DTPA applies to Real Estate Fraud
It’s no secret that real estate fraud is rampant in Texas. Today’s hot real estate markets, combined with the vast number of people moving to Texas from other places, provide fertile opportunity for scammers to capitalize on the universal dream of home ownership.
However, real estate fraud is not a new phenomenon in the Lone Star State — Texas histories recall the ugly chapter of fraudulent land transfers from Tejanosto Anglos through “tax sales” in the early 20th century. It has been estimated that more than 187,000 acres of land in two countries — Hidalgo and Cameron — were transferred from Tejanos to Anglos between 1900 and 1910, and historians have stated that Texas Sheriffs sold THREE TIMES as many parcels for tax delinquency in the decade from 1904 to 1914 as they had from 1893 – 1903.
Decades later, unscrupulous Texas landowners “sold” properties to unsophisticated buyers under Contracts for Deed. Despite collecting years and years of payments, these landlords would later “evict” the buyers, arguing that the arrangement was a leasehold.
Most recently, the Texas Legislature took note of instances of individuals using false deed documents to fraudulently sell properties they do not own to unsuspecting buyers. Some of these buyers would spend money on renovations and mortgage payments for these homes, only to discover that they are not the legal owners. The severity of this problem is obvious.
Like it did when it reformed the law relating to Contracts for Deed, the Lege in 2015 enacted legislation designed to deter and lessen the impact of fraudulent real estate transactions in Texas. They did this by adding a new section, 27.015 to the Texas Fraud Statute (Chapter 27 of the Texas Business & Commerce Code). The new legislation makes fraud involving “the transfer of title to real estate” ALSO a false, misleading, and deceptive act under the DTPA.
The significance of the new law is profound. The inclusion of real estate fraud under the litany of prohibited acts under the DTPA not only creates a public remedy to be pursued by law enforcement (Texas Attorney general, District Attorneys and now City Attorneys). It also enhances the financial consequences of statutory fraud by subjecting fraudsters to the “teeth” of the DTPA — treble damages for “knowing and intentional” conduct. This enhancement provides consumers who are fraud victims with the potential for meaningful recoveries. Hopefully, the fear of treble damages will serve as a deterrent for would-be deed scammers.
Section 27.015 states as follows:
Sec. 27.015. DECEPTIVE TRADE PRACTICE; PUBLIC REMEDY. (a) In this section, “consumer protection division” has the meaning assigned by Section 17.45.
(b) A violation of Section 27.01 that relates to the transfer of title to real estate is a false, misleading, or deceptive act or practice as defined by Section 17.46(b), and any public remedy under Subchapter E, Chapter 17, is available for a violation of that section.
(c) It is the duty of city attorneys to lend the consumer protection division any reasonable assistance requested in the commencement and prosecution of actions under this section.
(d) To the same extent and in the same manner a district or county attorney may institute or prosecute an action under this section, a city attorney may institute or prosecute an action under this section.
(e) If a district, county, or city attorney brings an action under this section, 75 percent of any penalty recovered shall be deposited in the general fund of the county or municipality in which the violation occurred.
(f) This section does not apply to an action to recover damages that is subject to Chapter 27, Property Code.