Fraud is deliberately misrepresenting or concealing certain facts to make another person do something damaging to their assets or other affairs. Real estate fraud is a form of theft that involves unethical activities associated with a real estate business. California law prohibits real estate fraud, and authorities are keen on implementing the statutes to protect real estate clients from cunning lenders and agents. Facing fraud charges can affect your life negatively. Real estate fraud accusations can also ruin your business and professional reputation, even if they do not result in a conviction. If you face real estate fraud charges, our experienced attorneys at the California Criminal Lawyer Group will work with you to help you fight the charges in Bakersfield.

Real Estate Fraud Under California Law

Real estate fraud is not a single offense with a straightforward definition. It consists of several acts that are unlawful under California law. Penal Code 487 is the primary law prosecutors use to prosecute cases involving different forms of real estate fraud. Penal Code 487 outlines the crime of grand theft and is commonly used because real estate fraud involves theft through pretense. You must defraud another person whose property exceeds $950 for real estate fraud to qualify as grand theft. This threshold can be attained easily in the real estate business.

Many real estate fraud lawsuits do not perfectly fit the grand theft definition parameters. Prosecutors, therefore, combine PC 487 with another code when prosecuting the offense. Other laws that the prosecutors use to charge real estate fraud include the following:

  • Recording of forged documents in public records under Penal Code 115.
  • Rent skimming outlined under Civil Code 890.
  • Foreclosure fraud under Civil Code 2945.4.

Types Of Real Estate Fraud

The law provides various legal provisions and theories to enhance the prosecution of a real estate lawsuit. Usually, the rationale is that the victim could have incurred losses during a real estate transaction. Additionally, fraud can happen in different transactions, including lease agreements, rentals, or property purchases. The common types of real estate fraud include:

  1. Foreclosure Fraud

A foreclosure happens when a borrower cannot repay their loan within the specified period, and their residence serves as security. The home or residence faces foreclosure because of non-compliance with repayment conditions. In this case, the homeownership is transferred to a board of trustees presided over by the court.

You can face fraud charges for failing to follow the proper process during foreclosure. Perhaps you facilitated the transfer of ownership by acting as a real estate professional. In this situation, you must understand the nature of your charges to help you determine the best defense strategy to fight your accusations. Usually, foreclosure fraud can happen in the following ways:

Entering Into Agreements With Another Party To Service A Home Without Notifying The Owner

You can commit real estate fraud by agreeing with another person about servicing the residence without notifying the owner. For example, you could misrepresent information to the homeowner by telling them they need to renovate their home for the court trustees to accept it, only to extort money from them. You could also conspire with someone else to forge the request's legitimacy. In this case, you will have made homeowners vulnerable to losing money. The prosecutor can provide evidence of your false representations that can lead to real estate fraud charges.

You can also commit real estate fraud by entering an agreement to sell a house to another person without notifying the owner of the pending agreement. In this case, the homeowner does not have an opportunity to talk to the alleged buyer and complete the agreement. The prosecutor must prove beyond a reasonable doubt that your agreement resulted in fraud.

Securing Power Of Attorney From The Homeowner

A power of attorney allows you to act in legal or business matters on behalf of the person who grants the authority. You can secure this mandate from someone out of the country or incapacitated to assist them in running and maintaining their real estate property transactions. However, only trusted people should be given power of attorney status because it permits them to decide using discretion.

Depending on the facts of your case, you could face real estate fraud charges if you trick a homeowner into granting you access to power of attorney. This could happen if you abuse the power to sell or buy a home under foreclosure for personal gain without informing the owner. The officers investigating your case will gather relevant evidence to show that you abused the power of attorney. The investigators present evidence to the prosecutor for further action.

Buying A Property Before Official Foreclosure Begins

Your primary goal as a real estate professional handling foreclosure transactions should be to ensure a smooth transfer of property ownership from the owner to the court trustees. You could face real estate fraud charges if you try to push for direct purchase in the market for your benefit or register the property in your name.

A person can buy a home before official foreclosure because homes under foreclosure often hit the market at significantly lower prices than normal. These situations do occur because the primary goal of the court is to repay the debts of homeowners, not to make a profit. Some homeowners lose their homes when real estate professionals use the information they have in the transaction to buy the houses before they face public auction.

If the prosecutor accuses you of this form of fraud, he/she must gather substantial evidence to show that you intended to amass profit or discounts at the homeowner's expense. Several evidence sources are available for the prosecutor, including witness statements. The prosecutor can also present any document you prepare to facilitate buying the home before foreclosure starts.

Charging A Homeowner A Service Fee Before Providing The Services

You can face real estate fraud charges if you seek a homeowner's payment before the foreclosure process ends. The fraudulent element in your case must be evident. The prosecutor must prove beyond a reasonable doubt that the homeowner would lose money under your arrangement. For example, you can defraud a homeowner into spending their money if you receive the payment and stop offering real estate services.

The circumstances of your case could also revolve around tricking a homeowner into paying you more money by charging pre-service fees. Since this deal is illegal, the prosecutor will focus on proving that your false representations played a significant role in the non-completion of the foreclosure process. The situation will also be deemed an aggravating factor if the homeowner loses an additional amount from the fraudulent agreement. The charge can be detrimental because the judge will likely impose severe penalties.

Tricking A Homeowner To Enter Into An Illegal Contract

Real estate fraud charges can also apply if you trick a homeowner facing foreclosure into signing an unlawful contract. This can happen if you take advantage of the desperation of the homeowner and try to persuade them to consider illegal contracts to protect their home. For example, you can trick the homeowner by telling them that the contents of a contract allow them to retain their house upon paying you to negotiate with their debtors. This conduct is illegal because it violates the law and endangers the privacy of the foreclosure agreement.

When accusing you of tricking a homeowner into entering into an illegal contract, the prosecutor must provide specific evidence regarding the contract's contents. The prosecutor must prove how the contents of the contract would influence the foreclosure process. It must be evident how the contract would benefit you at the homeowner's expense.

Charging A Higher Service Fee

Your charges must be reasonable, whether you handle the foreclosure transaction as an independent real estate practitioner or under court supervision. You can be guilty of real estate fraud if you charge more than the standard figure. You could face charges even if you merely presented the service charge rates and the homeowner had not paid. Charges will apply provided you showed an intent to defraud, making it a crime to undertake any further engagements with the homeowner.

The prosecutor will work with the investigating officers to gather evidence, like the forged charge rates from the documents. The prosecutor could also contact the homeowner to testify about how you falsified the charge rates, contrary to the real estate transaction code of conduct.

Penalties For Foreclosure Fraud

You could face misdemeanor or felony charges if the court finds you guilty of foreclosure fraud. Misdemeanor charges attract a jail term that does not exceed one year. Felony charges, on the other hand, attract a jail term that does not exceed three years.

  1. Forgery Of Documents

You can commit real estate fraud through the forgery of real estate documents. Forgery is outlined under California Penal Code 115. If the prosecutor accuses you of forging documents, he/she must prove that you knew of your actions and intended to defraud the homeowner.

The prosecutor must prove that you recorded or registered a document. Under this element, it must be evident that you directly engaged in the unlawful actions. The District Attorney can gather evidence from witness statements or surveillance footage to prove these allegations.

It must also be evident that the information in the document is forged. The prosecutor should prove the forgery element because it ties in with the element of fraud necessary to facilitate your prosecution. You could have made the homeowner rely on false details to make a real estate transaction using false information.

There could be evidence showing that you committed forgery in the state's government office. This element helps to demonstrate the illegal aspect of violating government rules toward protecting property.

Penalties For Forging Documents

Judges usually charge a person with the crime of forging real estate documents as a wobbler. You could face misdemeanor or felony charges. Misdemeanor charges attract a jail term of one year. Felony charges attract:

  • A jail term that does not exceed three years.
  • A fine that does not exceed $10,000.
  • Felony probation.

  1. Theft Through False Pretense

You could commit real estate fraud through fraudulent theft. Penal Code 487 prohibits using untrue promises or misrepresentations to obtain property or money from a real estate transaction. If the prosecutor accuses you of violating PC 487, the following elements must be evident:

  • You deliberately lied to a homeowner or mortgage lending entity.
  • You used pretense to deceive the homeowner.
  • The homeowner gave you money based on fraudulent representations.

Penalties For Violating Penal Code 487

You could face misdemeanor or felony charges if you are found guilty of committing theft by pretense. If the judge convicts you of a misdemeanor, you could face a jail term that does not exceed one year. If the judge sentences you to a felony, you could face a jail term that does not exceed three years.

  1. Predatory Lending

Predatory lending is when a mortgage broker creates a refinance loan that does not benefit the borrower and places exorbitant fees on it. The broker focuses on maximizing commission with no consideration for the ability of the borrower to repay the loan. The following are the activities that constitute predatory lending:

  • Open and direct deception.
  • Taking advantage of the ignorance of the borrower of complex transactions.
  • Imposing exploitative and unreasonable terms on borrowers, especially by the use of aggressive sales strategies.

  1. Unlawful Property Flipping

If you are a property appraiser, a mortgage broker, or a realtor, you could face charges for flipping property unlawfully. Unlawful flipping happens when you wrongly inflate the value of a property by appraising it fraudulently and either:

  • An innocent client buys the property at a higher price than the real price.
  • A bank uses the property as collateral to lend more money than the actual price of the property.

Most property flipping that people do is legal. It is lawful to buy property, refurbish it, and sell it at a profit as long as you charge a reasonable price that does not result in fraud.

  1. Straw Buyer Schemes

You could commit straw buyer schemes when you request someone else to buy property for you because he/she has a good credit score. In this transaction, the term "straw" means the buyer. For example, you could request someone else to apply for a mortgage on your behalf because of their good credit rating if your credit score is low. You then offer the person some money in exchange for the service. The person signs the mortgage papers, purchases the property, and transfers it to you. However, you do not make the agreed mortgage payments but leave the buyer to deal with the lender. In this case, you are a straw buyer and could face real estate fraud charges.

  1. Rent Skimming

It is a crime under Civil Code 890 to engage in rent skimming when:

  • You failed to apply proceeds from rent to the property's mortgage in the first year following your acquisition of a residential property for rent.
  • Pretend to own a particular property, rent out the property fraudulently without consent, and keep the profits for yourself.

This statute, however, has certain exceptions. You cannot be guilty of rent skimming if, within 30 days after collecting the proceeds, you either:

  • Pay a healthcare provider unexpected and necessary medical costs for yourself, your family, or
  • Remit payments to material suppliers or licensed contractors to correct problems with living conditions on that property. You can only do this if you fail to secure an optional source of income to cover those costs.

You will be subject to a civil lawsuit if you engage in rent skimming on only one occasion. However, you could face severe penalties if you are found guilty of engaging in several acts of rent skimming.

Penalties For Rent Skimming

You will face penalties for rent skimming, depending on whether it was your first or subsequent offense. You will only face civil penalties if it is your first crime of rent skimming. Any person who suffered a loss because of your real estate fraud could file a civil case against you. You could pay the following if you face a civil lawsuit:

  • The attorney's fee and the person's reasonable legal costs.
  • Restitution is equal to the actual amount the victim lost.
  • Additional fees, where applicable.

You could face criminal charges and penalties for several rent skimming offenses. Rent skimming crime is usually charged as a wobbler. In this case, you could face misdemeanor or felony charges. Misdemeanor charges attract the following penalties:

  • A jail term that does not exceed one year in a county jail.
  • A fine that does not exceed $1000.
  • Both a fine and a jail term.
  • Misdemeanor probation.

Felony charges attract the following penalties:

  • A jail term of 16 months, two years, or three years.
  • A fine that does not exceed $10,000.
  • Both a fine and a jail term.
  • Felony probation.

Additional Penalties

If you are convicted of felony real estate fraud and the victim suffers a significant loss, you could face additional penalties. Additional penalties include:

  • You could face a one-year additional jail term if your fraudulent activities cost the victim a loss that exceeds $65,000.
  • You could face a two-year additional jail term if the victim's loss exceeded $200,000.
  • You could face a three-year additional jail term if the victim's loss exceeded $1,300,000.
  • You could face a four-year additional jail term if the victim's loss exceeded $3,200,000.

Apart from the above additional penalties, you could also face an additional one to five years jail term and a hefty fine if:

  • The victim's loss exceeded $100,000.
  • You have been convicted of at least two felony crimes related to real estate fraud.

Defenses To Real Estate Fraud Charges

You can present the following defenses to challenge your real estate fraud charges:

False Accusations

The real estate business is complicated and usually involves several individuals. Since it involves many players, the real perpetrators could accuse you of fraud to cover up their offenses. Your case could also be an issue of identity theft, where someone else uses your name for illegal transactions. Sometimes, someone could legally sell their property to you and demand that you return it. Your attorney will help you gather evidence to show that you are innocent.

The Homeowner Consented To The Transaction

The allegations of fraudulent real estate transactions against you are usually connected to your dealings with another person's home. It is also common for the homeowner or complainant to be elderly. In most cases, the elderly could consent that you represent them, and then he/she forgets or gets confused about it. Consent could be a valid defense if you assisted in good faith and with the homeowner's permission. The judge can dismiss your case if you convince the court that you acted with the homeowner's consent.

You Had No Fraudulent Intent

Intent to defraud is one of the essential elements of real estate fraud. The judge cannot convict you if you had no fraudulent intent, regardless of what you did. You could have had good intentions while you acted. Perhaps you misinterpreted the impact of your actions and the effect they will have on the homeowner. Claiming a lack of intent could be a valid defense if any of these happen. If you acted without intent to defraud, you cannot be held guilty, even if you made a mistake that will likely affect you or your business.

Find a Criminal Defense Attorney Near Me

Facing real estate fraud accusations can be devastating. Your professional reputation could suffer, and you could lose your practicing license. To mitigate the situation, you must consult an experienced criminal defense attorney to help you create a solid defense to fight your charges. At the California Criminal Lawyer Group, we have experienced attorneys who will go out of their way to help you obtain a favorable outcome for your case. We have helped many defendants fight real estate fraud charges in Bakersfield. Contact us at 661-750-8230 and speak to one of our attorneys.