Condominium and Cooperative Fraud Prevention and Recovery Act

Drafting status. A complete bill draft with a sponsor’s memorandum. No bill number is assigned and no sponsor has agreed to carry it. Every citation was verified against a primary source on 2026-07-27; the appendix at Part V records each verification.

PART I — SPONSOR’S MEMORANDUM IN SUPPORT

BILL NUMBER: to be assigned

TITLE OF BILL: An act to amend the civil practice law and rules and the real property law, in relation to notices of pendency in proceedings concerning cooperative and condominium funds, and to a rebuttable presumption arising upon conviction of a financial crime involving such funds.

PURPOSE OR GENERAL IDEA OF BILL:

To extend to condominium and cooperative owners two of the four remedies New York enacted in 2023 to protect single-family homeowners from deed theft, in the two respects where the underlying fraud pattern is the same.

SUMMARY OF PROVISIONS:

Section 1 sets out legislative findings.

Section 2 amends CPLR 6501 to permit the attorney general to file a notice of pendency where there is probable cause to believe that a criminal offense involving the funds or property of a condominium or cooperative corporation has been committed.

Section 3 adds a new section 339-ii-2 to the real property law creating a rebuttable presumption, upon conviction of a person for a felony involving the misappropriation of condominium or cooperative funds, that transactions that person caused the association to enter during the period of the offense were not entered in good faith.

Section 4 provides that the presumption does not disturb the rights of a good faith purchaser for value without notice.

Section 5 sets a severability clause and effective date.

JUSTIFICATION:

In November 2023, New York enacted Chapter 630 of the Laws of 2023 — S.6577, sponsored by Senator Brian Kavanagh, with Assembly same-as A.6656 sponsored by Assemblymember Weinstein, signed November 14, 2023, all verified 2026-07-27. The chapter addressed deed theft, a fraud pattern in which a fiduciary or a stranger takes control of a homeowner’s property and disposes of it before the homeowner can respond.

Among the mechanisms it enacted were a rebuttable presumption arising from a criminal conviction, and an expansion of notice-of-pendency authority permitting district attorneys and the attorney general to file on probable cause of a real-estate-related crime. That authority now appears in CPLR 6501, which — verified 2026-07-27 — permits a notice of pendency in an action where the judgment demanded would affect title to, encumbrance of, or the possession, use or enjoyment of real property, and permits filings by district attorneys and the attorney general in criminal matters involving real property where probable cause exists or charges have been filed.

The Legislature adopted those mechanisms because the ordinary civil remedies were arriving too late. By the time a defrauded homeowner obtained a judgment, the property had been conveyed and the proceeds dispersed.

The same timing problem exists in condominium and cooperative fraud, and for the same structural reason. A managing agent or a sponsor principal holds funds belonging to hundreds of households. Detection is slow because the people best positioned to detect it are volunteers reading summaries prepared by the person under suspicion. By the time the misappropriation is established, the money is gone and the building is facing an assessment.

This bill does not import the whole of Chapter 630. Two of its four mechanisms do not transfer, and the reasons are set out in Part III of this document rather than concealed. What transfers is the presumption and the notice of pendency, because both address the timing problem directly and both are already drafted in New York law in a form the Legislature has adopted.

The Attorney General already possesses broad authority in this area. Executive Law § 63(12) — verified 2026-07-27 — permits the attorney general to apply to the supreme court, on five days’ notice, for an order enjoining the continuance of a business carried on with repeated fraudulent or illegal acts. General Business Law § 352-e — verified 2026-07-27 — places condominium and cooperative offerings, including amendments, under the department of law. This bill supplies a procedural tool to authority that already exists; it does not create a new regulator.

PRIOR LEGISLATIVE HISTORY:

New. Chapter 630 of the Laws of 2023 (S.6577 / A.6656) is the architectural precedent and is described above.

FISCAL IMPLICATIONS:

None identified. The bill creates no new office and no appropriation. Filing a notice of pendency is an existing procedure; the presumption operates in litigation already brought.

EFFECTIVE DATE:

Ninetieth day after it shall have become a law. The presumption in section three applies only to convictions entered on or after that date.

PART II — THE BILL

                           STATE OF NEW YORK
    ____________________________________________________________________

                                                    [NUMBER TO BE ASSIGNED]

                              IN SENATE / IN ASSEMBLY

    Introduced by ____ -- read twice and ordered printed, and when printed
      to be committed to the Committee on Judiciary


    AN ACT to amend the civil practice law and rules and the real property
      law, in relation to notices of pendency and to a presumption arising
      upon conviction of a financial crime involving condominium or
      cooperative funds


    The People of the State of New York, represented in Senate and Assembly,
    do enact as follows:

Section 1. Legislative findings.

The Legislature finds and declares as follows:

1. By chapter six hundred thirty of the laws of two thousand twenty-three, the Legislature enacted remedies addressing the theft of real property, including a presumption arising upon criminal conviction and an expansion of authority to file a notice of pendency upon probable cause of a criminal offense concerning real property.

2. The Legislature enacted those remedies because ordinary civil process was completing after the property or its proceeds had been conveyed beyond recovery.

3. The same delay operates against unit owners in condominiums and shareholders in cooperative corporations, whose funds are held and disbursed by a managing agent, a sponsor, or a board, and whose ability to detect misappropriation is limited by their dependence on records prepared by the party holding the funds.

4. It is the purpose of this act to extend those two remedies, and only those two, to the funds and property of condominiums and cooperative corporations.

§ 2. Amendment to the civil practice law and rules.

Section 6501 of the civil practice law and rules is amended by adding a new undesignated paragraph to read as follows:

The attorney general may file a notice of pendency against real property of a condominium or a cooperative corporation, or against a unit or shares therein held by a person described in this paragraph, where the attorney general certifies that there is probable cause to believe that a criminal offense has been committed involving the misappropriation, conversion, or fraudulent disposition of funds or property of such condominium or cooperative corporation by a sponsor, a member of the board of managers or board of directors, a managing agent, or a principal or employee of a managing agent. A notice filed pursuant to this paragraph shall be cancelled upon the attorney general’s certification that the grounds for filing no longer exist, and shall in any event be cancelled by the court on motion of any party upon a showing that probable cause did not exist at the time of filing.

§ 3. Amendment to the real property law.

The real property law is amended by adding a new section 339-ii-2 to read as follows:

§ 339-ii-2. Presumption arising upon conviction.

1. Where a person has been convicted of a felony an element of which is the misappropriation, conversion, larceny, or fraudulent disposition of funds or property of a condominium or a cooperative corporation, and such person, during the period in which the offense was committed, was a sponsor, a member of the board of managers or board of directors, a managing agent, or a principal or employee of a managing agent of such condominium or cooperative corporation, it shall be presumed in any subsequent civil action brought by or on behalf of such condominium or cooperative corporation that any contract or transaction such person caused such condominium or cooperative corporation to enter during such period was not entered in good faith.

2. The presumption established by subdivision one of this section is rebuttable. It may be rebutted by a preponderance of the evidence that the contract or transaction was fair and reasonable as to the condominium or cooperative corporation at the time it was entered.

3. The presumption established by subdivision one of this section shall not apply to any contract or transaction entered before or after the period in which the offense was committed.

4. A civil action in which the presumption established by this section is invoked shall be commenced within six years after entry of the judgment of conviction, notwithstanding any shorter period that would otherwise apply.

§ 4. Rights of third parties preserved.

Nothing in section three of this act shall affect the rights of a purchaser for value in good faith and without notice, or of a lender that in good faith and without notice advanced funds secured by an interest in real property. A notice of pendency filed pursuant to section two of this act shall constitute notice for the purposes of this section from the time of its filing and not before.

§ 5. Severability; effective date.

If any provision of this act is held invalid, such invalidity shall not affect any other provision. This act shall take effect on the ninetieth day after it shall have become a law, provided that section three of this act shall apply only to judgments of conviction entered on or after such date.

PART III — THE TWO MECHANISMS THAT DID NOT TRANSFER

The prior draft proposed a four-part architecture mapped one-to-one onto Chapter 630. Two parts have been dropped. The reasoning is recorded here because a sponsor’s counsel will ask, and because a bill that quietly drops a promised safeguard is worse than one that explains why.

Dropped: the stay of common-charge collection during an investigation.

The deed-theft analogue stays an eviction or foreclosure while a government agency investigates a fraudulent transfer. The condominium analogue would stay collection of common charges while the attorney general investigates the board or the managing agent.

It does not transfer, for a reason that is fatal rather than fixable. In a deed-theft case, the stay protects the victim from the perpetrator. In a condominium, common charges are owed to the association — that is, to the other unit owners, who are the victims. Staying collection does not stop the fraud; it defunds the building while the investigation runs. Heat, water, insurance, and the underlying mortgage are all paid from common charges. A stay would convert an investigation into an operating crisis for the households the bill is meant to protect.

If an individual owner’s arrears trace to disputed conduct, that is a defence to be raised in the collection action. It is not a reason to stop the building’s revenue.

Dropped: expansion of RPL §§ 265-a and 265-b to unit owners.

Section 265-a of the real property law is titled “Home equity theft prevention” and section 265-b is titled “Distressed property consulting contracts” — both verified 2026-07-27. Section 265-a regulates equity purchasers acquiring residences in foreclosure or default, requiring written contracts with specified terms, a fourteen-day cancellation period, and rescission within two years for material violations.

These sections address a distinct transaction: a third party acquiring a distressed homeowner’s equity. That transaction does occur to condominium owners in common-charge foreclosure, and to that extent the sections may already reach it — a question of construction, not of amendment. The prior draft proposed expanding the definitions to cover “unit owners facing common-charge foreclosure where the underlying arrears trace to disputed governance conduct.” That formulation makes the applicability of a consumer-protection statute turn on a contested fact about a third party’s conduct, which is unworkable at the point of sale where the statute has to operate.

If the sections do not already reach unit owners, the fix is a clean definitional amendment in a separate bill, not a conditional expansion inside this one.

PART IV — OPEN DRAFTING QUESTIONS

1. Section numbering. 339-ii-2 is a placeholder. Real property law article 9-B runs §339-d to §339-ll — verified 2026-07-27 — and actual placement is for the Legislative Bill Drafting Commission.

2. Cooperatives are not condominiums. Article 9-B governs condominiums. Most New York City housing cooperatives are business corporations governed by the Business Corporation Law, not by the Cooperative Corporations Law. The prior draft proposed amending “NY Coop. Corp. Law Article 5”; that article is titled “Miscellaneous Provisions” (§§ 70–77) and is not a governance article — verified 2026-07-27. Whether the cooperative limb of this bill belongs in the Business Corporation Law or the Real Property Law must be resolved before introduction. This draft places both limbs in the Real Property Law for readability and flags the question rather than guessing.

3. Interaction with Business Corporation Law § 722. BCL § 722 authorizes indemnification of directors and officers and conditions it on having acted in good faith for a purpose reasonably believed to be in the corporation’s best interests — verified 2026-07-27. A director for whom the presumption in section 3 operates is, by the terms of the presumption, in tension with that condition. Whether the presumption should expressly reach advancement and indemnification is a design choice this draft leaves open.

4. Cancellation standard for the notice of pendency. Section 2 permits cancellation on a showing that probable cause did not exist at filing. Whether that is the right standard, or whether the ordinary CPLR article 65 cancellation practice should govern, is a question for Judiciary Committee counsel.

5. Whether the presumption should reach non-felony convictions. Drafted for felonies only. A misdemeanor conviction under a fund-segregation provision — such as the one proposed in the pending S.71 at RPL art. 12-D § 448(11), verified 2026-07-27 — would not trigger it. That may be too narrow.

PART V — CITATION APPENDIX

Verified 2026-07-27 against the source shown.

Corrections made to the prior version

PATH TO PASSAGE

Choke-point analysis: the choke-point analysis. In the 2025 session 16,794 bills were introduced and roughly 800 reached the Governor — about 4.8%. Verified 2026-07-27.

Route: standalone, Judiciary. Lead with the precedent, not the problem.

The argument that opens the door. This bill does not ask the Legislature to adopt anything new. It asks it to extend two of the four mechanisms it already enacted in Chapter 630 of the Laws of 2023 — Kavanagh in the Senate, Weinstein in the Assembly, signed 2023-11-14, all verified 2026-07-27 — to a different victim class with the same timing problem.

Say what did not transfer, first. Two of Chapter 630’s four mechanisms do not carry over, and the bill explains why in Part III. Volunteering that before committee counsel finds it converts the most likely objection into evidence that the draft is careful.

Related: LEGISLATIVE_MODEL.md · solution S18 in 01_Database/condoscoop.db · mixed-income-421a-affordability-disclosure-act.md