Fraud takes many forms in California. Generally, it entails someone inflicting, in most cases, financial loss or harm on an institution or person, thereby gaining an advantage to which they are not entitled. One form of California fraud crime is real estate fraud— a fraudulent theft committed in connection with real estate transactions. This is a severe crime that carries harsh penalties. You could face an incarceration period, significant fines, and victim restitution if convicted.
However, facing charges for this crime does not mean you are criminally liable and should be automatically convicted. The court must allow you to defend yourself and give your account of events. It could be that the victim falsely accused you because they are scheming to repossess their property after selling it to you. Alternatively, it could be an older client who agreed to you representing them in a real estate transaction but became confused about it.
Hiring a skilled defense lawyer will help you defend your case more effectively. An attorney who understands how local courts and prosecutors operate is the best person to help you obtain the most favorable outcome. At Chula Vista Criminal Attorney, we have decades of experience defending clients in Chula Vista and the neighboring cities against fraud crimes, including real estate fraud. We can assist you in developing a solid defense strategy to prove your innocence or obtain a lenient sentence. Do not fight alone; let us help you through it all.
Defining the Crime of Real Estate Fraud
Real estate fraud happens when a business or person defrauds someone else during the financing, sale, or purchase of real estate or any other real estate transaction. For example, someone can lie on an application or file false documents. In California, this crime is primarily prosecuted under state laws, although it can also be tried under federal law.
Real estate fraud statutes cover a wide range of unlawful activity, including rental agreements, mortgages, housing, flipping property, and predatory loans. Real estate fraud can happen at any transaction level, such as the appraisal, foreclosure, financing, or closing stages. This violation comes in many forms, including:
- Elder fraud is when somebody uses a fake real estate scheme to defraud elderly victims.
- Filing forged or fake documents is when a person files a forged deed with the county record intending to defraud the actual property owner.
- Rent skimming— happens when someone embezzles a tenant's rent, making them face eviction for failing to pay rent.
- Straw buyer schemes happen when someone purchases a home for another person who is not eligible, for example, because they have a horrible credit report.
- Foreclosure fraud— an illegal scheme to defraud people facing foreclosure on their property.
- Mortgage fraud— entails equity skimming and unlawfully obtaining mortgages with stolen identity or false information.
California Law on Real Estate Fraud
Whereas California has no specific real estate fraud law, prosecutors apply the following statutes when pursuing charges against a suspect:
- Code 890, rent skimming.
- Code 2945.4, foreclosure fraud.
- PC 115, filing forged documents.
- PC 532, theft by false pretense.
- PC 487, grand theft.
Civ. Code 890, Rent Skimming
You can be charged with rent skimming when you act in either of these two ways: when you neglect to apply the rent payments you collected during your first year of owning a home to the loan on that property, or when you pretend that you own real estate, fraudulently rent it out illegally, and take the proceeds from the rent.
Rent skimming becomes a criminal offense in California only if the skimmer commits it multiple times. One incident of rent skimming does not subject a person to criminal charges. Instead, it subjects them to a civil suit, resulting in civil penalties.
Civ. Code 2945.4, Foreclosure Fraud
Foreclosure fraud is an offense perpetrated mostly by professionals who assist homeowners subject to foreclosure. You are criminally liable for this offense if you:
- Defraud the homeowner into signing an unlawful contract.
- Take a power of attorney from the homeowner.
- Take money from someone else for your services, and do not inform the homeowner.
- Take an interest in a property facing foreclosure.
- Charge excessive fees for services.
- Charge a homeowner for services before having provided them.
Foreclosure fraud became a common problem after the great recession of 2008, when a lot of homeowners faced potential foreclosure and the loss of their homes. Several disreputable businesses opened under the disguise of helping homeowners navigate the foreclosure procedure. The companies would improperly be interested in the ownership of the property facing foreclosure and charge exorbitant fees or otherwise deceive the already desperate homeowners.
Foreclosure fraud takes many forms, including straw buyer schemes, phantom help scams, illegal property flipping, predatory renting, and title transfer schemes.
Predatory Lending
Predatory lending occurs when a mortgage broker creates a loan for a possible buyer and loads it full of unnecessary fees that do not benefit the borrower. The broker tries to take advantage of these loans to pay commissions.
Illegal Property Flipping
Illegal property flipping occurs when a property's value is falsely inflated due to a fraudulent evaluation, a bank lends money on the property for more than its actual value, or an unsuspecting purchaser buys the property at an exorbitant price. Illegal property flipping does not apply to people who purchase a piece of property, fix it up, and resell it at an increased price, as this is deemed legal flipping.
Straw Buyer Schemes
A straw buyer buys a home on another person's behalf. They buy the home because the actual purchaser cannot close the transaction for particular reasons; for example, they have bad credit. Using a straw buyer is deemed unlawful where it is illegal for the actual purchaser to complete the purchase themselves or the purchaser defrauds someone else.
Phantom Help Scams
A phantom help scam occurs when a foreclosure assistance company promises to assist a homeowner in avoiding foreclosure in exchange for upfront charges and takes the money but does not perform any service. It is usually too late to prevent closure when the homeowner realizes they were scammed.
Title Transfer Schemes
Title transfer occurs when a consultant convinces a homeowner who faces foreclosure to transfer the home title. Here, the consultant informs the real estate owner that they can continue living on that property by renting it, and then they will repurchase it later. However, the consultant ultimately evicts the homeowner and obtains the existing home equity.
Bait and switch is a scheme of title transfer where a homeowner does not know they are transferring the title. Here, the consultant leads the property owner to think they have signed paperwork that will assist them in securing another loan, but in reality, they sign paperwork that transfers the title to the home to the consultant.
PC 115, Filing Forged Documents
Real estate-related fraud cases are frequently charged under PC 115. This law states that knowingly recording, registering, or filing a forged or false document in a government office, for example, a clerk's office, is an offense. In the mortgage or real estate context, this may entail filing a forged deed with the county recorder to defraud the government or other private entities as to the ownership of a property.
It could also involve forging disclosure forms regarding shortcomings with the real estate, home loan contracts, real estate sale contracts, or any other crucial real estate transaction documents. Filing these documents, which usually has to be done under penalty of perjury, is an offense under California law and triggers civil penalties.
PC 532, Theft by False Pretense
Real estate fraud in the context of theft by false pretenses occurs when somebody defrauds someone else out of a property through false representations or false pretenses. For the judge to convict you under this law, the prosecution must demonstrate that:
- You consciously and deliberately deceived a mortgage lender or real estate owner by making false promises.
- Intending to convince the party to give up property.
- The person relied on your false promises and gave you their money or property.
PC 487, Grand Theft
Apart from PC 532, Penal Code Section 487, grand theft, is also applied when prosecuting theft by false pretense offenders. This section involves property crimes and applies when those violations defraud another person of property valued at more than nine hundred and fifty dollars.
Under this statute, real estate or mortgage fraud can happen when someone makes false promises or statements to a seller or buyer, intending that the seller or buyer be misled and therefore give them something valuable that they would otherwise not be entitled to. This may include lying about owning property during sales, concealing shortcomings with the property, et cetera.
The Consequences
Real estate-related fraud cases are punished differently based on the law under which the defendant is prosecuted. The penalties are as follows:
Penalties Under 487 PC, Grand Theft
If you are prosecuted under PC 487, you will face wobbler charges. That means the prosecuting attorney can try your case as a felony offense or misdemeanor violation based on the defendant's criminal record and the case facts.
If convicted of a grand theft misdemeanor, you will be subject to a jail sentence of 12 months, summary probation, victim restitution, and up to a thousand dollars in fines. And if convicted of a felony violation, you will face formal probation with a maximum of one year in jail or sixteen months, three years, or two years in jail. You may also face a fine of ten thousand dollars and victim restitution.
Penalties for Foreclosure Fraud
Violating Civ. Code 2945.4, the foreclosure fraud law, is also deemed a wobbler offense. The possible consequences are a year in jail, misdemeanor probation, and up to one thousand dollars in fines for a misdemeanor conviction. If found guilty of a felony, you will be subject to formal probation with a maximum of 12 months in jail or sixteen months, three years, or two years in incarceration. You may also be subject to a fine of at most ten thousand dollars.
Civ. Code 2945.4 also has a specific provision that allows the judge to impose an additional sentence apart from the penalties you face for related crimes.
Penalties for Rent Skimming
Violating the rent-skimming law is punishable based on whether you committed a single or multiple rent-skimming acts. You would be subject to civil consequences if you committed one act. A civil lawsuit means any victim who suffered a loss thanks to your actions can pursue damages. If they win the suit, you may pay restitution equivalent to the amount the victim lost, the victim's legal costs, attorney's fees, and additional fees if applicable.
You would be subject to criminal prosecution and consequences if you committed multiple rent skimming acts. This crime is deemed a wobbler. A misdemeanor conviction will subject you to summary probation, not more than one thousand dollars in fines, and a jail term of 12 months. On the other hand, a felony conviction carries felony probation, up to ten thousand dollars in fines, and a jail term of sixteen months, three years, or two years.
Penalties Under PC 115, Filing Forged Documents
Filing forged real estate-related documents is a straight felony. A conviction carries a sentence of sixteen months, three or two years in jail under the realignment program, a fine not exceeding ten thousand dollars, and felony probation. You may be subject to additional consequences if you committed this crime and the victim sustained a substantial loss. The sentence enhancement will be as follows:
- An additional year in prison if your activity made the victim lose more than sixty-five thousand dollars.
- An additional two years of incarceration if the victim's loss was above two hundred thousand dollars.
- Three more years of incarceration if your actions made the victim lose one million three hundred thousand dollars or more.
- Four more years in incarceration if your fraudulent act made the victim lose above three million two hundred thousand.
In addition to these penalty enhancements, you may be subject to a further 1–5 years in prison and increased fines if you have two or more prior felony convictions for real estate fraud-related charges and your actions made the victim lose more than a hundred thousand dollars. A conviction under this law may also lead to losing your real estate broker's permit.
Penalties Under PC 532, Theft by False Pretense
The penalties under PC 532 vary based on the value of the real estate property "stolen." If the property is worth less than $950, the crime will be a misdemeanor, and the penalties for a conviction will be six months in jail and up to a thousand dollars in fines.
The violation will be a wobbler if the real estate property is worth more than $950. In this case, a misdemeanor conviction carries one year in jail and a thousand dollars in fines. A felony conviction carries sixteen months, two years, or three years in prison and a ten-thousand-dollar fine.
Defending Against Real Estate Fraud Charges
Defenses for this crime vary from one case to another. Your lawyer will know what the suitable defenses to your case are. General legal defenses include the following:
The Victim Was Merely Not Content with the Transaction Outcome
Parties involved in real estate transactions usually negotiate aggressively and seek to gain the upper hand. In the criminal context, you can argue that you did not deceive or defraud the supposed victim but that they were merely unhappy with the transaction's outcome after the fact.
Sometimes, an unsatisfied client might blame the other party when a real estate deal's outcome differs from what they expected. As a result, they might accuse the party of fraud, whether or not that party adhered to all the transaction procedures. If that is the case, you can argue this defense by proving that you followed the necessary procedures to generate the desired results.
Evidence such as the guiding principles and code of conduct you must comply with as a realtor can help you argue this defense. You can also give valid reasons why the expected outcome was not reached to prove you did not commit fraud. It could be that the reasons were unforeseen, meaning you did not expect the results to be unsatisfactory.
Presenting several pieces of evidence will assist in persuading the judge to conclude that you never contemplated defrauding the client, leading to a dismissal of your charges.
You Were Coerced
Undue pressure and coercion can push someone to act differently, primarily out of fear for their safety if they fail to obey orders. If that happened in your case, the thing to do in arguing this defense is to identify where the pressure or coercion came from to give context to your actions.
Pressure or coercion could come from an employer, an individual interested in buying property ahead of the intended buyer, or another third party. Once you have identified the source of coercion, you should prove their interests in the transaction and how they resulted in undue influence and threats against you to act to their advantage.
Remember, the standards used to establish whether or not someone's actions are valid are those of a reasonable person. Particularly, you should convince the judge that the coercion you were subjected to was sufficient to make any reasonable person fear for their career advancement or safety. Thus, your reasons for acting the way you did should be compelling.
Lack of Fraudulent Intent
Like all fraud cases, the issue of the accused's intent is paramount in real estate fraud cases. It is one of the critical elements of the crime that the prosecuting attorney must prove. Irrespective of whatever you did, the judge cannot find you guilty if you had no intent to deceive. It could be that you acted with pure intentions or that someone misinterpreted your actions.
In these cases, arguing that you did not mean to deceive, with sufficient evidence, may make the judge dismiss your charges. Even if you committed an error that affected the transaction process, you are not guilty if you did not act with fraudulent intent.
False Allegations
Real estate transactions are intricate and often involve several people. With many parties involved, the actual culprits can easily accuse another party of fraud to escape criminal liability. If you are being framed to take the fall for someone else, you can argue the false allegations defense.
Sometimes it could also be an incident of identity theft, where someone else uses your personal details in an illegal transaction. Other times, a party may legally sell their real estate to you and want repossession. Your attorney can assist you in collecting the evidence necessary to demonstrate your innocence.
You Committed an Honest Mistake During Your Transaction
Your lawyer can assist you in arguing this defense to help you avoid a conviction. They can assert that, whereas the victim suffered losses, it was because of a genuine error. For example, it could be that the victim overpaid due to a typing mistake on a lease transfer agreement and consequently accused you of real estate fraud.
In that case, arguing this defense may convince the judge that you did not want to dupe the victim and that what happened was a one-time incident. This would lead to the judge dropping the charges against you. Note that although this defense may lead to the judge dropping your case, you might still face a civil lawsuit for your actions. Therefore, you can only be absolved of your charges if the victim does not sue you.
The Real Estate Owner Agreed to Go Through with the Transaction
Real estate fraud charges are frequently linked to the defendant's dealings with the victim's real estate. Accusations like these are prevalent when the victim is elderly. In most cases, the older adult consents for someone else to represent them in a real estate transaction, but then they become confused or forget about it. If that happened in your case, arguing the consent defense can suffice. Helping someone with their permission and in good faith is not a crime. Your attorney would know how and when to use consent as a valid defense.
Contact a Criminal Lawyer Near Me
You need expert legal representation if you are under investigation, arrested, or charged with real estate fraud. Effective legal representation by a skilled lawyer is essential to maximizing the chances of a desirable outcome.
At Chula Vista Criminal Attorney, our lawyers can help you fight real estate fraud charges, just like we have helped hundreds of other clients in Chula Vista and beyond. We can employ various strategies, including prefiling intervention, to have the prosecution reduce or drop your charges before your case undergoes the court process.
If that does not work, we can develop a strong defense strategy and fight throughout the criminal process for favorable results. Call us at 619-877-6894 for a free consultation so we can review your case details.