Review of Real Estate Fraud Charges and Defenses in California
Real estate fraud occurs when someone commits a type of fraud crime involving the purchase, sale, or financing of real estate property.
In fact, these type of fraud charges can be filed under California state and federal laws and punishable by harsh penalties, including fines, restitution and jail time.
Real estate fraud laws cover different types of unlawful conduct ranging from housing, mortgages, rental agreements, straw buyer schemes, flipping property, predatory loans, and more.
The crime of real estate fraud could happen at any point of a transaction connected with the property, and even including foreclosure proceedings.
California has a variety of statues it can use to pursue charges, such as:
- Penal Code 487 PC – grand theft,
- Penal Code 532 PC – theft by false pretenses,
- Penal Code 115 PC – filing forged documents,
- Civil Code 2945.4 – foreclosure fraud.
Most statutes for real estate fraud are “wobblers” that can be filed as a misdemeanor or felony. The penalties will depend on a range of factors.
As stated, real estate fraud is a crime that can take many forms and be charged under multiple theories of criminal activity.
Real estate fraud can occur during the financing process, the appraisal, or closing of a real estate transaction.
What is Real Estate Fraud in California?
Fraud in real estate occurs when someone commits a dishonest act resulting in an unjustified enrichment to themselves during a real estate transaction.
Anyone involved in the transaction can be charged with real estate fraud for illegal activities such as lying on applications or filing false documents.
Real estate fraud is actually a broad term covering different type of fraudulent activity that are directly connected to real estate transactions, including:
Mortgage fraud including equity skimming and unlawfully obtaining mortgages with a false information or stolen identity.
Foreclosure fraud such as an illegal scheme to take advantage of people facing foreclosure on their property.
Rent skimming where someone embezzles the rent money paid by tenants, who will often get evicted for not paying rent.
Property flipping including fraud related to buying and selling properties with inflated prices from false appraisals.
Filing forged documents such as filing a forged deed with the county recorded with the intent to deceive ownership.
Elder fraud involves someone using a fraudulent real estate scheme to take advantage of vulnerable elderly victims.
Straw buyer scheme involving someone buying a home on behalf of another person because they were not qualified, such as bad credit report.
Predatory lending when a mortgage broker obtains a loan for a home buyer using excessive and unnecessary fees to pad their commissions.
There is not a specific real estate fraud law in California, rather a criminal case can be filed under various statutes discussed below.
California Statutes for Real Estate Fraud Charges
Real estate fraud can be charged under different statutes for the different fraudulent activities that can take place during a real estate transaction.
In California, the sections of the Penal Code that can apply to the various forms of real estate fraud include:
- Penal Code 487 PC – Grand theft is charged when someone is alleged to be defrauded of property worth more than $950. This statute is normally used in real estate or mortgage fraud allegation and related to theft by false pretenses.
- Penal Code 115 PC – Filing forged documents is charged when someone knowingly submits a false or forged real estate document to a government office often relating to the ownership of the property, but also includes forging mortgage loan contracts.
- Civil Code 890 – Rent Skimming is charged when someone rents out a home that they are pretending to live in during the first year of the mortgage and failing to apply the rent towards their mortgage. Rent skimming can also occur when someone pretends to own a property and fraudulently rents it out.
- Civil Code 2945.4 – Foreclosure fraud can be charged for several reasons against those involved in foreclosure actions. If someone “helping” a homeowner charges an excessive fee, charges for a service before providing it, or takes a property interest in the subject property, then they can be charged with foreclosure fraud.
Your criminal history also plays a role in the seriousness of the charges levied against you.
Real estate fraud can also result in federal criminal charges since real estate transactions often deal with federally backed banks.
What Are the Penalties for Real Estate Fraud?
The penalties for conviction of the various forms of real estate fraud can range from low-level misdemeanor to serious felony, depending on the crime alleged.
The penalties for the major forms of real estate fraud include:
- Penal Code 487 PC grand theft. This charge is known as a “wobbler” offense, which means that it can be charged as either a misdemeanor or felony. This means that a conviction for this offense can potentially result in either jail or state prison for up to one year for a misdemeanor and three years for a felony.
- Penal Code 115 PC filing forged documents. This charge is always a felony and can result in incarceration for up to three years, along with a fine of up to $10,000.
- Civil Code 890 rent skimming can be charged when there are multiple acts of skimming. A single act will not lead to criminal charges, rather a civil penalty. This offense is a wobbler offense charged as either a misdemeanor or felony and the penalties are the same as grand theft above.
- Civil Code 2945.4 – Foreclosure fraud is a wobbler offense that can be charged as either a misdemeanor or felony. The penalties are also the same as grand theft discussed above.
What Are Some Defenses to Real Estate Fraud?
If you were accused of real estate fraud in California, our Los Angeles criminal defense lawyers can use some common strategies, including:
- lack of fraudulent intent,
- alleged victim was not defrauded or deceived,
- consent from property owner,
- false allegation.
The crime of real estate fraud requires someone to have a criminal intent to unjustly enrich themselves by using a false claim or activity related to a real estate transaction.
The prosecutor has the burden to prove that you had a criminal intent connected to some activity involving real estate.
Thus, a common defense to fraud is to claim that a mistake was made. To be fraudulent, the activity alleged must have been intentional and made with the intent to defraud someone.
If a prosecutor cannot prove that the alleged acts were intentional, you will have a good chance of being found not guilty of real estate fraud at a trial.
Another defense includes you had consent from the property owner, such as a situation where an elderly person foregut they gave you consent to conduct their real estate transaction.
Other defenses may include Constitutional violations or a lack of evidence.
Further, we might be able to negotiate with the prosecutor to avoid the filing of formal charges through prefiling intervention.
Our experienced criminal attorneys will examine these and other potential defenses when preparing the defense for someone accused of real estate fraud.
The top-rated criminal law firm of Eisner Gorin can answer questions you may have about real estate fraud charges. We have a long record of success obtaining the best possible outcome.
Contact our firm for a consultation at (877) 781-1570.