damper on the industry that engages in this.”

Of course, predation is still a risk if homeowners or speculators are not aware of the provisions of the law.

“It’s partially on the courts, it’s partially on the lawyers who are representing the investors to be aware of this law,” Kohanowski added.

For Massey, pro bono lawyers and the City Bar Justice Center have been trying to work out a resolution so that she can keep her home. Michael Romano, a lawyer representing the LLC, said the parties are finalizing details of an agreement but declined to comment further.

New Rules

Under the old law, heirs who live in the property have priority over other parties to purchase the other shareholders’ stakes. The court had to look at how any late-arriving partial interest was acquired, and if the court determined the property should be sold, the transaction had to be handled through a third-party broker appointed by the court.

But previously, anyone with any fractional interest in a property could initiate a partition action. That means they could go to court and demand that a judge order the property’s sale, with the proceeds split proportionally among the recognized shareholders. The investors would profit after paying well below what their shares were worth and those living in the property would likely lose their home .

The law now bans such maneuvers. Those investors may keep their shares, but can’t use the courts to divest the property from the family members.

Edward Mostoller, director of the Homeowner Stability Project at the City Bar Justice Center, called the amendments to the law “a game-changer” that could help preserve generational wealth, especially for Black and brown families.

What’s more, if an heir gets an outside offer, the other heirs have a right to purchase that share of the property for the same price. This is meant to keep properties — and the wealth that comes with it — within a family. And heirs who live in the property get priority to purchase, so that they’re less likely to be displaced from their homes.

The person making the offer and the heir who initially received it must notify other heirs, who then have six months to match the offer if they want to purchase the shares.

If the heirs aren’t notified and the investor didn’t do due diligence to get in touch, but the sale still goes through, the other heirs may buy the shares for the price paid by the investors within six months after they’re made aware of the sale.

And even then, if the heirs living in the property don’t have the financial means to purchase the shares held by other heirs, they may be able to get a loan through Sustainable Neighborhoods , a subsidiary of the Center for NYC Neighborhoods. Property owners and heirs of properties caught up in a complicated situation can also contact the Center’s Homeowner Hub for free legal services.

Others around the country are eyeing the changes to New York’s law to understand whether they could apply elsewhere.

Conner Bailey, a professor emeritus of rural sociology at Auburn University who studies heirs’ property in the south, said the provisions New York adopted could also apply to Alabama, where it’s typically farmland, not houses, that is passed down throughout generations to multiple heirs.

The changes to the law “are very explicitly to keep developers at arm’s length,” he said. “This provides an opportunity for the families to make a considered decision and mobilize the resources if they want to retain the land or the property.”

Other Efforts

The changes to the Uniform Partition of Heirs Property Act are just one way lawmakers tried to tackle the loss of generational wealth through predatory real estate practices.

As part of the budget, the state also implemented what’s known as a transfer on death deed, which can simplify estate planning and avoid Surrogate’s court. The deed transfers a property to at least one specific person upon the owner’s demise.

Another change in the law made deed theft — taking the title of a home  without the approval or knowledge of the homeowner — a crime, and the state attorney general may now prosecute it without a referral.

At the city level, the Council in its budget included $1 million for legal assistance and estate planning services to protect the generational wealth of low-income homeowners and their heirs.

In the meantime, Massey is hoping for the best outcome for herself: that she’ll own the house outright and see an end to the uncertainty of sharing ownership with a company.

That house is where her mother passed away at age 96, and, over a decade later, where her husband took his last breath before he died of cancer. It’s where she continues to care for her 24-year-old son, who has autism. And it’s where she hopes to live out the rest of her days.

“I’m not a spring chicken anymore. I’m getting older. I’ve been fighting for this house ever since I was in my 40s,” she said. “Either it’s going to be an asset or it’s going to be a liability. So far, it’s been a hill to climb.”

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