Financial Elder Abuse in Real Estate Transactions
California law states that an “elder” is anyone in the state, 65 years of age or older. (California Welfare & Institutions Code § 15610.27.) Financial abuse of an elder, or dependent adult, occurs when a person or entity, does or assists in the following: “takes, secretes, appropriates, obtains or retains, real or personal property of an elder or dependent adult, to a wrongful use, or with intent to defraud, or both.” (Welf. & Inst. Code § 15610.30.) The Code also says that a person or entity who knew or “should have known” that the elder person was being defrauded, and continues with the wrongful transaction, can be liable for elder abuse.
Financial elder abuse is becoming more common. The California Department of Justice estimates that one in 20 elders becomes a victim to neglect or physical, psychological, or financial abuse. For every reported case of elder abuse, there are five unreported cases. In 2020, those over 65 years of age accounted for about 15% of the population in the state and approximately one in eight over 65 years of age, and nearly half of those 85 and older, will have Alzheimer’s disease.
Elders, and dependent adults, are vulnerable targets for the unscrupulous, particularly in real estate transactions. Californians over age 65 own approximately 25% of the total value of all owner-occupied housing in the state. Many instances of elder abuse occur through actions of family members, trusted professionals, or caregivers.
Real estate agents may encounter someone who is a victim of elder abuse, or an elderly client whose capacity to enter into a legal agreement is questionable. Realtors© have a legal and ethical obligation to protect the interests of their client. N.A.R. Code of Ethics, Article 1, requires that Realtors® “protect and promote the interests of their client” which means they must put the interests of their client ahead of their own.
Civil penalties for financial elder abuse require the wrongdoer to compensate the victim, pay punitive damages, and pay the victim’s attorney fees and costs. (Welf. & Inst. C. § 15657.) Criminal penalties also apply for theft or embezzlement from an elder adult and can result in imprisonment. (Penal Code § 368.)
Financial elder abuse is also related to “legal capacity” which is required for a person to enter into a contract. Capacity to contract depends on whether the elder understands the “nature and extent” of the transaction. In general, a person does not have capacity to contract when he or she evidences a deficit that, “significantly impairs the person’s ability to understand and appreciate the consequences of his or her actions with regard to the type of act or decision in question.” (Probate Code § 811.) On the other hand, an individual is presumed to have capacity until proven otherwise. (Prob. Code § 810.).
Signs that an elderly person may lacks capacity to contract, or is a victim of elder abuse include: the person exhibits poor cognitive functioning, an inability to articulate the reasons behind their decisions, is severely disorganized thinking, shows obvious lack of medical care, is disorientated as to time, location, people and the situation. Also, if the elder lacks awareness of their own finances, who experiences an abrupt change to their financial status or financial planning may indicate a problem.
What You Can Do if You Suspect a Problem
If an agent suspects someone may not have the mental capacity to make an important decision, or is being inappropriately influenced, their goal should be to protect their client and themselves. It may be helpful to meet with the client a few times. An elderly person who seems disoriented or has trouble processing information may simply be experiencing the effects of a new medication or may be having trouble adjusting to some life event. It is best to meet with the client at the time of day their energy is the highest. Meeting multiple times allows you to determine whether the worrisome behavior is consistent or just an isolated instance.
After meetings with the client, if the agent is still unsure about the client’s capacity, it can be helpful to keep notes, documenting the time and place of the meeting, the client’s demeanor, the questions asked and answered, and have the presence of third-parties and their statements. If the agent has persistent concerns about the client’s capacity, they should obtain legal advice on what action to take.
Evidence of abuse includes observation or suspicion of physical abuse, financial abuse, abandonment, isolation, abduction, neglect by others or by the elderly person. If an anyone suspects that an elder may be the victim of financial or physical elder abuse, they should call Adult Protective Services (San Diego County, no. 1-800-510-2020) or contact a lawyer knowledgeable in this area.
Financial elder abuse is on the rise. Being aware of the warning signs and knowing how to respond can protect both the elder and the real estate agent.
(This Article was published in The San Diego Realtor, June 2017 and update in August 2020.)
This article provides general information and is not intended to provide advice on any specific matter. Attorney Robert Muir can be reached at muirlaw.com