Real estate fraud, scams, and schemes all comprise a type of theft that you could use to steal another person’s property or home. You could commit real estate fraud in many ways, namely straw buyer schemes, illegal property flipping, and foreclosure. Because of real estate’s high value, your victim could incur substantial financial losses if you defraud them.
California law takes fraud offenses seriously and prosecutors often charge real estate fraud suspects with grand theft under PC 487. If found guilty, you could spend many years in prison or pay hefty fines and restitution amounts. However, the prosecution must prove beyond a reasonable doubt, certain elements of crime before the court can convict you.
Getting charged with a crime doesn’t mean that you are guilty. The accuser could have accused you falsely, the plaintiff could be looking for ways to repossess the property they sold to you, or they could even be an elderly person who gave you consent to represent them and forgot about it. At The Los Angeles Criminal Defense Attorney. we can help you develop a strong defense to fight your charges. We have many years’ experience representing clients in Los Angeles and surrounding cities. Don’t fight alone, allow us to seek the best possible outcome.
The Definition of Real Estate Fraud Per California Law
Real estate fraud entails different crimes and each with a distinct definition. Generally, this crime occurs when you take advantage of someone else or business in a real estate deal. Prosecutors use California PC 487, the law that defines grand theft penalties, as the primary statute for court cases involving real estate fraud. The law would apply in real estate fraud if you defrauded someone else or business of property valued over $950 through pretenses.
Suspects could commit real estate fraud in many transaction levels like an appraisal, closing, or even foreclosure. Since many real estate fraud lawsuits cannot fit entirely within grand theft's legal parameters, the prosecution could use other statutes including:
Civil code 2945.4 - Foreclosure Fraud
California Civil Code Section 2945.4 defines the crime of foreclosure fraud. Usually, foreclosure consultants are known to commit this crime. As a foreclosure consultant, you perform services such as ceasing foreclosure sales, helping property owners obtain extensions of reinstatement periods, and assisting homeowners in getting advances of funds. You are guilty of this crime if you perform any of the following acts:
- Trick a property owner into signing an illegal agreement
- Receive money from a third party and services are done and fail to notify the property owner
- Obtain an interest in a property that is facing foreclosure
- Charge excess fees to offer any service
- Charge a homeowner service fees for services not offered
- Placing a lien on a particular property as compensation
- Obtain an attorney’s power from a homeowner. As an attorney, you can handle legal matters on behalf of the homeowner
Civil Code 890 - Rent Skimming
Per California CV 890 rent skimming occurs when you, as a rent collector, embezzle rent money that tenants pay, who could get evicted for ‘rental arrears.’ You can also violate CV 890 if you rent a residential property and fail to apply the rental income to its mortgage.
You cannot get charged with rent skimming if, after collecting the proceeds, you pay a healthcare worker your medical costs or those of your loved ones, whether unexpected or expected within 30 days. Another act that cannot have you charged with CV 890 is when you pay approved contractors of material suppliers to renovate the property using rental proceeds within 30 days.
However, you must prove beyond a reasonable doubt that you didn’t have another income-generating activity to cater for contractor fees or medical expenses. Under California law, you are subject to a civil lawsuit if you commit rent skimming once. You are subject to criminal liability and could get convicted if you violate CV 890 several times.
Penal Code 115 PC - Forged Deeds or Documents in Public Records
In California, the prosecution charges many real estate fraud lawsuits under PC 115. You are guilty of violating PC 115 if you knowingly record, register, or file a forged or false document and perform the act with a public records office, for example, the county clerk’s office. The court could find you guilty of real estate fraud if you acquire a loan or try to sell a property that doesn’t belong to you using a fake title deed. The court has the jurisdiction to prosecute you under California Penal Codes 470 and 115.
Elements of the Crime
To prove you are guilty of real estate fraud, the prosecutor must show enough evidence that:
- You made a false representation or misstatement
- You knew that you were making a fraudulent information concealment
- While making the misrepresentation, you have intent to commit fraud
- The plaintiff relied on your fraudulent representation to decide like buying property or approving a loan
- As a result of reliance on your untrue disclosure, the accuser incurred financial loss
Types of Real Estate Fraud in California
Like white-collar crimes, real estate fraud involves complicated schemes where you use creative tactics. In several instances, you could not know that your acts are unlawful. Because of this, it's hard to explain all types of real estate fraud practices. However, law enforcers are keen to notice schemes that could constitute real estate fraud. If need be, California authorities seek the help of the California Bureau of Real Estate to fraudulent money-making ventures. The bureau's significant roles are receiving public complaints and filing petitions should they notice red flags in pending transactions related to real estate.
Popular categories of real estate fraud that occur in California are:
Foreclosure fraud – California Civil Code Section 2945.4
California CV Section 2945.4 defines the crime of foreclosure fraud. You violate CV 2945.4 if you claim to be a foreclosure specialist and scam people facing foreclosure (happens when someone cannot pay their mortgage on their property). Ways in which you could commit foreclosure fraud are explained in the section above (Civil code 2945.4 - Foreclosure Fraud). Categories of foreclosure fraud include:
Title transfer is a type of fraud that happens when you, as a foreclosure consultant, persuade a homeowner facing foreclosure to sign over the home title. You could trick the property owner by telling them that they could occupy it by renting it with the promise that you would resell it back to them in the future. You then evict the tenant (previous owner) and acquire equity in the property.
Bait and Switch
Bait and switch is a form of foreclosure fraud closely related to the title transfer. The significant disparity is that, with bait and switch, you persuade the homeowner to sign papers that could help them get a mortgage payment. The truth is that the documents your fraud victim signs, transfer title to their property to you. Commonly, the documents victims sign entail writings that are illegible, confusing, and tiny.
Phantom Help Scams
A phantom help scam occurs when you, being a foreclosure consultant, promise a property owner to avoid foreclosure, receive payment for the service, and fail to deliver. The homeowner discovers the fraudulent act when it's too late to stop the foreclosure.
Straw Buyer Schemes
A straw buyer refers to someone who buys property on behalf of someone else. You, being the real buyer, could use a straw buyer when you cannot make a transaction for various reasons. For instance, when you have a bad credit rating. In return, you offer the straw buyer money for using their name and personal details.
After the straw buyer completes the transaction, you fail to remit the agreed mortgage payments; hence, leaving them to deal with the lender. In California, using a straw buyer is illegal if you intend to defraud another person or are not legally allowed to buy a property. In a straw buyer scheme, parties involved could include the straw buyer, the real buyer, a mortgage agent, the home seller, and a real estate broker.
Rent Skimming - California Civil Code Section 890
According to California CV 890, rent skimming, a form of real estate, occurs when you fraudulently fail to apply the rental income to pay a mortgage the year you buy a property or rent out your property and keep the rental income. Per California law, you would not subject yourself to criminal liability if:
- You use rental income to settle any healthcare-related costs for a member of the family you defraud
- You use the rent proceeds to pay contractors to sort out housing violations if you don’t have another income source that you could use to settle the expenses
Illegal Property Flipping
While property flipping – the quick buying and selling of property – is legal, there exist particular fraud forms that accompany the practice. As a mortgage broker, property appraiser, or realtor, you could illegally flip property if you inflate its value through fraudulent appraisal, and an unsuspecting customer buys the property. You are also guilty of illegal property flipping if you use it after exaggerating its monetary value as collateral to borrow money from a bank. However, this fraud cannot apply to someone who buys a property, refurbished it, and resells it at a reasonable Profit.
Predatory lending is a form of real estate fraud that occurs when you, as a mortgage broker, generates a refinance loan that entails excessive/ unnecessary charges that cannot benefit the borrower. You commit this crime when looking to pad your commission and without considering the borrower’s ability to settle the loan. This type of real estate fraud involves actions like:
- Imposing unfair and unreasonable conditions on borrowers, especially through aggressive sales tactics
- Taking advantage of borrowers who are unaware of exploitative transactions
- Straightforward deception
Possible Punishments for Real Estate Fund
Penalties for Penal Code 487 PC – California Grand Theft
California law considers real estate fraud a wobbler offense under PC 487 (grand theft). You are guilty of grand theft if you defraud another person of property valued over $950. The prosecution could either charge you with a misdemeanor or felony hanging on the factors surrounding your case or your criminal history.
If you are charged with misdemeanor real estate fraud, possible penalties are:
- Serving time in a county jail for not more than one year
- Summary probation
- Paying a $1,000 maximum fine
- Serving time in jail together with paying a fine or plaintiff restitution
The possible punishments for a felony grand theft are:
- A fine not exceeding $10,000
- Serving time in jail for 16 months, two years, or three years
- Formal probation
- Paying a fine adding to a jail term
Penalties for Civil Code 2945.4 – Foreclosure Fraud
Per California Civil Code 2945.4, foreclosure fraud is a wobbler. If convicted for misdemeanor foreclosure fraud, penalties are:
- A maximum fine of $1,000
- A jail term of not more than one year in county jail
- Summary probation
- Both imprisonment and a fine
The judge also has the jurisdiction to add penalties to your sentencing for charges related to California CC 2945.4.
Punishment for Civil Code 890 – Rent Skimming
California CC 890 explains the penalties for committing rent skimming. The judge imposes the penalty depending on a case by case basis. Normally, the prosecution must prove beyond a reasonable doubt that you committed rent skimming once or several times. If found guilty, the court can only impose civil punishment. Per California law, a civil lawsuit means that everyone who incurred a loss because of your fraudulent actions could file claims. If the plaintiff press charges, you could pay:
- Lawyer’s fees and the accuser’s legal costs
- Compensation equal to the money the accuser lost
- Extra costs, where applicable
If you committed rent skimming many times, you could face criminal charges and sentencing. Per California law, rent skimming is a wobbler offense. Misdemeanor rent skimming is punishable by:
- Serving time in jail for a maximum of one year
- Paying a fine of not more than $1,000
- Both incarceration and a fine
Felony charges attract:
- Incarceration for 16 months, two years, or three years
- A $1,000 fine
- Serving jail time and paying a fine
Penal Code 115 PC - Forged Deeds
California PC 115 is the statute that defines penalties and punishment for forged deeds crime. Per the statute, violating PC 115 is a felony. The punishment is:
- Paying a maximum fine of $10,000
- Serving a jail term of 16 months, two years, or three years
- Felony probation
In California, a judge has the jurisdiction to enhance punishment if you are charged with real estate fraud, and the plaintiff suffered a major loss. The additional penalties include:
- An additional one year if the accuser incurred lost more than $65,000
- An added two years if the plaintiff lost over $200,000
- A further three years if your victim’s loss surpassed $1,300,000
- An extra four years if you caused the victim to lose more than $3,200,000
Besides additional punishment, you could serve time in prison for an extra one to five years or even more if:
- You caused the victim to lose over $100,000
- You have had at least two felony conviction in the past, and they relate to real estate fraud
Defense Strategies for Real Estate Fraud
Even though real estate fraud attracts severe penalties, you have the right to defend against the charges. However, you need the help of a competent criminal attorney to help you maneuver the complex California justice system. Your lawyer could employ some robust legal defenses to fight your lawsuit. These defense strategies include:
False Accusations/Mistaken Identity
The business of real estate is complicated as it involves multiple players. With so many parties, the real offender could claim you committed fraud to cover up their tracks. Yours could also be a case of identity theft, where someone else uses your name in illicit transactions. In other instances, someone could sell the property to you and realize they made a mistake. Since they want it back, they could accuse you of fraud. With the help of an experienced lawyer, you could gather evidence to show you’re innocent and cast doubts in the prosecution’s proof.
You Entered into A Transaction with The Consent of a Property Owner
Many times, people get accused of real estate fraud due to their dealings with someone else’s property. It is not uncommon to find out that many fraud victims are the elderly. An older person could consent to your decision about their property, then they get confused or forget about it. Your lawyer could argue that you assisted the elder in good faith and with their consent. The defense of acting with consent relates to that of lacking intent.
You Didn’t Have Fraudulent Intent
Intent to defraud is the primary element for the crime of real estate fraud. Irrespective of your activities, the court cannot convict you before the prosecution proves beyond a reasonable doubt that you had an intent to commit fraud. Your actions could be out of good intentions, or you misinterpreted your actions’ meaning and their consequences. A competent lawyer could state you had no intent to defraud to have your charges dropped or reduced even though you made a mistake that could affect you or your enterprise.
Plea Bargain Negotiations
While entering a plea bargain is not a legal defense, your lawyer could try plea bargain negotiations for a sentence reduction. For example, the judge could lower your California PC 487 charges to a misdemeanor or order you to restitute the accuser rather than sentencing you to jail.
How Do You Fight Your Real Estate License Case?
Like real estate dealings, strategy and negotiations are essential in a real estate fraud case. Apart from facing charges in court, the Department of Real Estate could suspend or revoke your license. Using your lawyer, you could go to court or negotiate with the real estate department. You are recommended to hire a competent defense lawyer if you want to keep your license.
Discuss Your Goals with Your Defense Lawyer
Even though you found an experienced attorney, they cannot serve you well without your help. You should work as a team, and make the lawyer’s work easy by heeding their legal counsel. Firstly, tell your lawyer about your goals. For example, notify them when you want to accept a plea bargain. By doing this, the defense attorney could develop robust defenses that best suit your charges. Additionally, discussing your goals helps the lawyer find the path to your desired results.
Discuss Legal Costs
You need a budget to engage experts and private investigators. Taking depositions could also need money and time. Even if you desire a positive outcome, you should tell your attorney the amount you can afford. Your attorney will then find a way the result you want could fit your budget.
Don't Speak to Law Enforcement
No matter how friendly law enforcers might be, avoid giving them information. They are against you and seeking statements that can strengthen the prosecutor’s lawsuit. If you disclose any information, you could incriminate yourself; hence, making the work of your attorney harder. You want to talk to your lawyer first and allow them to convey the information to the law enforcers after they ascertain it’s in your best interest.
Avoid Social Media
Note that the prosecution seeks the minutest information to charge and have you convicted. If you post any details online that touch your case, the prosecution could see those. Therefore, you are advised to avoid social media activity until the court makes a ruling.
Dress Decently and Be Respectful
Every time you attend a court hearing, dress decently. Don’t forget to make a good impression by showing respect to the jury. You also want to show up at the court on time.
Find a Los Angeles Criminal Defense Attorney Near Me
A fraud conviction could hurt your reputation, finances, and career. Possible penalties could include hefty fines and lengthy prison sentences, dependent on the damage caused. A competent criminal defense attorney could help you have the charges lowered or dropped. Fortunately, our real estate fraud attorneys put the essential skills and resources into protecting your professional standing and rights. You want to contact The Los Angeles Criminal Defense Attorney if you or your loved one is facing real estate fraud charges. Call us at 310-564-2605 to schedule a cost-free consultation meeting with our capable attorneys.