Real estate fraud in California encompasses a range of deceptive practices in property transactions, which can gravely affect individuals and financial institutions. This fraud includes crimes like forging deeds, illegal property flipping, and mortgage scams. For example, forging deeds involves altering ownership documents without consent, while mortgage scams often trick homeowners into taking unfair loans.

The consequences of real estate fraud are severe under California law. You could face significant legal repercussions if found guilty, including hefty fines, restitution, and even imprisonment. The impact extends beyond legal penalties, often resulting in long-term financial and reputational damage for the perpetrators.

If you or a loved one is facing criminal charges related to real estate fraud in Fresno, seeking professional legal advice is imperative. At the California Criminal Lawyer Group, we provide the expertise needed to handle real estate fraud allegations.

The Meaning of Real Estate Fraud and Mortgage Fraud Under California Law

California Real estate and mortgage fraud are multifaceted legal issues. These types of fraud involve intentionally deceiving someone in a real estate transaction or a mortgage agreement. Real estate fraud can take various forms, from falsifying income information on a mortgage application to manipulating property values for financial gain.

Theft By False Pretense

Theft by false pretense in real estate involves deceitfully obtaining property or money by misrepresenting a fact. This fraud is characterized by intentionally providing false information to persuade someone to enter a transaction under false beliefs.

For example, when a seller knowingly misrepresents the condition of a property, they could face charges for real estate fraud. Fraud occurs when the seller hides significant termite damage, claiming the house is in perfect condition, leading the buyer to purchase the property under false assumptions. This deliberate misrepresentation to secure a sale constitutes theft by false pretense.

To face a conviction, the prosecution must prove the following elements without a reasonable doubt:

  1. You willingly deceive a mortgage lender or property owner.
  2. You made a false promise.
  3. Your victim trusted your word and gave you money or their property.

Foreclosure Fraud

Foreclosure fraud occurs when you exploit homeowners struggling with mortgage payments. It typically involves false promises of assistance or solutions to prevent foreclosure, often leading the homeowner further into financial distress.

For example, foreclosure fraud could happen when a fraudulent company approaches a homeowner facing foreclosure, offering to negotiate with the lender for a fee. The homeowner pays the fee, but the company either does nothing or files readily available forms, which the homeowner could have done themselves for free. The promised aid never materializes, and the homeowner is left in a worse financial situation, still facing foreclosure.

Under California law, you are considered guilty if you do the following:

  • Charge a property owner for a service before you provide it.
  • Charge and take an exaggerated fee for your services.
  • Take and keep interest in the home facing foreclosure.
  • Receive payment from a third party for your services and fail to inform the property owner.
  • Deprive the property owner of the power of attorney.
  • Deceive the property owner into signing an illegitimate agreement.

Rent Skimming

According to California Civil Code 890, "rent skimming" refers to using rental income from a residential property during the first year after acquisition without applying it to the property's mortgage payments. It also includes renting out a property without the owner's consent and collecting the rental income​​.

Another way rent skimming could occur is when you pretend to be the owner of a non-existent home. You go ahead and fraudulently rent out the non-existent home or one you do not own and illegally keep the rent proceeds.

Example: A real estate investor buys a residential property and rents it out. Instead of using the rental income to pay the mortgage during the first year of ownership, they divert these funds for personal use or other investments. This behavior constitutes rent skimming and can lead to civil lawsuits. Criminal charges can be filed in cases involving multiple properties (five or more within two years), leading to fines or imprisonment​​​​.

Rent skimming is generally a civil offense but can escalate to a criminal offense if the act involves multiple properties. The penalties can include imprisonment, fines, or both, depending on the severity and number of instances​​.

Forged Deeds Or Documents

In the context of real estate fraud, forging deeds or documents typically involves knowingly filing, registering, or recording a false or forged document with a government office, such as a county clerk’s office. This includes altering or creating false real estate documents to fraudulently transfer titles or obtain funds​​​​.

A common scenario involves a person forging a property deed, falsely indicating they own a property. They might then file this forged deed with the county recorder's office to secure loans against the property, defrauding lenders or buyers. Another example could involve altering an existing deed to remove or add names without proper authorization, thereby illegally altering property ownership​​.

Common Forms Of California Real Estate Fraud

Real estate fraud in California encompasses various deceptive practices, each with its own characteristics and legal implications. Below are some of the most prevalent forms:

Foreclosure Fraud

Foreclosure fraud typically involves individuals or entities falsely promising to save homeowners from foreclosure. They often target vulnerable homeowners who are struggling with mortgage payments. The fraudsters may claim to be consultants or experts in foreclosure prevention, offering false hope and assistance for a fee.

  • Title Transfer

Title transfer fraud occurs when homeowners are deceived into transferring the title of their property, typically to a fraudulent consultant or company claiming to help them avoid foreclosure. In this scam, a homeowner struggling with mortgage payments is approached by a fraudster posing as a foreclosure consultant.

The consultant convinces the homeowner that they can avoid foreclosure and stay in their home by temporarily transferring the property title, often with the promise of repurchasing it later. Once the title is transferred, the homeowner becomes a tenant in their own home. Eventually, the consultant sells the property or evicts the homeowner, capitalizing on the property's equity.

  • Bait And Switch

Bait and switch in foreclosure fraud is a deceptive practice where homeowners are misled into signing documents under false pretenses. Homeowners are often made to believe that they are signing documents for a new loan or mortgage modification to alleviate their foreclosure woes. However, these documents transfer the property's title to the fraudster.

Example: A homeowner facing foreclosure is contacted by a fraudster who offers to help secure a new loan with better terms or a mortgage modification. Often desperate to save their home, the homeowner is presented with a stack of documents to sign, supposedly related to the new loan or modification.

Unbeknownst to them, buried within these documents is a title transfer agreement. By signing, the homeowner unknowingly transfers their home ownership to the fraudster, who can exploit the property for profit, leaving the original owner without their home and still burdened with the mortgage.

  • Phantom Help Scams

Phantom help scams in foreclosure fraud involve deceptive services. Here, so-called foreclosure assistance or rescue companies charge homeowners upfront fees for services they promise to provide but never perform. These scams prey on homeowners' desperation to save their homes from foreclosure.

A common example is when a homeowner in financial distress is approached by a company claiming to specialize in foreclosure prevention. The company promises to negotiate with lenders or take legal action to stop the foreclosure, asking for an upfront fee for these services. However, once the fee is paid, the company does little to nothing to assist the homeowner. The promised services are never rendered, and the homeowner is left in the same dire situation, often with even less time to prevent foreclosure due to the delay caused by relying on the fraudulent company.

Straw Buyer Schemes

A straw buyer scheme in real estate fraud involves using a third party, often with good credit, to purchase property on behalf of another individual who may not qualify for a mortgage due to poor credit or other reasons. The scheme is typically orchestrated by real estate agents or brokers who aim to profit from the transaction.

In this scheme, a real estate broker finds a person with good credit (the straw buyer) and convinces them to apply for a mortgage to purchase a property. The actual buyer, who cannot secure the mortgage due to poor credit or other issues, remains hidden in the background.

Once the mortgage is approved and the transaction is complete, the broker or other involved parties often siphon off the loan money, leaving the straw buyer legally responsible for the mortgage on a property they neither occupy nor intend to purchase.

Illegal Property Flipping

Illegal property flipping in California involves the practice of purchasing properties and quickly reselling them at significantly higher prices through fraudulent means, such as using false appraisals or loan documents. While property flipping is a legal practice, it becomes illegal when it involves deception and manipulation to artificially inflate property values.

An example of illegal property flipping is when a person buys a property at a lower market value and then collaborates with an appraiser to artificially inflate its value. The property is then quickly sold at this inflated price to an unsuspecting buyer or used to secure a higher mortgage loan from a bank. The inflated value does not reflect the property's actual worth, and the subsequent buyers or financial institutions are deceived into overpaying or overlending.

In California, illegal property flipping can lead to various charges, including grand theft, conspiracy, bank fraud, wire fraud, and money laundering.

Predatory Lending

Predatory lending in California means imposing unfair and abusive loan terms on borrowers. This includes charging excessive fees and interest rates, making loans without regard to a borrower's ability to repay, or frequently refinancing loans over a short period to incur additional fees.

An example of predatory lending could involve a mortgage broker creating a loan with terms that are not in the borrower's best interest. The broker might load the loan with unnecessary fees that provide no benefit to the borrower, often employing aggressive sales tactics or taking advantage of the borrower's lack of understanding of complicated financial transactions. The result is a loan that is exceedingly costly for the borrower, often leading to financial hardship or default.

Predatory lending practices are prohibited under various federal and state laws. Violating these laws can result in prosecution as a state or federal crime. At the state level, it could be prosecuted under grand theft (Penal Code 487 PC) or conspiracy to commit grand theft if multiple parties are involved. Other related charges may include forgery (Penal Code 470 PC) for falsifying loan documents and false advertising (Business & Professions Code 17500) for misleading sales tactics.

What is the law in California?

California law takes real estate fraud seriously, with several statutes addressing different aspects of this crime. Here's an overview:

Grand Theft, California Penal Code 487

Grand theft is defined under California Penal Code 487. The crime involves the unlawful taking of another's property valued at more than $950. The law categorizes theft as grand theft based on the value and nature of the property taken without permission, intending to permanently deprive the owner of its value. Different forms of grand theft include theft by larceny, false pretense, trickery, and embezzlement.

Grand theft is a "wobbler" in California, which means it can be charged as either a misdemeanor or a felony based on the case specifics and the defendant’s criminal history.

When charged as a misdemeanor offense, grand theft is punishable by up to one year in county jail. A conviction for a grand theft felony can lead to 16 months, two years, or three years in state prison.

Upon conviction, you could be required to pay back the stolen value. If the stolen property is a firearm, grand theft is automatically a felony, potentially leading to stricter penalties. Grand firearm theft is always a felony and is considered a “serious” felony under California’s three strikes law. Additional prison time may apply if the value of the stolen property is significantly high, for example, more than $65,000.

Foreclosure Fraud, California Civil Code Section 2945.4

Foreclosure fraud, punished under California Civil Code 2945.4, involves predatory practices by foreclosure consultants. This includes acquiring an interest in a foreclosed residence, taking the owner’s power of attorney, or charging excessive fees.

Specific prohibited actions include claiming compensation before fully performing contracted services, charging fees exceeding 10% per annum of any loan made to the owner, and taking any power of attorney from the owner for any purpose.

Foreclosure fraud is a wobbler in California, meaning it can be prosecuted as a felony or a misdemeanor.

  • Felony penalties include a county jail term of 16 months, two years, or three years.
  • Misdemeanor penalties include a maximum jail term of 364 days.
  • Both felony and misdemeanor convictions can include a fine of up to $10,000.
  • Court-ordered restitution, potential civil lawsuits by homeowners, and the loss of a real estate license for professionals.

Foreclosure consultants must register with the Secretary of State’s office and provide a $100,000 bond. Operating as a foreclosure consultant without registration is a crime, with penalties including a fine of $25,000 and up to 364 days in county jail. Foreclosure consultants are generally prohibited from collecting compensation or fees before the work is completed, with certain exceptions for attorneys and real estate brokers.

Rent Skimming, California Civil Code 890

Rent skimming, defined in California Civil Code 890, involves using rental income from a property within the first year of acquiring it without applying this revenue to mortgage payments. The law also considers rent skimming as receiving rental revenue from a property by asserting unauthorized possession or ownership, such as through a false claim of title or trespass, and then renting it out.

"Multiple acts of rent skimming" refers to knowingly and willfully rent skimming concerning five or more parcels of residential real property acquired within two years.

Single acts of rent skimming subject you to civil penalties but not criminal prosecution. Rent skimming becomes a criminal offense for multiple acts involving five or more properties acquired within two years. Penalties include imprisonment in a state prison or county jail for up to one year, a fine of up to $10,000, or both.

If you have been previously convicted of multiple acts of rent skimming, any additional act carries the same penalties. Additional civil remedies include actions by mortgagees or beneficiaries under deeds of trust for actual damages, attorney's fees, costs, and exemplary damages. Tenants affected by rent skimming can also bring civil actions for actual damages, moving expenses, attorney's fees, and exemplary damages.

The law provides an affirmative defense if the rental revenue was used for unforeseen medical treatment or necessary property repairs and if the defendant had no other source of funds for these payments. The penalties under this section are in addition to any other remedies or penalties provided by law for the conduct proscribed by this section​​​​​​​​.

Filing Forged Documents, California Penal Code 115

California PC 115 defines the crime of filing a false or forged document as knowingly registering, filing, or recording a forged or false document with a California government office.

This crime often involves filing forged or false real estate deeds but can include many documents filed in a public office, such as immigration documents and tax returns.

The elements of PC 115 include:

  • You presented a false document to be registered or filed or caused a false one to be filed or registered.
  • You knew the document was false or forged.
  • The document could have been filed, recorded, or registered in a California government office if it was authentic​​​​.

Filing a false or forged document is a felony in California. Penalties include up to three years in a California state prison, a fine of up to $10,000, and formal felony probation.

Multiple counts can be charged for each document filed. If you have a prior PC 115 conviction or the filing resulted in a financial loss of more than $100,000, you may not be eligible for probation. Sentencing enhancements can apply, such as additional fines or prison time, if the false document affected a family home mortgage or resulted in significant financial loss to the victim.

Related Offenses:

Penal Code 115 violations are related to offenses such as elder abuse under PC 368, forgery under PC 470, and perjury under PC 118. If filing a false document results in the financial exploitation of a person aged 65 or older, charges could be brought under either PC 368 or PC 115.

Find A Fresno Criminal Lawyer Near Me

Real estate fraud in California is a multifaceted legal issue, encompassing a range of fraudulent activities, from foreclosure scams to illegal property flipping. The consequences for those involved in such fraudulent practices are severe. As explained above, laws like Penal Code 487 for grand theft and Civil Code 2945.4 for foreclosure fraud establish clear boundaries and penalties for these crimes.

If you face charges related to real estate fraud in Fresno, the importance of seeking legal counsel cannot be overstated. Maneuvering the California justice system, understanding your specific case, and building a solid defense strategy are tasks for experienced defense lawyers.

At the California Criminal Lawyer Group, our team of skilled attorneys is well-versed in California real estate fraud laws. Our lawyers are committed to providing our clients with the best possible legal representation. Whether it is a case of suspected foreclosure fraud, rent skimming, or any other real estate fraud, we are equipped and on standby to offer the guidance and support you need.

While facing criminal charges can be a daunting experience, you do not have to go through it alone. If you or someone you know needs legal assistance, contact our office at 559-712-8377. We are here to help you navigate these challenging times and work towards a favorable outcome.