The Sovereign Citizen Movement: Growing Risks for California Real Estate and Title Insurance
by James w. Tarlton, National Underwriting Counsel - AmTrust Title Insurance Company

The rise of the sovereign citizen movement in the United States has created an expanding set of challenges for real estate professionals, particularly in California. While the ideology itself may seem like fringe pseudo-legal nonsense to most, its real-world implications are anything but trivial—especially in property transactions involving title insurance, escrows and closings.

From recording bogus deeds and liens to outright occupying homes illegally, self-proclaimed “Sovereign Citizens” are increasingly disrupting real estate markets. For those working in California’s title, escrow, lending, or legal sectors, understanding these tactics is critical to safeguarding transactions and property rights, protecting lenders and assessing title insurance risks.

What Is the Sovereign Citizen Movement?

Sovereign citizens believe they are exempt from federal, state, and local laws. Their core ideology asserts that a secret conspiracy replaced America’s lawful government in the 19th century with a corporate entity after adoption of the 14th Amendment. Followers often claim that by taking certain steps—such as filing declarations or renouncing birth certificates—they can reclaim sovereignty and shed all legal obligations as citizens of the United States, from avoiding taxes to traffic laws to mortgages. More troubling is that they do not recognize the authority of the federal government to regulate banking or mortgage lending or the authority of state or federal courts over their property or their “liberty” rights.

They assert that every individual has a "strawman" (a fictitious legal entity) and that debts, court orders, and regulations only apply to that strawman—not to their true “living” self. Though absurd to most, these arguments are presented using complex filings, odd punctuation in names, and references to outdated laws, treaties, ancient cases (most long-since overruled) or the Uniform Commercial Code (UCC).
Despite being repeatedly dismissed as frivolous by courts, sovereign citizen tactics persist—and cause real damage.

Real Estate Implications in California

1. Bogus Deeds and Unlawful Occupation
   
   California has seen a rise in squatting incidents by sovereign citizens who unlawfully occupy vacant or foreclosed homes. Typically, they record fraudulent quitclaim deeds or UCC filings asserting ownership, then change the locks and sometimes even lease the property to unsuspecting tenants.
   
   A notable California case occurred in San Diego (2021), when two sovereign citizens filed false liens and deeds in an attempt to take over multiple properties, including one involved in a federal drug case. These actions not only create legal chaos for owners and buyers but also delay or derail real estate transactions, cause tax complications for lawful owners and result in unnecessary legal costs by all parties.
   
   
2. "Paper Terrorism" and Legal Abuse
   
   Sovereign citizens frequently engage in what experts term “paper terrorism”—filing fraudulent liens, lawsuits, IRS forms, arbitration notices, or bogus affidavits intended to harass officials, lenders, or property owners. In California, this includes frivolous UCC filings with the Secretary of State and improper instruments filed with county recorders.
   
   Removing these documents often requires legal proceedings such as a quiet title action—costly, time-consuming processes that can stall or cancel property sales. Sovereigns often resist court authority through extensive pro se filings, suing multiple parties (including judges), prolonging litigation with bizarre legal arguments, refusal to respond, and asserting claims of diplomatic immunity (especially common among “Moorish” sovereign citizens).
   
   
3. Threats to Title Insurance and Escrow
   
   The presence of sovereign filings can cast a “cloud” on title—an unresolved issue that may prevent a property from being insurable or transferable. For title insurers in California, this risk is especially troubling because of the state’s high property values and fast-paced markets. Delays caused by clearing title defects can jeopardize closing deadlines, purchase contracts, or refinance transactions.
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   Escrow officers and underwriters face additional challenges when sovereign citizens are parties to a transaction. Individuals claiming this status often lack standard identification, use unusual names or documents, or refuse to comply with standard verification practices. Lenders may revoke approval, and title companies are often forced to list exceptions on commitments, undermining the insurability of the loan.

Legal Precedents and Court Response

Federal and state courts have uniformly rejected sovereign citizen arguments. California judges routinely dismiss sovereign legal claims as frivolous, incoherent, or legally baseless. Notable national cases further reinforce this precedent:

• El v. Ally Bank (9th Cir., 2022): Described sovereign claims as “misplaced,” relying on “obsolete dictionaries and 19th-century court decisions.”
  
  
• US v. Wright (4th Cir., 2020): A South Carolina sovereign was sentenced to 10 years for mail and wire fraud after filing bogus liens and affidavits on behalf of distressed homeowners.
  
  
• Bryant v. Washington Mutual Bank (2007): Dismissed redemption theory arguments as without merit.
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These cases demonstrate the legal system’s position—but also highlight how time and money must still be spent to rebut such claims.

California’s Legislative Response

Recognizing the damage caused by fraudulent filings, California passed Assembly Bill 1267 in 2015. This law targets the recording of knowingly false or forged documents intended to interfere with property rights or harass others.

AB-1267:

• Provides expedited court processes (ex parte motions) to invalidate bogus filings.
  
  
• Allows courts to impose civil penalties and issue restraining orders against serial abusers.
  
  
• Encourages county recorders to refer suspicious documents for legal review.

Still, as many California professionals note, the law does not prevent such documents from being recorded in the first place. California remains a “race-notice” jurisdiction, meaning the first party to record an interest in property has rights superior to later claims—unless fraud is proven. This makes early detection and review by title professionals absolutely essential.

Title Insurance: Best Practices for Underwriters

California’s title insurers and underwriters are increasingly adopting defensive strategies, including:

• Enhanced Document Scrutiny: Thorough review of all recently recorded deeds, liens, UCCs, affidavits, and powers of attorney.
  
  
• Name Searches and Cross-Checks: Identification of sovereign-style punctuation or references to “Moorish” or “American State National” in names.
  
  
• Verification of Authority: Requiring traditional, government-issued ID and rejecting homemade credentials, “diplomatic IDs,” or documents referencing fictitious entities.
  
  
• Pre-Closing Investigations: Interviews with parties claiming unusual legal status, including a review of any sovereign-related filings.

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If a title search reveals a sovereign citizen claim or document, underwriters may delay closing until the matter is resolved through court action or validated documentation. In many cases, the transaction is canceled by the lender, escrow agent or title insurance company entirely due to risk concerns.

​Lenders and Borrowers: Red Flags

Lenders face serious risk when sovereign citizens attempt to obtain financing. Typical issues include:
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• Refusal to sign standardized loan documents
  
  
• Attempts to pay debts with “bonded promissory notes” or fictitious instruments
  
  
• Rejection of federal laws or IRS reporting
  
  
• Obstruction of foreclosure actions by challenging court authority

Many lenders, especially in California, now treat self-declared sovereign citizens as high-risk applicants. Loan officers are instructed to terminate the application if the borrower exhibits red flags such as:

• Sovereign vocabulary (e.g., “secured party creditor,” “common law jurisdiction”, “Sovereign Citizen”)
  
  
• References to fictitious trusts or diplomatic immunity
  
  
• Non-cooperation with required disclosures or communication protocols

Impact on Real Estate Professionals

For brokers, escrow officers, and attorneys, sovereign citizen encounters are disruptive at best—and dangerous at worst.

Common issues encountered in California transactions include:

• Buyers trying to “reclaim” property using fake deeds
  
  
• Sellers attempting to avoid capital gains taxes with bogus exemptions
  
  
• Recording officers threatened or sued for rejecting sovereign filings
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• Escrow delays caused by last-minute filings clouding title

In some cases, professionals have been personally targeted with harassment. Sovereigns may file unrelated IRS forms and documents claiming to be owed money, place false liens against their homes, or accuse various parties of “war crimes” in bizarre criminal complaints.

These behaviors fall squarely within the sovereign citizen pattern of harassment and intimidation, designed to punish perceived government collaborators or disrupt legal systems.

​Recommendations for California Title and Escrow Professionals

To reduce exposure, California professionals are advised to:

1. Train staff to identify sovereign red flags in documents and behavior.
   
   
2. Use general exceptions in title commitments where sovereign status is suspected and provide documentation to lenders.
   
   
3. Notify lenders if there are indications that any person has claimed an interest in the property as a Sovereign Citizen or it appears that that their borrower may claim to be a Sovereign Citizen.
   
   
4. Report suspicious filings to county legal counsel or district attorney’s offices under AB-1267.
   
   
5. Decline high-risk closings when identity or authority cannot be verified through standard procedures.
   
   
6. Stay updated on sovereign citizen tactics through associations like CLTA, ALTA, and local escrow organizations.

​Conclusion

Though often dismissed as a fringe conspiracy, the sovereign citizen movement poses real and growing threats to the integrity of California’s real estate market. Through fraudulent filings, pseudo-legal tactics, and outright scams, these individuals can create expensive title defects, delayed closings, rejected loans, and legal exposure for industry professionals.

In a state with as much property value—and litigation—as California, vigilance is not optional. Title insurers, escrow officers, lenders, and agents must remain informed, proactive, and united in resisting these tactics to preserve the rule of law and the sanctity of property rights.