Fraud: how it can affect you
What is real estate fraud?
Fraud can affect any type of property, whether real estate, monetary investments or items you buy like paintings. There are several types of real estate fraud:
- Stealing title: when the crook changes the ownership or title of your property into his/her name. The crook may intend to sell the property or mortgage it behind your back. In either case, the criminal is fraudulently impersonating you and/or forging your signature.
- Obtaining an illegal mortgage: when the criminal leaves title or ownership in your name, but puts a mortgage on it illegally. Once again, you (and the lender under the mortgage) are the victim of an impersonator and/or forger.
- Value fraud: where you are tricked into believing the property is worth considerably more than it is. Remember that there is nothing necessarily illegal in Canada about buying low and selling high, unless it involves fraudulent concealment or intentional misrepresentation (such as giving you a forged appraisal or fraudulent "comparables".)
Why is real estate fraud happening?
Real estate fraud is a continent-wide, if not global, phenomenon. So, there is nothing unique about Canada that is making our properties vulnerable to it.
It is likely related to the upsurge in identity theft, which is reported regularly in the media. As population centres have grown in North America and people have become more mobile, those involved in the real estate industry (such as sales agents, mortgage brokers, lenders and lawyers) are less likely to know all of their clients on a long-term basis. When towns were small and everyone knew each other, it was pretty difficult to impersonate a local landowner to steal title!
These developments are compounded by the rise of the Internet, which makes obtaining a mortgage loan, for example, more convenient while (to some extent) de-personalizing the process.
How does TitlePLUS insurance help?
TitlePLUS insurance can help in two settings: when you are first buying your home or through our OwnerEXPRESSÂ® program if you already own a home (and do not yet have a title insurance policy).
The TitlePLUS policy provides coverage:
- for frauds that may have occurred prior to your purchase (for example, if it turns out that the vendor does not really have the right to sell the property to you), and
- if your property becomes a target of fraud at a later date. This is part of the post-Policy Date protection in the TitlePLUS policy.
There is also a "duty to defend" in the policy, which means that it is our problem, not yours, if someone must contact the government to request that title be restored to your name in the official records. Please refer to the TitlePLUS policy for full details, including actual terms and conditions.
However, please remember that at the end of the day, insurance is about indemnifying you with money for a loss. If a Court ever ruled that someone else now owned the property, all we could do is pay your loss: We can't tell the Court what to do with your property, just ask properly on your behalf by following legal procedures!
What else can I do to protect myself?
While having TitlePLUS insurance will give you peace of mind, isn't it better to avoid becoming a victim of real estate fraud in the first place? We completely agree, but there are no guarantees.
A prudent homeowner or buyer, however, will remember the following:
- Don't leave personal and confidential documentation where others can find it, especially if you have people coming into your home when you are not there to supervise. This is especially true if you are renting the property to tenants or giving access to others to "watch" it when you are away for an extended period of time.
- But do nevertheless leave someone responsible and trusted in charge when you are away. You don't want to return from an extended absence to discover that your house has been listed for sale, with a sign on the front lawn and open house events, and is now occupied by a stranger who bought it in good faith.
- Check your credit reports regularly to see if there have been any inquiries that you do not understand. If the fraudster is impersonating you, a prospective mortgage lender will likely have requested a credit report. Instructions on checking your credit reports are available at www.equifax.com or http://www.transunion.ca/.
- Be available, visible and known to your neighbours. Although many of us prefer unlisted phone numbers, it does hinder a really prudent lender or other real estate professional being able to call your address to verify that you are undertaking a transaction on the property. And you certainly want to be available for that call if you aren't moving or arranging a new mortgage! If your neighbours know that you are happy in your home and not looking to move, they may tip you off if they see an appraiser or a surveyor working on the property while you are at work.
- Check references for tenants carefully. If they offer you a deal (like all cash in advance) that sounds "too good to be true," it likely is!
- That same maxim, about things which sound too good to be true, also applies if you are in financial trouble and someone approaches you with a miraculous solution. Have it carefully checked out by an independent lawyer, acting for you alone, because sometimes these amazing solutions involve transferring your title to your new best friend and then that person does not deliver on the promised solution.
- Never buy a property sight unseen, no matter how good the price you are offered.
- Never sign documents you have not had a chance to read. Never hesitate about insisting that you have the opportunity to take documents to an independent lawyer. High pressure and rushed timeframes are the fraudster's best tools.
- Pick reputable, reliable consultants when you are conducting real estate transactions. You don't want to become a target because a less than honest real estate industry insider now knows your circumstances. Ask family and friends for referrals. You probably don't choose your hairdresser or barber just because he/she is the cheapest in town - why would you choose a real estate agent or lawyer that way?
- A Power of Attorney is a very powerful document. Think extremely carefully before you give someone authority over all your assets. You must trust that person 100%! If you know that you will be unavailable for a specific transaction, your lawyer can prepare a narrower document for that deal alone that will mean your overall financial well-being is less at risk.
Am I a fraudster? Could I be guilty?
The penalties for fraud are very serious. The Canadian Criminal Code has many sections that can be used to prosecute alleged fraudsters.
It should be perfectly obvious by now that forging a real estate document to take someone else's title or applying for a mortgage on property you don't really own is a big "no-no." But are there other ways you can get into trouble? While this is not intended to be legal advice, and you should always talk to your own lawyer about your specific circumstances, bear in mind the following "tips" from some of us who deal with the fraud fallout in our community.
Don't be a "front" or "straw buyer" for a transaction. If it isn't really your deal or your property, don't get involved, even if you are offered a big fee for letting your name and/or credit history be used. Ask an independent lawyer for advice, if you are really tempted. Similarly, don't lend your personal identification to anyone else.
Don't mislead your lender. Answer the questions on the loan application with scrupulous truthfulness. Be sure the employment and financial information you give your lender are completely true and update the lender if the information changes before the deal is completed.
Make sure the lender (not just the mortgage broker) understands the true purchase price for your property and all the terms of the deal. Offer the lender and your lawyer ALL the paperwork you have on the transaction and let them choose what they need to keep. Tell your lawyer anything that the real estate agent, mortgage broker or lender said that you found odd or disquieting. You will be more comfortable doing that if your lawyer is truly someone of your own choosing.
No matter how frustrating your matrimonial situation may be, stay patient and let the lawyers work out the property details. What you may consider a justified self-help remedy involving a transfer of, or mortgage on, your home may be viewed most unfavourably by the police if there has been any forgery, impersonation or misrepresentation of your spouse's position. Always be truthful with your lender and lawyer about your matrimonial status.
If someone has entrusted you with a Power of Attorney, be sure you understand fully the circumstances in which the "donor" (that is, the person who is giving you power over the assets) expects you to use it. You are legally required to use it only in the best interests of the donor. So, you can't use it, for example, to mortgage the donor's property because you are short of cash for your own needs.