Real Estate Title Fraud and Attacking the Perpetrators to Protect Your Investment
By Nate Bernstein, Esq., Managing Counsel, LA Real Estate Law Group
INTRODUCTION TO THE SUBJECT OF REAL ESTATE TITLE FRAUD AND HOW YOU CAN UNWIND IT AND PROTECT YOUR CHAIN OF TITLE
Crooks can perpetrate a real estate fraud scheme to manipulate the title of your property in an attempt to rob you of your equity, and profit at your expense. Real estate title fraud schemes can take on several creative forms- a forged grant deed, a forged quitclaim deed, fraudulent sale, recording deeds of trust for loans which you did not receive, elder abuse, undue influence, and or starting an unlawful foreclosure. Sometimes there can be several people involved with the scheme, especially if partial interests are transferred without your consent. A corrupt notary public may be a co-conspirator in the scheme. A family member also may be a ring leader in the scheme. Another common scenario, is a “voluntary” transfer of title during a duress situation of a mortgage lender’s foreclosure before the trustee’s sale to delay the sale. A borrower who is seriously behind on his mortgage is vulnerable and susceptible to abuse by title crooks who want to steal title for much less than fair market value on the eve of foreclosure. Even if the foreclosure is stalled, the crooked transferee refuses to transfer the title back to you, and then tries to sell the property or lease the property without your consent.
If you are the victim of real estate title fraud or loan fraud, you can and should file a criminal complaint with the city attorney or district attorney, but these government agencies cannot directly fix your damaged title chain through a criminal prosecution. Even if the title crook is in jail, your title, unless restored, is still is defective and not marketable.
You need to take prompt action to protect your title and restore clear title by filing a civil action. In considering whether to file a civil action to clear your title, the first step is to review, what my law school real property professor called, “the current state of the title.” Get a real estate title checkup. What is in a preliminary title report for your property ? Has a fraudulent instrument been recorded in the county where the property is located ? Has a fraudulent deed of trust been recorded ? Who is involved in the title fraud, and who will be named as a defendant ? Is there a wild deed in the chain of title that you did not sign and looks peculiar ? Was your signature forged ? Call a reputable title company and obtain a title report is a very important first step to obtain the county recording numbers for the fraudulent instruments.
PULL OUT YOUR TITLE INSURANCE POLICY FROM STORAGE
When you purchased the property you probably received a policy of title insurance as a property owner. If you have a title insurance policy, and you have been a victim of title fraud, it is highly recommended to file a claim with your title insurance carrier to seek relief and protection under your title insurance policy. If the title insurance company accepts your claim, the title insurance company can review your title report, investigate the situation, and may appoint a real estate attorney who can file a lawsuit to clear the title. An owner’s title insurance policy is a very important asset protection device that should be obtained each time you purchase a property.
SEEK INJUNCTIVE RELIEF IN APPROPRIATE SITUATIONS
In contemplating legal action, an important issue is whether you should file a lawsuit for injunctive relief to block future fraudulent action. Injunctive relief is a court order to restrain a third party from doing something injurious to the title of your property. Perhaps the title crook is trying to sell the property to a third party. The claim and remedy of injunctive relief can ask a judge with local jurisdiction to block a sale or future transfer. Filing for an injunction can be in three forms- the form of a temporary restraining order or TRO- which asks for emergency relief immediately in a case, and or preliminary injunction to stop the unlawful action well before trial, and or a permanent injunction- which prohibits the unlawful act at trial. If you prevail in a preliminary injunction hearing, this can set the tone for a successful case, beneficial settlement, or favorable outcome at trial. If you obtain injunctive relief you can record the court order or judgment at the County Recorder’s Office to give notice to the world that the judge has ordered the crook to stop the activity well before the trial date, and that any potential transferee could be named in a lawsuit and may be subject to the claims.
RECORD AND SERVE A LIS PENDENS
If and when a lawsuit is filed, the plaintiff also must record a lis pendens at the County recorder’s office. The definition, rules, and procedures about a “lis pendens” notice are found in California statutes, namely, Cal. Code of Civil Procedure Sections 405-405.24. to 405.39.
The lis pendens notice is then served on all party defendants and parties with an interest in the property. If recorded properly, the lis pendens notice will be in the chain of title with its own county recording number. The term “lis pendens” is a latin term for “action pending.” The lis pendens provides notice to the world in the title profile that a lawsuit is pending, and that any subsequent grantee, subsequent purchaser, assignee, or lender, takes title subject to the lawsuit claims. Generally, a lender will not make a loan secured by a title that is subject to a lis pendens. Generally, a title insurance company will not write a title insurance policy if the company is aware of the lis pendens. Recording and serving a lis pendens is a key step in protecting the property owner’s interest against future title transfers while a lawsuit is pending. For more information about recording a lis pendens contact LA Real Estate Law Group.
MAIN LAWSUIT CLAIMS TO ATTACK TITLE FRAUD
Along with injunctive relief, your counsel can file a lawsuit for such claims as quiet title, fraud, declaratory relief, and cancellation of instruments. These claims are the “bullets” for your attack on title fraud activity. One legal resource for learning more about the nuances of quiet title actions is the website “LAquiettitleattorney.com.” Also, please review California Civil Code 3412-3415. California Civil Code 3412 empowers a judge to cancel a fraudulently recorded instrument- This code section provides,
“3412. A written instrument, in respect to which there is a reasonable apprehension that if left outstanding it may cause serious injury to a person against whom it is void or voidable, may, upon his application, be so adjudged, and ordered to be delivered up or canceled.”
As noted above, if you file a quiet title action, you are also required by law to record a lis pendens on the title, to provide notice that an action is pending with regard to the title of specific property. In egregious cases, if you have applicable facts, you can also allege a cause of action for “slander of title”- this claim has the threat of punitive damages attached to it.
CONCLUDING THOUGHTS ON ATTACKING REAL ESTATE TITLE FRAUD
If you have been the victim of real estate title fraud as to any property that you own, California civil law provides victims with claims and remedies that can be asserted to protect your property or to get the title to your property back in your name. To file a civil action in proper form with knowledgeable real estate counsel, you will need to have some reasonable financial resources to sue the responsible defendants, and to move the case expeditiously in front of a judge in your local jurisdiction. If the claim is covered by title insurance, that is highly beneficial to reduce the expense of title litigation. Experienced civil judges see these types of cases fairly often, and are interested in protecting the public. Making a criminal complaint is also an important step, but a civil action needs to be filed to fix the cloud on your title, and to prevent block future transfers.
The author of this article, Nate Bernstein, Esq., is the Managing Counsel of LA Real Estate Law Group, and a member of the State Bar of California and his practice concentrates in the areas of complex real estate litigation, commercial litigation, employment law, and bankruptcy/creditor’s rights matters. The contact number is (818) 383-5759, and email is email@example.com. Nate Bernstein is a 25 year veteran Los Angeles real estate and business attorney and trial lawyer. Mr. Bernstein also has expertise on bankruptcy law, the federal bankruptcy court system, creditor’s rights and debtor’s bankruptcy options. He previously served as Vice President and In House trial counsel at Fidelity Title Insurance Company, a Fortune 500 company, Nate Bernstein created www.laquiettitleattorney.com, a leading educational resource on quiet title real estate litigation. Nate Bernstein is a local expert on real estate law and economic trends in the real estate and leasing market, business law, and bankruptcy law. Nate has personally litigated more than 40 major real estate trials, and has settled more than 200 complex real estate and business cases.