What is Considered Real Estate Fraud?
Real estate fraud happens when someone commits a crime related to buying, selling, or financing property. These types of fraud can be prosecuted under both California state and federal laws and can lead to severe penalties, including fines, restitution, and jail time.
Real estate fraud laws address various illegal activities, including housing scams, mortgage fraud, rental scheme violations, straw buyer schemes, property flipping, predatory lending, and more.
These crimes can occur at any stage of a property transaction, including foreclosure processes. California has several statutes available to pursue charges, including:
- 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 real estate fraud statutes are "wobblers" that can be prosecuted as either misdemeanors or felonies.
Penalties vary based on several factors. As mentioned, real estate fraud encompasses various forms and can be charged under different criminal theories. It can occur at any stage of a real estate transaction, including during financing, appraisal, or closing.
Understanding Real Estate Fraud
Real estate fraud occurs when someone engages in dishonest acts that result in illegal enrichment during a transaction.
Anyone participating in the process can be accused of fraud if they commit crimes like providing false information on applications or submitting fraudulent documents.
Real estate fraud is a broad term that encompasses various types of fraudulent activities directly related to real estate transactions, including:
- Mortgage fraud, such as equity skimming and obtaining mortgages illegally using false information or stolen identities.
- Foreclosure fraud involves illegal schemes aimed at exploiting individuals facing foreclosure on their property.
- Rent skimming involves someone embezzling the rent money paid by tenants, often leading to their eviction for nonpayment.
- Property flipping that involves fraud, such as buying and selling properties at inflated prices based on false appraisals.
- Filing forged documents, such as submitting a counterfeit deed to the county records, with the intent to deceive about ownership.
- Elder fraud occurs when someone exploits vulnerable seniors through a deceptive real estate scheme.
- A straw buyer scheme where someone purchases a home on behalf of another unqualified person, such as due to a poor credit report.
- Predatory lending occurs when a mortgage broker secures a loan for a homebuyer by charging excessive and unnecessary fees to inflate their commissions.
California does not have a dedicated real estate fraud law; instead, a criminal case can be prosecuted under various statutes described below.
California Statutes Related To Real Estate Fraud
Real estate fraud can be prosecuted under various statutes depending on the specific fraudulent activity involved in a transaction. In California, the relevant sections of the Penal Code that may apply to different types of real estate fraud include:
- Penal Code 487 PC: Grand theft is charged when someone is accused of being defrauded of property exceeding $950. This law typically applies in cases involving real estate or mortgage fraud and pertains to theft by false pretenses.
- Penal Code 115 PC: Filing forged documents involves knowingly submitting false or forged real estate documents to a government office, often related to property ownership, and also includes forging mortgage loan contracts.
- Civil Code 890: Rent skimming occurs when an individual rents out a home they claim to live in during the first year of the mortgage, but does not put the rent toward their mortgage payments. It can also happen when someone falsely claims ownership of a property and rents it out illegally.
- Civil Code 2945.4: Foreclosure fraud can be prosecuted if individuals involved in foreclosure actions engage in certain misconduct. Specifically, if someone assisting a homeowner demands excessive fees, charges for services before delivering them, or takes an interest in the property, they can be charged with foreclosure fraud.
Your criminal history influences the severity of the charges you face. Additionally, real estate fraud can lead to federal criminal charges, as many real estate transactions involve federally insured banks.
Penalties for Real Estate Fraud
Penalties for different types of real estate fraud vary from minor misdemeanors to serious felonies, depending on the specific crime. Major forms of real estate fraud carry the following penalties:
- Penal Code 487 PC addresses grand theft. This offense is classified as a "wobbler," meaning it can be prosecuted as either a misdemeanor or a felony. Consequently, a conviction may lead to jail time of up to one year for a misdemeanor or up to three years for a felony.
- Penal Code 115 PC involves filing forged documents. This is classified as a felony, potentially leading to up to three years of imprisonment and fines reaching $10,000.
- Civil Code 890 rent skimming applies when there are multiple instances of skimming. A single act generally results in a civil penalty, not criminal charges. This offense is considered a wobbler, meaning it can be charged as either a misdemeanor or a felony, with penalties comparable to those for grand theft.
- Civil Code 2945.4 states that foreclosure fraud is a wobbler offense, meaning it can be prosecuted as either a misdemeanor or a felony. The penalties are similar to those for grand theft as described earlier.
Possible Defense Strategies
If accused of real estate fraud, our California criminal defense attorneys can use strategies like proving a lack of fraudulent intent, showing the victim wasn't deceived, demonstrating the property owner's consent, and challenging false allegations.
Real estate fraud involves intentionally dishonestly gaining from a false claim or activity related to property transactions. The prosecutor must prove that you had criminal intent linked to a specific real estate-related action.
A common defense to fraud is to argue that a mistake occurred. For an activity to be considered fraudulent, it must have been deliberate and with the intent to deceive.
If the prosecution cannot demonstrate that the alleged actions were intentional, you are more likely to be acquitted of real estate fraud during the trial.
Additional defenses could involve Constitutional violations or insufficient evidence. We may also negotiate with the prosecutor to prevent formal charges via prefiling intervention. Reach out to the Hedding Law Firm for a case review.
Related Content:
