Assembly Bill Targets Rent-Skimming Fraud

A rent-skimming scam that appears to be on the rise in Los Angeles, Orange and Riverside counties has triggered a state bill that would help protect homeowners if their homes end up in foreclosure.

The bill, sponsored by the Los Angeles County district attorney’s office and carried by Assemblywoman Susan A. Davis (D-San Diego), who chairs the Consumer Protection Committee, would prevent squatters from claiming rights to vacated homes.

In the scam, phony property managers break into vacant homes, change the locks, then place ads for housesitters. Those who respond become rent-paying tenants and are presented with legal-looking documents declaring that the company is establishing ownership of the property under a 120-year-old law called “adverse possession.”

Originally intended to reestablish occupancy on vast tracts of abandoned ranch land, the 1872 statute allows a claimant to gain title to abandoned property by living on it and paying its taxes for five years. It has no bearing on homes in foreclosure, which are still owned either by the lending agency or by the original purchaser, said Tom Papageorge, a Los Angeles deputy district attorney in charge of consumer protection.

But some scam artists are successfully using the statute to commit fraud. Authorities say the scheme first surfaced in 1995 in Lancaster and Palmdale, communities hard-hit by aerospace and construction layoffs. When homeowners discovered tenants--who had been paying “rent” to the scam artists--living in their vacated homes, the ensuing disputes typically ended up in court.

Papageorge’s division began an investigation that culminated last year with an injunction against San Bernardino-based Windsor Pacific Inc. that ordered the firm to cease operations in Los Angeles County. Criminal procedures are underway against the company in Orange and San Bernardino counties, Papageorge said.

Davis’ bill would expand the laws against rent-skimming to include those who take or claim property without the owner’s consent, rent it to others, then collect the rent and keep it. A single offense would be a misdemeanor, punishable by up to six months in jail, a $1,000 fine or both. Five or more offenses could be prosecuted either as a misdemeanor or a felony.

AB 583 unanimously passed the Senate Judiciary Committee on Tuesday and now goes to the full Senate. It has already passed the Assembly. The bill, also supported by the California Mortgage Bankers Assn., has no registered opponents.

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