Title Fraud, The Sequel
In the fall 2004 edition of Legal Issues we told you about a scheme that has begun to pop up in Ontario, and in particular in the Greater Toronto Area – title fraud. Title fraud essentially involves the theft of the title to a home. Following is one couple’s experience with title fraud.
The Shins paid $500,000 cash for a luxury condo located in the Richmond Hill area. Five years later, a scam artist, by the name of Jiang, forged and filed a deed transferring the condo to his name. A year later, Jiang mortgaged the property to secure a $200,000 line of credit for himself. Jiang drew out the entire amount from the line of credit and then defaulted on the mortgage.
The bank subsequently obtained a default judgement against Jiang. The bank then sought to enforce the judgement by evicting the Shins from the condo that they no longer legally owned. The court confirmed that the bank could enforce its rights under the mortgage in this fashion. On the good news front the bank did agree to defer its rights until after the Land Titles Assurance Fund hearing.
The Land Registry System
To understand how this theft could happen you need to understand that the registry system in Southern Ontario is all about documents that are, or at least appear to be, correctly filled out. The job of the registrar is to verify that the proper documents (e.g. transfers of deed and mortgages) are properly completed, to accept the designated fees and land transfer taxes and to correctly register the documents on title. Note that it is not the registrar’s job too verify whether owners have indeed sold and/or mortgaged their property.
Blank transfers and mortgages are readily available at stationary stores and off the Internet. Legal descriptions of property are easily obtained since this is public information. And if you have $8 you can review the appropriate abstract book to see the complete history of a piece of land. Finally, while lawyers are generally involved in transfers and mortgages there is no legal requirement for their involvement.
Although many real estate transactions in Ontario are now completed electronically, and access to the registration is controlled, it is by no means foolproof and “fraud artists” have found various ways to get around the controls.
Remedies
One of the possible remedies for victims of title fraud is recourse to the province’s Land Titles Assurance Fund. This fund was set up to compensate those wrongfully deprived of their land. Unfortunately this is a remedy of last resort and can be a lengthy process.
Another remedy is title insurance. While title insurance has traditionally only been available at the time of purchase of a home, First Canadian Title (the company with whom we place many of our title insurance policies) now offers title insurance to homeowners who have not previously purchased insurance. In addition to covering the policy holder for title fraud, the policy also covers many other defects in the title which the owner may not be aware of. The advantage of such a policy is that if you become the victim of title fraud, the insurer will compensate you immediately.
While title fraud is a scary prospect it is important to understand that it is not that common relative to the number of homes that are out there. Nevertheless, it is important to be an informed consumer.
If you would like more information about title insurance and whether it is right for you please contact Stan Landau.
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