Special Notice / Hearing: None__
Vote Required: Majority
To: Honorable Board of Supervisors
From: Stephen M. Wagstaffe, District Attorney
Subject: Resolution Increasing Existing Fee on Real Estate Instrument Recording from $3 to $6
RECOMMENDATION:
title
Adopt a resolution to adjust the Assessor-County Clerk-Recorder Schedule of Fees set forth by County Ordinance 2.90.030 to increase the current recording fee on certain real estate instruments from $3 to $6.
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BACKGROUND:
These fees will be collected at the time of recording of every eligible real estate instrument as defined in California Government Code section 27388.
One of the easiest and most lucrative criminal acts to commit is real estate fraud. There are almost no safeguards to protect title to our homes from the knowledgeable white-collar criminal who will file a false Grant Deed or Quit Claim Deed to seemingly transfer title to him or herself. Once the criminal appears to have title, they can sell the home or drain the equity out of the property.
San Mateo County homeowners are particularly vulnerable to real estate fraud crimes given the incredibly high value of real estate in this County. Several San Mateo County cities consistently rank in the Top 25 nationally for cities with the highest average property values: Atherton (Number 1 nationwide); Portola Valley (Number 15); and Hillsborough (Number 22).
State law has long recognized the significant public concern surrounding real estate fraud and the need for real estate fraud investigation and prosecution. To cover the costs of combatting real estate fraud, Government Code Section 27388 allows a county Board of Supervisors to impose a fee for the recording of designated real estate instruments. The fees collected may be placed in a Real Estate Fraud Prosecution Trust Fund and used to pay for the costs associated with real estate fraud investigation and prosecution.
In 2017, this Board approved the formation of a dedicated investigation and prosecution unit focusing on real estate fraud within the District Attorney’s Office. Pursuant to Government Code section 27388, this Board also approved the imposition of a $3 recording fee on certain real estate instruments for purposes of funding the District Attorney’s Real Estate Fraud Unit. The District Attorney has continued the dedicated investigation and prosecution unit focusing on real estate fraud in every year since the 2017-2018 Fiscal Year, submitting reports to the Board of Supervisors each year regarding the work of the Real Estate Fraud Unit
DISCUSSION:
Government Code section 27388 provides for a recording fee “up to ten dollars ($10)” on certain types of real estate documents. These fees are collected by the County Recorder who is permitted to deduct “any actual and necessary administrative costs . . . in carrying out this section” up to a maximum of 10% of the fees collected. The County Recorder must pay the remaining collected fees quarterly to the Controller’s Office, who then disburses the funds to the District Attorney.
The District Attorney’s Real Estate Fraud Unit has now been in existence for over seven years with a dedicated full-time Inspector and a part-time Prosecuting Attorney. Over these past seven years, the Real Estate Fraud Unit has proven its dedication to fighting real estate fraud in San Mateo County through performance and positive impact. In just the past four years, the Unit conducted four jury trials resulting in 50 felony real estate fraud-related convictions. The Unit has also obtained many more convictions through plea negotiations. Currently, the Unit’s open cases making their way through the court system involve a total of 93 felony offenses.
Below are the financial figures of the Real Estate Fraud Unit since its inception in the 2017-2018 Fiscal Year:
|
Year |
Received |
Expenses |
Deficit paid by DA’s General Fund |
|
2017-2018 |
$241,749.90 |
$382,771.49 |
$141,021.59 |
|
2018-2019 |
$180,409.94 |
$320,838.25 |
$140,428.31 |
|
2019-2020 |
$204,769.25 |
$341,282.08 |
$136,512.83 |
|
2020-2021 |
$177,117.41 |
$373,921.17 |
$196,803.76 |
|
2021-2022 |
$315,826.12 |
$421,391.93 |
$105,565.81 |
|
2022-2023 |
$145,999.80 |
$294,645.70 |
$148,645.90 |
**Funds for the 2023-2024 Fiscal Year have not yet been disbursed.
When the Real Estate Unit was established in 2017 with the $3 recording fee, it was difficult to predict how successful the Unit would be or what funds would be received each year through the recording fee. The amount collected depends on the number of qualifying documents recorded during that year and, as the above data shows, can fluctuate substantially from year to year, depending on the real estate market.
Analysis of the financial figures from the Real Estate Fraud Unit’s first six years reveals that the $3 recording fee has never fully covered the costs of running the Unit. During each of the first six years of the Unit’s existence, the funds brought into the District Attorney’s Office through the recording fee has covered about 2/3 of the costs to operate the Unit with our full-time Inspector and part-time Prosecutor. As a result, the District Attorney’s general budget has covered roughly 1/3 of the costs each year.
In February 2024, employees of the District Attorney’s Office made inquiries to 12 other California District Attorney offices to determine the fees charged in their respective counties. The following counties currently assess the statutory maximum $10 recording fee:
• Alameda
• Marin
• Riverside
• San Bernardino
• Santa Clara
• Solano
• Ventura
The following counties assess less than the full $10:
• Contra Costa ($3)
• Monterey ($9)
• Orange ($3)
• San Diego ($3)
• San Francisco ($3)
The only other Bay Area counties with cities in the Top 25 highest property values nationally are Marin and Santa Clara Counties, both of whom charge the full $10:
• Marin County: Stinson Beach (Number 6 nationally in average property value), Ross (Number 21 nationally in average property value), and Belvedere Tiburon (Number 22 nationally in average property value).
• Santa Clara County: Los Altos (Number 12 nationally in average property value), Los Altos Hills (Number 13 nationally in average property value), Saratoga (Number 16 nationally in average property value), Palo Alto (Number 19 nationally in average property value), and Los Gatos (Number 23 nationally in average property value).
Real Estate Fraud Notification Program
Within the next few months, the District Attorney’s Real Estate Fraud Unit hopes to implement a Real Estate Fraud Notification (REFN) Program through CoreLogic. An REFN Program involves hiring an outside company to generate letters to homeowners upon the recording of certain types of real estate documents. This will enable homeowners to quickly learn whether a document they did not authorize was recorded on the title of their property. By catching these fraudulent transactions early, the Real Estate Fraud Unit will have a greater potential to intervene before the fraudsters cause further damage by selling the home or draining the equity from the property. The victims of many cases handled by the Unit over the past seven years, could have benefited from an REFN Program by learning about the fraudulent recordings much sooner.
Under a REFN Program, District Attorney Offices select the types of documents that will trigger the creation of notification letters. Examples include grant deeds, trustee deeds, quit claim deeds, equity or lines of credit, and notices of default. Letters are then sent to the person who last paid the property taxes for the involved property, along with the first few pages of the recorded document. The letter will direct recipients to contact the District Attorney’s Office if they are unfamiliar with the recorded document.
REFN Programs like this have been implemented at multiple District Attorney’s Offices around the state, including Alameda and Contra Costa. Prosecutors from those offices attest to the success of the programs in deterring and detecting real estate fraud.
As a result of all of this, the District Attorney requests that the Board of Supervisors raise the recording fee from $3 to $6 per qualifying document. The increased amount is still far below the maximum of $10 allowed under the law and collected in many neighboring counties. The District Attorney makes this request for the reasons stated above, namely covering the Real Estate Fraud Unit’s existing program expenses and implementing a REFN Program.
In preparation for this request, employees of the District Attorney’s Office consulted with members of the Assessor-County Clerk-Recorder and Controller’s Office. In February 2024, members of the Controller’s Office advised that there would be no increase in resources to the Controller’s Office resulting from an increase of the recording fee. In September 2024, members from Assessor-County Clerk-Recorder advised that there would be no expenses incurred due to reconfiguring the cashiering application to accommodate an increase in the recording fee, and that any additional administrative expenses moving forward would be covered by the 10% administrative fee collected from each recording fee.
Additionally, in preparation for this request, employees of the District Attorney’s Office consulted with the San Mateo County Association of Realtors (“SAMCAR”). In the attached letter dated April 2, 2024, SAMCAR expressed its support for the District Attorney’s request.
CONCLUSION:
The San Mateo County District Attorney’s Office requests that the Board adopt a resolution adjusting the Assessor-County Clerk - Recorder Schedule of Fees set forth by County Ordinance 2.90.030 to increase the current recording fee on certain real estate instruments from $3 to $6.
FISCAL IMPACT:
There is no net County cost impact.