California has several laws defining fraudulent conduct during real estate transactions and mortgage loan acquisition processes. Generally, it is a crime for anyone to commit fraud when handling a real estate property rental agreement, purchase, sale, or financing. The laws cover everything, including housing, mortgages, and foreclosures. If you face charges for real estate fraud, turn to the Riverside Criminal Defense Attorney Law Firm for reliable assistance. We understand the law and know how to build a strong defense with the best odds of yielding a desirable outcome.
Real estate fraud often leads to significant financial losses. Some cases even involve many victims, an aspect that puts pressure on prosecutors to be more aggressive when pursuing credible allegations. Moreover, a conviction attracts harsh penalties, including hefty fines, restitution, and time behind bars. Our team of attorneys understands what is at stake and will fight to ensure you enjoy the best possible outcome.
Real Estate Fraud Defined
Real estate fraud is a general term used to refer to various crimes prosecutors can pursue under different laws. The legal definition of Fraud is the act of willfully concealing or misrepresenting facts with the intent of persuading another person to do something that does not match their interests.
Therefore, real estate fraud is the offense of willfully concealing or misrepresenting facts related to real estate or mortgage transactions to convince another person to act contrary to their best interests.
California Laws That Criminalize Real Estate Fraud
Real estate fraud typically attracts Grand Theft charges under Penal Code 487. However, various laws make it a crime to commit fraud when handling a real estate or mortgage transaction.
These laws include:
Grand Theft — Penal Code 487
The law describes grand theft as the crime of unlawfully taking another person’s money, property, or labor valued at $950 or more. This is a wobbler offense that a defendant can commit through various actions, including:
- False pretense
The law classifies real estate fraud as grand theft by false pretense. The prosecution must prove the following elements beyond a reasonable doubt to convict you:
- You committed fraud during a real estate transaction with the intent to deceive a property owner or mortgage lender
- Your goal was to enjoy benefits you do not deserve
- The victims gave you access to the benefits you were after because of your false representation
- The value of the real estate or mortgage transaction exceeded $ 950
Grand theft is a wobbler offense charged as a felony or a misdemeanor. A misdemeanor conviction is punishable by:
Foreclosure Fraud — Civil Code 2945.4
Under Civil Code 2945.4, foreclosure fraud is a crime. The widespread housing crises have made foreclosure fraud the most prevalent real estate fraud in California. Often, the offense is committed by skilled foreclosure consultants who engage in any of the following activities:
- Collecting money as payment for a non-existent service
- Demanding excessive fees for rendered services
- Unlawfully place a lien on a property or demand to use the property deed as collateral for a service
- Unlawfully foreclose a property because of personal agendas or interests in the property
- Offer services to two people, groups, or organizations where there is a conflict of interest
- Use fraudulent means to get a power of attorney from a property owner
- Using coercion or attempting to use pressure to lead a homeowner into signing an illegal contract or an agreement that does not work in their best interests
Foreclosure fraud is a wobbler offense, just like grand theft. If the prosecution charges you with a misdemeanor, your punishment will include
- A sentence of up to 1 year in county jail
A felony conviction is punishable by:
- Felony probation and imprisonment for up to 1 year in county jail, or
- Incarceration for up to 3 years in county jail
Theft by False Pretenses — Penal Code 532 PC
Penal Code 532 criminalizes defrauding another person of their property or money through false representation or promises. False pretense can involve any of the following actions:
- Lying to a property owner to convince them to give you their property
- Making reckless statements that are not necessarily true to coerce a property owner to give you their property or sign an agreement
- Failure to provide information you are obligated to provide under certain circumstances
- Making false promises that you have no intention of keeping
Theft by false pretenses is a wobbler offense. A conviction is subject to grand theft penalties.
Rent Skimming — Civil Code 890
Rent skimming as described under Civil Code 890 is the offense of collecting income from rental property without first meeting your debt obligations.
If you acquired a rental property through a mortgage, the law requires you to first apply the proceeds from the property to your mortgage payments. Likewise, it is unlawful to collect rent from a property you do not own or have the authority to lease and collect rental revenue for personal use. Depending on the situation, leasing someone else’s property without permission can also attract trespass charges under Penal Code 602.
Rent skimming often attracts only civil penalties when the defendant is accused of one offense. However, multiple counts of rent skimming are subject to both criminal and civil penalties.
In a civil lawsuit, a judge can force the defendant to pay restitution to the victim to recover damages that cover the amount of money stolen and costs related to the case, like attorney fees. If the judge also opts to award punitive damages, a defendant has to part with up to three times the total value of the damages incurred by a victim.
Rent skimming under criminal law is a wobbler offense. A misdemeanor conviction attracts the following punishment:
- A sentence of up to 1 year in county jail
A felony conviction for rent skimming is punishable by:
- Felony probation and imprisonment for up to 1 year in county jail, or
- Incarceration for up to 3 years in county jail
Filing Falsified Documents or Deeds — Penal Code 115
Under Penal Code 115, it is illegal to record, file or register forged or falsified documents to any public office in California. For instance, it is a crime to present a fake real estate deed to the county clerk’s office. This is a grave offense charged as a felony, and it can also attract additional charges under Penal Code 470 forgery laws.
The prosecution can get a conviction under Penal Code 115 by proving the following elements without a reasonable doubt:
- You presented documents for recording, filing, or registration to a public office
- You knew that the document(s) was fake or forged when you filed it
- The document in question could be legally filed if it was authentic
Penal Code 115 applies to all kinds of documents, including property deeds, deeds of trusts, quitclaim deeds and even pay stubs. A conviction is subject to the following penalty:
- Up to 3 years jail time in county jail
- A maximum fine of $10,000
Additional Penalties for Real Estate Fraud
Each case is unique, and the court will always consider all aspects before imposing penalties. For instance, the judge must consider
- Whether a crime is a felony or a misdemeanor
- The number of financial losses suffered by the victim
- The number of victims involved
- The amount of money stolen from the victims
- The criminal record of a defendant
- The level of sophistication demonstrated when carrying out the crime
Here are some common rules that apply during sentence enhancement:
- Real estate fraud that causes the victim to lose $65,000 or more attracts an additional 1-year jail term
- If the victim suffers a loss amounting to $200,000 or more, the defendant has to spend two more years in a state prison
- When the losses of the victim amount to $ 1.3 million or more, the defendant will receive a 3-year sentence enhancement.
- When real estate fraud leads to a victim losing over $3.2, the accused risks spending four more years in state prison
- If the defendant is convicted of a felony where the victim’s losses amount to over $100,000, the judge can impose the befitting sentence enhancement as mentioned above and add a sentence of 1 to 5 years depending on the facts of a case.
A felony conviction will also result in the loss of certain rights. Losing rights is a major problem because an offense will impact your life after you have served your sentence.
If you are convicted of real estate fraud felony, you will also lose the following rights:
- Voting rights while on parole or in prison
- Gun rights (lifetime ban)
- The right to travel abroad and enter certain countries
It is also common for felons to encounter challenges finding meaningful employment, primarily because employers often do criminal background checks. You will also not be eligible for housing in specific neighborhoods, not to mention that a conviction can impact your parental rights during a divorce.
If you are a realtor, a conviction will affect your professional license. Depending on the facts of a case, the California Department of Real Estate can suspend your license or revoke it. If you were eyeing a career in real estate, the department would bar you from obtaining a professional license if you have been convicted of real estate fraud, a serious felony, sex offense, or financial-related felony within the past seven years.
If you face real estate fraud charges, there is a lot at stake. You must do yourself the favor of acting quickly and finding the best criminal defense team to advocate for your rights and fight to protect your future and livelihood. At the Riverside Criminal Defense Attorney Law Firm, we can help you understand the charges you face in-depth, the possible criminal penalties, and what you can do to protect your best interests.
Common Types of Real Estate Fraud
As aforementioned, real estate fraud is a broad term that refers to a wide range of illegal activities aimed at stealing money or property. This is a white-collar crime that often involves using complex and creative schemes to minimize suspicion from the victims. In most cases, the California Department of Real Estate’s assistance for the law enforcement to identify and investigate potential issues.
From predatory loans to straw buyer schemes, here are some of the most common types of real estate fraudulent activities:
It is common for property owners to panic once they receive a foreclosure notice. This turns them into perfect prey for unscrupulous foreclosure consultants who can take advantage of their desperation to conduct any of the following illegal activities:
- Title transfer—real estate fraud can occur when a dishonest foreclosure consultant provides ill advice to persuade a property owner into transferring their property ownership rights and repurchasing a house later. Once the unsuspecting property owner initiates a title transfer, they are immediately evicted from their home by the new homeowner who has the property title deed.
- Bait and Switch—this type of fraud also involves making a title transfer. However, the property owner only realizes that they have transferred their title when too late and are getting kicked out. Often, the victim is made to believe that a foreclosure consultant is helping them secure a mortgage payment plan ideal for their current financial situation. They either sign a blank document or a contract whose terms they do not understand.
- Phantom Help Scams—another common type of foreclosure fraud is phantom help scams. The consultant approaches homeowners at risk of foreclosure and promises to help them retain their property once they pay a specific fee. The unsuspecting victims pay the fee and believe all is well until they receive an actual foreclosure notice.
Straw Buyer Schemes
Straw buyer schemes involve two parties, one with a perfect credit score and another with a poor credit score. The one with a good score purchases real estate property on behalf of the one with a bad score and does a title transfer. Eventually, the property owner who was essentially ineligible for a mortgage cannot make payments. Once law enforcement officers discover such an arrangement, both parties can face charges for real estate fraud.
Property flipping is a type of real estate fraud where the perpetrators can be real estate appraisers, mortgage brokers, or realtors. The offense involves unlawfully inflating the value of a property or mortgage. An unsuspecting property buyer ends up servicing a mortgage for a property whose actual value is much lower. Property flipping, where a realtor purchases a rundown home, fixes it, and sells it for profit, is not illegal as long as the new price reflects the flipped-up home’s actual value.
Predatory lending involves imposing deceptive, abusive, and unfair loan terms on the borrower. The loan carries high fees or inflated interest rates that deprive a borrower of equity because the lender keeps all the benefits. The perpetrators of this type of real estate fraud often use aggressive sales tactics to sell the perks of the loan without mentioning the drawbacks.
Victims of predatory lending enter into financial transactions with no idea of the lack of transparency or a lender’s fraudulent motives. They eventually find themselves stuck in loan agreements where they cannot reasonably free themselves from debt.
- Some of the lending tactics a perpetrator uses to take advantage of unsuspecting borrowers include:
- Imposing excessive and abusive fees
- Balloon payment terms that often involve low monthly payments with one large payday for the lender at the end of a loan’s term
- Mortgage flipping where a mortgagor is pressured to refinance again and again while generating new fees for the lender
- Unnecessary extras on a mortgage like premium life insurance
- Steering where a lender lures a borrower into signing up for a prime loan that they cannot reasonably afford
Equity fraud involves fraudulently obtaining the personal details of a victim and using them on mortgage documents.
Mortgage elimination is another common type of real estate fraud perpetrated by mortgage lenders. The lender uses false information to convince borrowers that they will receive a better deal to complete payments within a short time frame when they choose a specific package. The lender then imposes new fees that leave borrowers spending more on their mortgage plans and perhaps even completing payments much later than anticipated.
Fraudulent Loan Origination
Fraudulent loan origination is a type of predatory lending practice. In this case, the realtor helps an ineligible property buyer to obtain a loan and purchase real estate property. The realtor closes a sale and leaves the property owner struggling to pay a mortgage they cannot reasonably afford. This poses the risk of losing everything through foreclosure.
Best Defenses to Fight Real Estate Fraud Charges
Fighting real estate fraud charges is no easy feat. Often, the authorities begin gathering information and evidence long before making any arrests. By the time you find yourself in handcuffs, there is a good chance that the prosecution will already have compelling evidence that can convict you.
Your best chance of enjoying a favorable outcome is to enlist reliable lawyers who have the skills and resources to do comprehensive investigations and gather facts that can work in your best interests. Here are some of the best defenses your lawyer can use:
Lack of Intent
One of the primary elements the prosecution must prove beyond a reasonable doubt is that you conducted fraudulent activities with the intent to defraud the victim(s) of their money or property when conducting real estate or mortgage transactions.
Your lawyer can argue that you had pure intentions and merely wanted to help your accuser. The expert can also claim that you accidentally violated the law and had no idea about the potential repercussions of your actions. A good argument can convince a judge to drop your charges or compel the prosecution to offer you the best plea bargain.
You are not guilty of real estate fraud if the accuser gave consent. Note that the court will always seek to ensure you received “proper consent.” For instance, you cannot claim to have obtained consent from an elderly individual who is not of sound mind.
However, a lawyer can secure reduced charges or an acquittal if any reasonable person in your position would not have suspected that a specific client is not of sound mind. It could be that the victim is of sound mind, only that they have a condition that makes them forget easily. This is not something you could have suspected during an otherwise perfectly legal real estate transaction. Presenting proof that you obtained consent can lead to your acquittal.
Another common defense that could work is that you are being falsely accused. It could be that the real culprits of a crime are trying to pin the blame on you. Real estate fraud schemes are complex, and it is easy for big wigs to shift the blame to the lower staff. Again, a reliable attorney can have the charges dropped by presenting evidence that helps to clear you of guilt.
It is not common for real estate fraud to happen where the only persons present are the defendant and the victim. Fraudulent activities often happen where multiple people of a specific company are involved. This leaves room for the victim to mistake you for the actual perpetrator of the fraud. It could be that the imposter posed using your name and personal details.
Find a Real Estate Fraud Attorney Near Me
If you are facing charges for real estate fraud, nothing is as important as finding a skilled team of criminal defense attorneys. The right experts can make the difference between clearing your name and spending time behind bars. Even when a situation seems hopeless because of the overwhelming evidence against you, a competent attorney can still provide invaluable help and use the best defense tactics to have your charges reduced. At Riverside Criminal Defense Attorney Law Firm, we understand the best tactics that yield the best results. We have built a reputation on our ability to put up a strong defense and negotiate effectively even when handling complex cases. Call us today at 951-946-6366 for a 100% free and no-obligation consultation.