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Protecting Yourself From Real Estate FraudOctober 25, 2020 0 Comment Category: Real Estate
What is Real Estate Fraud?
Fraud refers to the act of intentionally misrepresenting or concealing specific facts to allow a person to take action that would be damaging to their affairs. Real estate fraud consists of theft through unethical activities that pertain to the real estate business. There is no single type of real estate fraud, and it often encompasses a variety of behaviors prohibited by California law. Frequently prosecutors will refer to Section 487 of the Penal Code for various cases involving real estate fraud. This is the state law against grand theft and is often applied because real estate fraud generally involves theft through pretense.
To qualify for grand theft, the accused must defraud another person of property valued at least $950 or more, a low number when considering the costs of real estate.
However, most real estate fraud cases don’t perfectly fit into the legal parameters of grand theft through pretenses, which is why prosecutors will often use other statutes in combination with Penal Code 487.
- Civil Code 2945.5: Law prohibiting foreclosure fraud
- Civil Code 890: Statute outlawing rent skimming
- Penal Code 115 PC: Code that prohibits the recording of forged documents in public records.
Protecting Yourself From Real Estate Fraud Accusations
An accusation of real estate fraud can often severely impact your life and business whether or not it ends in a conviction or no criminal charges pressed. Accusations of real estate fraud can ruin your professional reputation and your business, which is why it is so important to immediately reach out to an experienced Los Angeles Real Estate Lawyer.
Whether accusation or valid or not, the lawyers at Davidovich Law will defend you vigorously in court and help you preserve your rights. Our experience in real estate law allows us to navigate the legal system while protecting both your image and your business and ensure you receive the justice you deserve.
Types Of Real Estate Fraud
Much like other white-collar crimes, Real estate fraud is often complicated, and sometimes a defendant may not even be aware that their activities are illegal. Here are some of the most common types of real estate fraud.
- Rent Skimming
Civil Code 890 is a statute that explicitly outlaws rent skimming in these cases:
- Fraudulently renting out a property without permissions while pretending to be the owner and keeping the profits for yourself.
- Failing to apply proceeds from rent towards your property’s mortgage in the first year of acquiring residential property for rent.
There are also certain exceptions for rent skimming charges. You cannot face charges for rent skimming if within 30 days after collecting rent proceeds you:
- Pay for necessary or unexpected medical costs for yourself or your family to a medical provider.
- Pay licensed contractors or suppliers of materials to correct some issues regarding the property’s living conditions in the case of not having alternative sources of income to cover business expenses.
Engaging in rent skimming may result in a civil lawsuit, but multiple rent skimming acts will result in criminal proceedings and penalties.
- Illegal Property Flipping
Suppose you are a realtor, mortgage broker, or property appraiser. In that case, you may face prosecution for illegally flipping property under certain circumstances such as wrongly inflating property’s value through fraudulent appraisal and the following:
- Having a bank use the property as collateral to lend more money than the property’s real value.
- Innocent client purchases the property at a higher price in comparison to the property’s real value.
Most property flipping is not considered unlawful and does not refer to legally buying property, refurbishing it, and then selling it for a profit. As long as the new price is reasonable and not a result of fraudulent appraisal, you need not worry.
- Predatory Lending
Predatory lending refers to lending where, as a mortgage broker, a refinancing loan plan is created with exorbitant fees that do not benefit the borrower and maximizes commission over the borrower’s capacity to pay off the said loan. Specific activities that constitute predatory lending include:
- Taking advantage of a borrower’s ignorance of complex transactions for your own gain
- Open and direct deception.
- Imposing unreasonable and exploitative terms through aggressive sales strategies on borrowers.
Being charged with real estate fraud can be devastating to you and your business’s reputation. If you are faced with charges of real estate fraud, contact the California Real Estate Lawyers at Davidovich Stein Law Group to seek legal advice or call our office at (818) 938-8917. Know your rights and get the justice you deserve.