Real Estate and Mortgage Fraud Laws in California
The crime of real estate fraud occurs when somebody commits a form of fraud directly connected to the purchase, sale, or financing of real estate property.
This type of fraud is filed chiefly under California state laws but could also be filed under federal regulations. There are harsh penalties, such as huge fines, restitution, and jail time if convicted. The real estate fraud laws include several different types of illegal activity, including:
- rental agreements,
- straw buyer schemes,
- flipping property,
- predatory loans.
Real estate fraud can occur at any point of a transaction related to property, including the foreclosure proceedings, financing process, appraisal, or closing of a real estate transaction. While California does not have a specific real estate fraud statute, prosecutors will use the following to pursue charges against someone:
- 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.
What is Real Estate Fraud?
Real estate fraud laws are violated when somebody commits a dishonest act in a property transaction that benefits the perpetrator, such as lying on applications or filing false documents. The most common forms are discussed below.
Mortgage fraud includes equity skimming and illegally getting mortgages with false information or stolen identity.
Foreclosure fraud is an unlawful scheme to take advantage of people facing foreclosure on their property.
Rent skimming occurs when somebody embezzles the tenant's rent money, often facing eviction for non-payment of rent.
Filing forged documents occur when someone files a forged deed with the county recorded with the intent to deceive ownership of the property.
Elder fraud occurs when someone uses a fraudulent real estate scheme to take advantage of elderly victims.
A straw buyer scheme is when somebody buys a home for someone else who is not qualified, such as a horrible credit report.
What Are California Statutes Used for Real Estate Fraud Charges?
As noted, real estate fraud is charged under various statutes based on the type of fraudulent activities during a real estate transaction, such as:
- Penal Code 487 PC grand theft is filed when someone defrauded property over $950. This law is typically used in real estate or mortgage fraud allegations of theft by false pretenses.
- Penal Code 115 PC filing forged documents are filed in a situation where a person knowingly submits a false or forged real estate document to a government office.
- Civil Code 890 rent skimming occurs when someone rents out a property they pretend to live in and fails to apply the rent to their mortgage.
- Civil Code 2945.4 foreclosure fraud is charged against those involved in foreclosure actions, such as charging excessive fees.
In some cases, real estate fraud could be federal charges since some transactions deal with federally backed banks.
What Are the Punishments?
The penalties for the different types of real estate fraud will depend on whether the case was filed as a misdemeanor or felony, such as:
Penal Code 487 PC grand theft is filed as either a misdemeanor or felony. If convicted, you face jail time for up to one year for a misdemeanor and three years for a felony. Penal Code 115 PC filing forged documents is always a felony that carries a jail time of up to three years and a fine of up to $10,000.
Civil Code 890 rent skimming is only charged when there are multiple acts of skimming. This wobbler also has the same penalties as grand theft listed above. Civil Code 2945.4 foreclosure fraud is another wobbler with the same penalties as grand theft.
How Can You Fight Real Estate Fraud Charges?
If you have been accused of real estate fraud in California, we can use several common legal defenses, such as:
- No fraudulent intent,
- Alleged victim was not deceived,
- There was consent from the property owner,
- False accusation.
To be convicted of real estate fraud, it must be proven you had criminal intent to benefit by using a false claim or activity related to a real estate transaction. The burden of proof is the responsibility of the prosecutor.
Perhaps we can make an argument that a mistake was made. In other words, fraudulent conduct has to be intentional and made with the intent to defraud someone. You will likely avoid a conviction if a prosecutor can't prove criminal intent.
Perhaps we can argue you had consent from the property owner, such as when someone forgets they gave you consent to conduct their real estate transaction. Maybe there are constitutional violations or insufficient evidence.
Perhaps we can negotiate with the prosecutor to avoid filing formal charges, which is a prefiling intervention.
Cron, Israels & Stark are based in Los Angeles County. You can contact us for a free case review by calling (424) 372-3112 or using the contact form.