California criminal law addresses fraudulent behaviors occurring during real estate transactions in several overlapping ways. Real estate-related fraud arises when somebody commits fraud associated with the financing, rental, sale, or purchase of any real estate property. Statutes on real estate-related fraud cover various criminal behaviors, including rental contracts, mortgages, foreclosures, and housing.
This type of fraud generally leads to significant monetary losses, prompting prosecuting attorneys to pursue valid allegations aggressively. If a judge sentences you for this crime, you will have severe consequences, including hefty court fines, incarceration, and restitution.
The good news is that we at CCLG: Los Angeles Criminal Attorney may be able to help you avoid these consequences. We will develop a robust defense strategy that may lead to a charge dismissal, an acquittal, or lenient penalties if a conviction is inevitable. Call us to share details about your case during your initial consultation.
Real Estate Fraud Overview
Real estate-related fraud is a crime often paired with mortgage fraud under California law. It is when one business or party exploits another individual in a mortgage or real estate deal or transaction. Real estate or mortgage fraud can arise at any stage in the transaction process. It can occur at the foreclosure appraisal, closing, or other stages.
States use different legal theories and laws to prosecute real estate and mortgage fraud offenders. These laws and theories include the following:
- Rent skimming
- Foreclosure fraud
- Forged documents or deeds
- Theft by false pretenses
The Meaning of Forged Documents or Deeds
Mortgage and real estate-related fraud cases are usually prosecuted under state laws of forged documents and deeds. These laws state that it is a criminal offense to consciously record, register, or file a forged or false document with any government office in the state (such as the county clerk’s office).
The Meaning of Rent Skimming
There are two different ways in which the act of rent skimming can occur. Firstly, you commit this crime when you rent a residential property within the initial year of its acquisition and neglect to remit the rent you collect to the home loan. Secondly, you commit rent skimming when you pass as a property owner, fraudulently rent the property out without authorization, and keep the rent you collect to yourself.
According to most states, rent skimming qualifies as an offense only when committed multiple times. However, committing this act only once will subject you to a lawsuit.
Also, a judge cannot find you liable for rent skimming when, once you collected the rent payment, you paid a healthcare professional your or your loved one’s medical bills, whether expected or unexpected, within thirty days. Another conduct exempt from prosecution is if you paid contractors authorized to supply material for renovating the property with the rent proceeds within thirty days. Nevertheless, you must show you did not have other income-generating activities to pay for medical expenses or contractor fees,
The Meaning of Foreclosure Fraud
Usually, professionals who aid homeowners whose homes are about to be foreclosed commit foreclosure fraud. You face punishment for this crime if you are the said professional and do the following:
- Charge a homeowner facing foreclosure for any service before providing it
- Defraud them into appending their signature on an illegal contract
- Collect or demand excessive fees for services
- Take the homeowner’s power of attorney
- Accept cash from another party for their service, and neglect informing the real estate owner
- Take any form of interest in the property subject to foreclosure
The Meaning of Theft By False Pretense
Theft by false pretense is a crime whereby a person defrauds another out of property or cash using false representations of promises. Although state laws on false pretense vary, the prosecution must prove these elements for the jury to find you guilty of this offense:
- You deliberately deceived a mortgage lender or the owner of a real estate
- You achieved your deception by making a false promise
- The victim depended on your promise and gave you their money or property
Common Forms of Real Estate Fraud
The most prevalent types of mortgage and real estate fraud are straw buyer schemes, foreclosure fraud, predatory lending, and illegal property flipping. The definition of foreclosure fraud is provided above. There are many actions constituting foreclosure fraud, including the following:
- Phantom help scams
- Bait and switch
- Title transfer schemes
“Bait-and-switch” refers to a transfer of title whereby the homeowner is not conscious of the fact that they are handing over the title. The homeowner is made to believe that they are appending a signature on documentation that will aid them to acquire a new mortgage. However, in this sense, they sign documentation that transfers their home title to the involved consultant.
A title transfer scheme arises when a property owner faces a foreclosure action, and a property consultant convinces them to give the property title to them. In situations like this, the consultant lets the owner know they can stay there if they pay rent and can repurchase it after some time. However, the property consultant then evicts the owner-cum-renter and secures any available home equity.
Phantom help scams occur when a company helping a homeowner with foreclosure promises to aid them to avoid foreclosure in return for upfront fees, and it takes the cash but its promises are not kept. By the time the homeowner knows they have been scammed, it is impossible to prevent foreclosure.
Illegal Property Flipping
An illegal flipping arises when a fraudulent appraisal leads to a false inflation of a property’s worth, and
- A lender lends funds on the real estate for higher than its real worth, or
- An purchaser with no reason to suspect buys it at the heightened price.
Remember that this does not include an individual who purchases a property, renovates it, and resells it more expensively. This act is known as legal flipping under state laws
Straw Buyer Scheme
Straw buyers refer to individuals who buy homes on other people’s behalf. They are utilized because the intended purchaser cannot seal the deal for a given reason. The actual buyer may, for example, have poor credit. Utilizing straw buyers is against the law, where the home purchase transaction defrauds a person, or it is against the law for the intended purchaser to do the purchasing.
Predatory Lending
Predatory lending occurs when mortgage brokers create loans for potential buyers and load them with unnecessary charges that do not benefit the borrowers in any way. Brokers try to escape paying these loans to pad their commissions.
California Laws on Real Estate Fraud
In California, prosecutors use four main laws to charge individuals who have committed real estate or mortgage fraud. They are:
- 487 PC, grand theft
- PC 115, filing forged documents
- Civil Code 890, the rent skimming crime
- Civil Code 2945.4, foreclosure fraud
Grand Theft Per 487 PC
The general law on grand theft under PC 487 often applies to real estate and mortgage fraud cases. Prosecutors use this law to prosecute individuals who have committed theft by false pretenses as described above. The law includes property crimes when those crimes defraud a party out of assets worth above $950. Generally, you violate this law when you defraud somebody out of property or money through false promises or representations.
You can commit mortgage or real estate fraud under PC 487 when you make a false promise or statement to a property seller or purchaser intending that they are misled and thus give you something valuable to which you would not belong to you under the usual circumstances. This might include lying that you own a property when conducting a sale, hiding any defects the property has.
If the D.A. accuses you of grand theft in the context of real estate or mortgage fraud, they must prove certain elements to make the jury convict you. These elements include proving that you deliberately deceived the victim by making false representations or claims, intending them to allow you to assume ownership of their property contingent on your false representation.
A violation under this statute is deemed a wobbler, meaning the prosecution can press misdemeanor or felony charges. Grand theft as a misdemeanor carries up to 12 months in jail and $1,000 in fines. On the other hand, grand theft as a felony carries a prison sentence of two years, three years, or 16 months. The court may also need you to pay restitution to the victim.
Foreclosure Fraud Per CIV 2945.4
As defined above, foreclosure fraud is prohibited under CIV 2945.4 in California. This crime can also be a felony or misdemeanor. A conviction for a misdemeanor carries a court fine of $1,000, jail for 12 months, and probation. A conviction for a felony carries two years, three years, or sixteen months.
Foreclosure fraud became a common issue after the Great Recession of 2008, when several homeowners faced potential foreclosure and risked losing their homes.
Several disreputable companies opened and were endorsed to help homeowners navigate foreclosure. These companies would, in fact, charge extremely high fees, incorrectly take interests in owning homes facing foreclosure, or use other means to defraud the property owners who were already desperate. This behavior is also a crime under California’s mortgage and real estate fraud statutes.
Rent Skimming Under CIV 890
Also, as defined above, rent skimming is prohibited under CIV 890 in California. This law criminalizes committing rent-skimming multiple times. One act will not result in criminal charges. Instead, you can be sued in civil court. Under California statute, a civil case means that every individual who suffered losses triggered by your fraudulent conduct can seek damages. If the victim or victims win their lawsuits, the judge may order you to pay:
- The victim’s legal charges and lawyer’s fees
- Extra costs, if applicable
- Compensation equivalent to the amount of money the victim or victims lost
Violating the California rent skimming law multiple times can be a misdemeanor or felony. A misdemeanor carries a jail sentence of twelve months, a fine not exceeding $1,000, and probation. A felony attracts three years, two years, or sixteen months in prison, $1,000 in court fines, and probation.
PC 602.9 describes the offense of illegally renting residential property when the owner has not authorized you to do so. This crime is closely related to rent skimming since you pretend to own the property you are renting out, and since the property owner does not know, you will keep the rent collection to yourself. This crime is a misdemeanor punishable by jail for 12 months and a court fine not exceeding $2,500.
Filing Forged Documents Under 115 PC
115 of PC prohibits submitting forged documents related to real estate, as described above. In the context of real estate, this could include filing a fake deed to lie to a private party or the government about property ownership. It may also entail faking real estate sale contracts, disclosure forms regarding defects with a real estate property, mortgage contracts, or other essential real estate transaction documents.
Filing any of the mentioned and other documentation, which must generally be completed under penalty of perjury, constitutes an offense under California statutes and can trigger substantial civil penalties. The consequences of these illegal actions vary contingent on the severity of the crime and the accused’s criminal record.
Especially in forgery cases, mortgage and real estate fraud is always deemed a felony carrying a court fine of $10,000 and incarceration for not more than three years.
A judge can enhance your sentence if you are convicted of real estate or mortgage fraud under PC 115 and the involved victim incurred significant losses. These additional consequences include the following:
- 12 more months if the victim sustained losses of $65,000
- 24 more months if the victim lost more than $200,000
- Three extra years if the victim lost $1.3 million
- Four extra years if the victim suffered a loss exceeding $3.2 million
Apart from the additional consequences, you may serve prison time for an additional one to five years or more if:
- Your record has a minimum of two prior convictions for felonies related to real estate fraud, and
- Your conduct subjected the victim to a loss exceeding $100,000
Defending Against Charges of Real Estate Fraud
Defenses to mortgage and real estate fraud allegations under California criminal statutes vary across cases. However, like all fraud-related accusations, the matter of the accused person’s intention will dominate. Common defenses your lawyer can assert based on your case facts include:
The Property Owner Accepted to Proceed with the Deal
Real estate fraud charges are often associated with the accused person’s transactions with the victim’s estate. Accusations such as these are common in cases of elderly victims. Usually, the older person agrees that someone else represents them during a real estate transaction. However, they forget about making that request or become confused about it.
If that is what occurred in your situation, asserting the defense of consent can lead to your charges being dropped. Helping somebody else in good faith and with their authorization is not a violation. Your lawyer would know when and how to argue consent as a legitimate defense strategy.
You Made an Honest Error In Your Transaction Process
Your attorney can raise this defense strategy for you to avoid a criminal conviction. They can assert that, even though the victim incurred losses, that was due to a genuine mistake. Perhaps, for example, the alleged victim overpaid because of a typing error on a lease transfer agreement and thus reported you for real estate fraud.
In this case, asserting this defense strategy may lead the court judge to understand that you never wanted to trick the victim, and what transpired was a one-time mistake. This could result in the judge dismissing your charges. Remember that, even though this defense strategy might result in the dismissal of your case, you may be subject to a civil suit for your conduct. Thus, you can only be vindicated from your actions if the alleged victim does not file a lawsuit against you.
False Accusations
Real estate-related transactions are complicated and usually include several individuals. Since many parties are involved, the real offenders may easily accuse someone else of the fraudulent act to escape responsibility. If you believe someone else has framed you to answer for something you did not do, you can assert the defense of false allegations.
At times, you may also be dealing with a case of identity theft, whereby another person utilizes your personal information in an unlawful transaction. In other cases, a person might lawfully sell their property to you and then want to repossess it. Your legal counsel can assist you in gathering the evidence required to show your innocence.
You Never Had Fraudulent Intention
Like all other fraud-related cases, the defendant’s intention is central in real estate fraud cases. It is among the essential elements making up the offense that the D.A. must show. What you did notwithstanding, the judge will not convict you if you never intended to deceive the victim. Perhaps you had pure intent, or the victim misinterpreted your conduct.
Where the prosecution cannot establish intent, your lawyer helping you assert that you never meant to deceive the victim, with enough evidence, might lead to the judge dismissing your case. Even if you made mistakes that impacted the transaction procedure, you cannot be convicted if you never acted with fraudulent intention.
Coerced Confession
Coercion and undue processes can compel somebody to act in a way they would not otherwise. That is mainly because they fear what will happen to them if they do not follow orders. In that case, your lawyer can argue this defense strategy by identifying where the coercion or pressure originated to determine why you acted the way you did.
Coercion or pressure could originate from a person interested in purchasing property before the intended purchaser does, an employer, or any other third party. After identifying where the coercion came from, your lawyer should demonstrate the third party’s interest in the deal and how it led to undue threats and influence on you to do things that benefit them.
Note that the standard applied in establishing whether someone’s conduct is valid is that of a reasonable party. In particular, you should persuade the jury that the coercion the third party made you ensure was enough to make a reasonable individual fear for their safety or career advancement. Therefore, your reason for doing what you did must be compelling enough.
The Victim In Question Was Merely Discontented with the Outcome of the Transaction
Usually, parties in a real estate transaction negotiate rigorously, and each is after gaining an advantage by the end of that transaction. As far as criminal real estate charges are concerned, your lawyer can help you assert that you never deceived or defrauded the involved victim. The lawyer can present evidence to show that the victim was merely displeased with the transaction’s outcome.
At times, a discontented client may blame the other involved party if the outcome of a real estate deal differs from the anticipated results. Consequently, they may allege that the party used fraudulent means, even if that party followed the transaction procedure as it should be. If this happened in your case, your lawyer can assert this defense strategy and prove that you complied with the required procedures, which led to the desired outcome.
Your lawyer can present evidence like the guiding principles for realtors and the realtors’ code of conduct. These pieces of evidence can assist in solidifying this defense strategy. In addition, your lawyer can give legitimate reasons why you and the victim did not reach the expected results to demonstrate that you never committed fraud. Perhaps you could not foresee the reasons, meaning you never expected the outcome to be dissatisfying.
Presenting multiple pieces of evidence will help persuade the presiding judge to deduce that you did not contemplate defrauding the victim, resulting in your charges being dismissed.
Find an Experienced Fraud Crimes Lawyer Near Me
Charges of real estate fraud can be severe. Being convicted can hurt your career, finances, and reputation. However, a skilled fraud crimes lawyer can assist you in fighting the accusations against you and avoiding any negative impacts. At CCLG: Los Angeles Criminal Attorney, we boast fraud crimes lawyers who will put their resources and skills into safeguarding your rights and professional standing. You want to call us at 323-922-3418 if you face real estate and mortgage fraud charges or are under investigation. We will schedule a complimentary consultation to share your case details with one of our experienced attorneys.
