NY Real Prop L § 265-B (2021)
2021 New York Laws RPP - Real Property Article 8 - Conveyances and Mortgages 265-B - Distressed Property Consulting Contracts.

§ 265-b. Distressed property consulting contracts. 1. Definitions. The following definitions shall apply to this section:  (a)  "Homeowner"  means  a  natural  person  who is the mortgagor with respect to a distressed home loan or who is in danger of losing  a  home for nonpayment of taxes.  (b)  "Consulting  contract" or "contract" means an agreement between a homeowner  and  a  distressed  property  consultant  under   which   the consultant agrees to provide consulting services.  (c)  "Consulting  services"  means  services  provided by a distressed property consultant to a homeowner that the consultant  represents  will help to achieve any of the following:  (i)  stop,  enjoin,  delay, void, set aside, annul, stay or postpone a foreclosure filing, a foreclosure  sale  or  the  loss  of  a  home  for nonpayment of taxes;  (ii) obtain forbearance from any servicer, beneficiary or mortgagee or relief  with respect to the potential loss of the home for nonpayment of taxes;  (iii) assist the homeowner to exercise a  right  of  reinstatement  or similar  right  provided  in  the  mortgage  documents  or any law or to refinance a distressed home loan;  (iv) obtain any extension of the period within which the homeowner may reinstate or otherwise restore his or her rights  with  respect  to  the property;  (v)  obtain  a  waiver  of  an  acceleration  clause  contained in any promissory note or contract secured by  a  mortgage  on  a  property  in foreclosure;  (vi) assist the homeowner to obtain a loan or advance of funds;  (vii) assist the homeowner in answering or responding to a summons and complaint,  or otherwise providing information regarding the foreclosure complaint and process;  (viii) avoid or ameliorate the impairment of  the  homeowner's  credit resulting from the commencement of a foreclosure proceeding or tax sale; or  (ix)  save  the  homeowner's  property  from  foreclosure  or loss for non-payment of taxes.  (d) "Distressed home loan" means a home loan  that  is  in  danger  of being  foreclosed  because  the homeowner has one or more defaults under the mortgage that entitle the lender to accelerate full payment  of  the mortgage and repossess the property, or a home loan where the lender has commenced  a foreclosure action. For purposes of this paragraph, a "home loan" is a loan in which the debt is incurred by the homeowner primarily for personal, family or household purposes, and the loan is secured by a mortgage or deed of trust on property upon which  there  is  located  or there  is  to  be located a structure or structures intended principally for occupancy of from one to four families which is or will be  occupied by the homeowner as the homeowner's principal dwelling.  (e)   "Distressed   property  consultant"  or  "consultant"  means  an individual or a corporation, partnership, limited liability  company  or other   business  entity  that,  directly  or  indirectly,  solicits  or undertakes employment to provide consulting services to a homeowner  for compensation  or  promise  of  compensation with respect to a distressed home loan or a potential loss of the home for  nonpayment  of  taxes.  A distressed property consultant does not include the following:  (i) an attorney admitted to practice in the state of New York when the attorney  is  directly  providing  legal  representation  to a homeowner pursuant to a retainer agreement,  and  has  entered  an  appearance  on behalf  of  a  homeowner,  in  the  course  of  his or her regular legal practice. This exception shall not  apply  to  non-attorney  individuals  engaged in activities covered by subdivision two of this section who are employed by, associated with, or consultants for law firms when such law firms  are  not  providing  legal  representation  to  a  homeowner in a foreclosure action pursuant to a retainer agreement;  (ii)  a person or entity who holds or is owed an obligation secured by a lien on any  property  in  foreclosure  while  the  person  or  entity performs services in connection with the obligation or lien;  (iii)  a  bank,  trust  company, private banker, bank holding company, savings bank, savings and  loan  association,  thrift  holding  company, credit  union  or  insurance  company  organized  under the laws of this state, another state or the United States, or a subsidiary or  affiliate of  such  entity  or  a  foreign  banking  corporation  licensed  by the superintendent of financial services or the comptroller of the currency;  (iv) a federal Department of Housing and  Urban  Development  approved mortgagee  and  any  subsidiary  or affiliate of such mortgagee, and any agent or employee of these persons while engaged in the business of such mortgagee;  (v) a judgment creditor of the homeowner, if the  judgment  creditor's claim accrued before the written notice of foreclosure sale is sent;  (vi)  a  title  insurer authorized to do business in this state, while performing title insurance and settlement services;  (vii) a person licensed as  a  mortgage  banker  or  registered  as  a mortgage  broker or registered as a mortgage loan servicer as defined in article twelve-D of the banking law, provided that no such person  shall take  any  upfront  fee  in conjunction with activities constituting the business of a distressed property consultant;  (viii) a bona fide not-for-profit organization that offers  counseling or advice to homeowners in foreclosure or loan default; or  (ix)  a  person  licensed  or registered in the state to engage in the practice of other  professions  that  the  superintendent  of  financial services has determined should not be subject to this section.  (f) "Property" shall mean real property located in this state improved by  a  one-to-four  family  dwelling used or occupied, or intended to be used or occupied, wholly or partly, as the home or residence of  one  or more persons, but shall not refer to unimproved real property upon which such dwellings are to be constructed.  (g)  "Business  day"  shall mean any calendar day except Sunday or the public holidays as set forth  in  section  twenty-four  of  the  general construction law.   2.  Prohibitions.  A distressed property consultant is prohibited from doing the following:  (a) performing consulting services without a written,  fully  executed consulting contract with a homeowner;  (b)  charging  for  or  accepting  any payment for consulting services before the full completion of all such services, including a payment  to be placed in escrow pending the completion of such services;  (c) taking a power of attorney from a homeowner;  (d)  retaining  any  original loan document or other original document related to the distressed home loan, the property or the potential  loss of the home for nonpayment of taxes;  (e) inducing or attempting to induce a homeowner to enter a consulting contract that does not fully comply with the provisions of this article;  (f) inducing the transfer of a deed to any person or entity, including to the distressed property consultant;  (g)  accepting  or taking ownership of a deed from a homeowner for any period of time whatsoever;  (h)  simulating  in  any  manner  a  law  enforcement  officer,  or  a representative of any governmental agency;  (i)  disclosing  or  threatening to disclose information affecting the homeowner's reputation for credit worthiness with knowledge or reason to know that the information is false;  (j)  communicating  with  the homeowner or any member of his family or household with such frequency or at such unusual  hours  or  in  such  a manner as can reasonably be expected to abuse or harass the homeowner;  (k)  claiming,  attempting,  or  threatening  to  enforce a right with knowledge or reason to know that the right does not exist;  (l) using a communication which  simulates  in  any  manner  legal  or judicial  process  or  which  gives  the appearance of being authorized, issued or approved by a government, governmental agency, or attorney  at law when it is not; or  (m)  encumbering  the  property with a lien without any contractual or legal basis.   If any provision of this subdivision or the application thereof to any person or circumstances is held invalid, the  invalidity  thereof  shall not  affect  other  provisions or applications of this subdivision which can be given effect without the invalid provision or application, and to this end the provisions of this subdivision are severable.   3.  Distressed  property  consulting  contracts.  (a)  A  distressed property consulting contract shall:  (i) contain the entire agreement of the parties;  (ii)  be  provided  in  writing  to  the  homeowner  for review before signing;  (iii) be printed in at least twelve point type and written in the same language that is used by the  homeowner  and  was  used  in  discussions between  the  consultant  and the homeowner to describe the consultant's services or to negotiate the contract;  (iv) fully disclose  the  exact  nature  of  the  distressed  property consulting services to be provided by the distressed property consultant or   anyone   working   in  association  with  the  distressed  property consultant;  (v) fully disclose the total amount and terms of compensation for such consulting services;  (vi) contain the name, business address and telephone  number  of  the consultant and the street address (if different) and facsimile number or email address of the distressed property consultant where communications from the homeowner may be delivered;  (vii)  be  dated  and  personally  signed  by  the  homeowner  and the distressed property consultant and be witnessed and  acknowledged  by  a New York notary public; and  (viii)  contain  the  following  notice,  which shall be printed in at least fourteen point boldface type,  completed  with  the  name  of  the distressed  property  consultant,  and located in immediate proximity to the space reserved for the homeowner's signature: "NOTICE REQUIRED BY NEW YORK LAW   You may cancel this contract, without any penalty  or  obligation,  at any   time   before   midnight  of      fifth  business  day  after execution).        Name of Distressed Property Consultant) (the "Consultant") or anyone working for the Consultant may not take any money from you or ask you for  money  until  the  Consultant  has  completely  finished  doing everything this Contract says the Consultant will do. You  should  consider  consulting  an  attorney or a government-approved housing counselor before signing  any  legal  document  concerning  your home.  It  is advisable that you find your own attorney, and not consult with an attorney recommended or provided to you  by  the  Consultant.  A list  of  housing counselors may be found on the website of the New York  State Department of  Financial  Services,  (enter  web  address)  or  by calling  the  Department  of  Financial  Services  toll-free  at  (enter number).  The  law  requires  that  this  contract  contain  the  entire agreement  between  you and the Consultant. You should not rely upon any other written or oral agreement or promise." The distressed property consultant shall accurately enter  the  date  on which the right to cancel ends.  (b)(i)  The  homeowner has the right to cancel, without any penalty or obligation, any contract with a  distressed  property  consultant  until midnight  of  the  fifth  business  day  following  the day on which the distressed property consultant  and  the  homeowner  sign  a  consulting contract. Cancellation occurs when the homeowner, or a representative of the  homeowner, either delivers written notice of cancellation in person to the address specified in the consulting contract or sends  a  written communication  by  facsimile, by United States mail or by an established commercial letter delivery service. A dated proof of facsimile  delivery or   proof   of  mailing  creates  a  presumption  that  the  notice  of cancellation has been delivered on the date the facsimile is sent or the notice  is  deposited  in  the  mail  or  with  the  delivery   service. Cancellation  of  the  contract  shall  release  the  homeowner  of  all obligations to pay fees or any  other  compensation  to  the  distressed property consultant.  (ii)  The  consulting contract shall be accompanied by two copies of a form, captioned "notice of cancellation" in at least  twelve-point  bold type.  This  form  shall  be  attached  to the contract, shall be easily detachable, and shall contain the following  statement  written  in  the same  language  as used in the contract, and the contractor shall insert accurate information as to the date on which the right  to  cancel  ends and the contractor's contact information: "NOTICE OF CANCELLATION Note:  You  may cancel this contract, without any penalty or obligation, at any time before midnight of ______. (Enter date)  To cancel this contract, sign and date both copies of this  cancellation notice  and  personally deliver one copy or send it by facsimile, United States mail, or  an  established  commercial  letter  delivery  service, indicating  cancellation to the Distressed Property Consultant at one of the following:  Name of Contractor_________________________ Street Address_____________________________ City, State, Zip___________________________ Facsimile:_________________________________  I hereby cancel this transaction.  Name of Homeowner:_________________________  Signature of Homeowner:____________________  Date:______________________________________"  (iii) Within ten days following receipt of a  notice  of  cancellation given  in  accordance  with  this  subdivision,  the distressed property consultant shall return any original contract and  any  other  documents signed  by  or provided by the homeowner. Cancellation shall release the homeowner of all obligations to pay any  fees  or  compensation  to  the distressed property consultant.    3-a.   Distressed   property  consultant  advertisements.   (a)  All advertisements disseminated by a  distressed  property  consultant  must prominently include the following statement: "In New York State, Housing Counselors,  who  are approved by the U.S. Department of Housing & Urban Development  or the New York State Department of Financial Services, may provide the same or similar services as a distressed property consultant for free. A list of approved Housing Counselors can be found on the  New York  State  Department  of  Financial  Services  website  at (enter web address) or by contacting the New York  State  Department  of  Financial Services  toll-free at (enter number). You should consider consulting an attorney or a government-approved housing counselor before  signing  any legal  document  concerning  a  distressed  property consultant."   Such statement, if disseminated by print media  or  the  internet,  shall  be clearly  and  legibly printed or displayed in not less than twelve-point bold type, or, if the advertisement is printed to be displayed in  print that is smaller than twelve point, in bold type print that is no smaller than  the  print  in  which  the text of the advertisement is printed or displayed.  (b) For the purposes of this  subdivision,  the  term  "advertisement" shall   include,  but  is  not  limited  to,  all  forms  of  marketing, solicitation, or  dissemination  of  information  related,  directly  or indirectly,  to securing or obtaining a consulting contract or services. Further, it shall include any and all commonly recognized forms of media marketing via television, radio, print media, all  forms  of  electronic communication  via  the  internet,  and all prepared sales presentations given in person or over the internet to the general public.  (c) The advertising provisions of this subdivision shall apply to  all distressed  property  consultants  who disseminate advertisements in the state of New York or who intend to  directly  or  indirectly  contact  a homeowner  who  has  property  located  in  New  York  state. Distressed property consultants shall establish and at all times  maintain  control over the content, form and method of dissemination of all advertisements of  its  services.  Further,  all  advertisements  shall be sufficiently complete and clear to avoid the possibility of deception or the  ability to mislead or deceive.   4.  Penalties  and  other  provisions.  (a)  If  a  court finds that a distressed property  consultant  has  violated  any  provision  of  this section,  the  court  may  make  null and void any agreement between the distressed homeowner and the distressed property consultant.  (b) If the distressed property consultant violates  any  provision  of this  section and the homeowner suffers damage because of the violation, the homeowner may recover actual and  consequential  damages  and  costs from  the  distressed  property  consultant  in  an action based on this section.    If  the  distressed  property  consultant  intentionally  or recklessly  violates  any provision of this section, the court may award the homeowner treble damages, attorneys' fees and costs.  (c) Any provision of a consulting contract that attempts  or  purports to  limit the liability of the distressed property consultant under this section shall be null and void. Inclusion of such provision shall at the option of  the  homeowner  render  the  consulting  contract  void.  Any provision   in   a  contract  which  attempts  or  purports  to  require arbitration of any dispute arising under this section shall be  void  at the  option  of  the  homeowner.  Any  waiver  of the provisions of this section shall be void and unenforceable as contrary to public policy.  (d) In addition to the other remedies provided, whenever  there  shall be  a violation of this section, application may be made by the attorney general in the name of the people of the state of New York to a court or justice  having  jurisdiction  by  a  special  proceeding  to  issue  an  injunction, and upon notice to the defendant of not less than five days, to  enjoin  and  restrain  the continuance of such violations; and if it shall appear to the satisfaction  of  the  court  or  justice  that  the defendant  has,  in  fact,  violated  this section, an injunction may be issued by such court or justice, enjoining and restraining  any  further violation,  without  requiring  proof that any person has, in fact, been injured or damaged thereby. In any such proceeding, the court  may  make allowances  to  the  attorney  general  as  provided in paragraph six of subdivision (a) of section  eighty-three  hundred  three  of  the  civil practice law and rules, and direct restitution. Whenever the court shall determine  that  a violation of this section has occurred, the court may impose a civil penalty of not more than ten thousand  dollars  for  each violation.  In  connection  with  any  such  proposed  application,  the attorney general is authorized to take proof and make a determination of the relevant facts and to issue subpoenas in accordance with  the  civil practice law and rules.  (e)  The  provisions  of  this  section  are  not exclusive and are in addition to any other  requirements,  rights,  remedies,  and  penalties provided by law.   5.  The department of financial services shall prescribe the telephone number and web address to be included in the notice.