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TITLE FRAUD – Do not get Victim, Know It.

(Content provided courtesy of the Ministry of Consumer Services)

Real estate fraud has two components: mortgage fraud and title fraud.

Title fraud generally hurts individual homeowners. It often involves fraudsters using stolen identity or forged documents to transfer a registered owner’s title to himself or herself, securing a mortgage on the property and then disappearing with the mortgage proceeds.

There is a perception that there is an epidemic of title fraud in Ontario. This is not the case. The incidence of title fraud is, in fact, relatively low – about 10 cases out of 2.2 million real estate transactions per year. But even one case is too many, which is why a number of steps have been taken to minimize the risk of title fraud.

To address the issue of title fraud, the Ontario government recently passed the Ministry of Government Services Consumer Protection and Service Modernization Act, 2006. This legislation amended the province’s land registration laws to:

  • Ensure that a homeowner will not lose their property due to the registration of a falsified mortgage, fraudulent sale or counterfeit power of attorney. The changed laws will ensure that an innocent homeowner will not have their home stolen from under them.
  • Improve the government’s ability to return title to the rightful owner in the event of fraud.
  • Create an expedited process for the Land Titles Assurance Fund. The ministry is now able to make earlier payments to innocent individual homeowners or purchasers of a home who have suffered a loss in a clear case of fraud. As long as there is no court proceeding and both the victim and his/her lawyer are cooperative, the ministry will ensure that title is returned and a decision is made within 90 days.
  • Ensure fraudsters do not have access to the system. The Director of Titles will have additional powers to suspend or revoke an individual’s access to the electronic registration system.
  • Dramatically increase existing fines for real estate-related offences to $50,000 from $1,000.

Based on discussions with the real estate fraud working group, which is made up of industry professionals, the government is also:

  • Introducing new rules on who can register documents (e.g. the transfer of a home from one owner to another and/or the addition of a mortgage to title) on the electronic land registration system. Tightening the system by limiting who can register documents will further decrease the risk of fraud by ensuring registrants are certified, professional and responsible.
  • Strengthening the current standards for dealing with powers of attorney. Whenever an individual uses a power of attorney to register a document, a lawyer will be required to discuss it with their clients and provide a statement to that effect.

Title fraud is limited in comparison to the number of real estate transactions that occur every year. However, even one case is unacceptable, and this is an important issue for Ontarians. These new measures are a significant step forward, but ongoing work needs to occur to ensure that we stay one step ahead of fraudsters. It will take the ongoing efforts of all players – including government, law enforcement, lawyers, lenders, real estate agents, mortgage insurers and industry associations – to fully address this issue and protect homeowners.

For more information visit:  Ministry of Government Services

CONSUMER TIP

You may wish to consider title insurance as an additional means of protecting interest in a property. In fact, many mortgage companies require you to purchase title insurance. To find out more about title insurance, speak to your real estate broker or salesperson or discuss it with your lawyer.

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