Recent news stories have highlighted the dangers of real estate title fraud, which occurs when fraudsters or con artists steal title to a home to take advantage of its value.
Yesterday, CBC News reported on a Toronto family who successfully thwarted a scam attempt in which someone used fake identification to pose as the 95-year-old homeowner and convinced real estate agents to list the home for sale without the family’s knowledge or permission.
The case appears to be ongoing Toronto police investigationin which police say two homeowners left Canada for work in January 2022, only to learn months later that their property had been sold without their knowledge by people using fake identification.
So what is property fraud and how can you prevent it from happening?
What is property fraud?
Title fraud occurs when a person uses false identification or forged documents to steal a homeowner’s identity and take away their “title” or legal ownership of a property.
Once the fraudsters get title to the property, they can remortgage it, sell it to an unsuspecting buyer, or otherwise extract value from it and dispose of the proceeds.
Homeowners often don’t learn what’s happened until they receive a notice of missed payments or try to sell, insurance company First Canadian Title (FCT) says on its website.
It can take considerable time, money and effort to deal with the need to recover your property and/or remove any fraudulently recorded mortgages.” – First Canadian Title Insurance Company
Victims of property fraud lose the right to mortgage their home, can no longer use the equity and cannot sell the property until they recover their ownership rights through the courts, according to the FCT.
“It may take considerable time, money and effort to deal with the need to recover your property and/or remove any fraudulently registered mortgages,” FCT wrote on its website.
Maurice Cooper, a civil defense lawyer in Toronto who successfully argued a landmark case in 2006 that shifted responsibility for property fraud from victims to lending institutions, said seniors and people who rent their homes to tenants, may be at high risk of property fraud.
But homeowners can take steps to protect themselves.
Take steps to protect your identity
Identity theft is often the first step in property fraud.
Government-issued identification documents, including driver’s licenses, passports, birth certificates, Social Security Number (SIN) cards, and citizenship cards, can be used to apply for a mortgage or take steps to buy or sell a home.
The Canadian Fraud Center offers the following tips to prevent identity theft:
- Be careful who you share personal information with.
- Check credit card statements, bank statements and credit card statements regularly and report anything wrong.
- Shred documents containing personal information before throwing them in the trash.
- Limit mail theft by regularly extracting mail.
- Notify the post office, financial institutions and other service providers of your new address when you move.
The Toronto Police Service is seeking the public’s help in identifying a man and woman, pictured here, who allegedly used false identification to sell a home they did not own. (Toronto Police Service giveaway)
For more information on how to prevent identity theft, visit the following links:
Get title insurance
Title insurance is an insurance policy that protects property owners and their lenders against losses related to title to the property or property, including from title fraud, according to the Financial Services Regulatory Authority of Ontario (FSRAO).
Although it cannot prevent you from becoming a victim of fraud, it is the most important thing in mitigating its consequences.
Realtor Varun Shriskanda says getting title insurance can protect homeowners from the consequences of real estate fraud. (Sean Benjamin/CBC)
“Title insurance will step in and save you in a situation like this,” said Varun Sriskana, a Toronto-based realtor, property manager and housing advocate. “It protects you in case someone cheats on you.”
Title insurance can cover legal expenses incurred by homeowners seeking to recover title to their property, according to the FCT.
It protects homeowners from fraudulent claims against their property and pays legal costs to restore a homeowner’s property rights.
If a buyer unknowingly buys a home that has been fraudulently registered, insurance should also protect them. In such cases, the real owner will likely get their home back and the unwitting buyer will get their money back.
Know who you’re dealing with
People on both sides of a real estate transaction need to make sure they’re comfortable with the identity of the person on the other side of the deal, said Stephen Moranis, past president of the Toronto Regional Board of Real Estate.
That means potential tenants must ensure the landlord actually owns the property, while landlords must check references and request documents such as credit scores to screen potential tenants, Moranis said.
“Each party has to be very, very careful to check and make sure that the other party they’re dealing with is actually in a position, a legal position, to lease or sell the property they’re considering,” Moranis said.
Murtaza Haider, a professor of data science and real estate management at Ryerson University, said he talked to neighbors the last time he was looking to buy a home, asking them about the property and the current owners, looking for potential red flags.
Simply Googling a person’s name and cross-checking photos on social media can also help spot any irregularities, Haider said.
Preventing tenant ownership fraud
Homeowners who rent their homes to tenants may be at a higher risk of fraud because the tenants have physical access to the home.
Landlords should take steps to make sure documents containing personal information, such as driver’s license renewal applications or tax returns, don’t fall into the wrong hands, Haider said.
“Make sure your mail stays with you. Make sure you have a forwarding address,” Haider said. “Make sure they don’t fall into the hands of people you don’t want but yourself.”
Murtaza Haider, a professor of data science and real estate management at Toronto Metropolitan University, says homeowners should monitor their digital and physical mail to make sure their personal information doesn’t fall into the wrong hands. (Doug Husby/CBC)
Haider said homeowners can also look up their property online from time to time to see if it is inappropriately listed for sale or on a rental website like AirBnB.
“It’s always good to check the address, check it in different places on the Internet to see if your property is being used for its intended use,” Haider said.
Landlords should also rely on bank information rather than cash payments because that adds another level of due diligence, Haider said.
The Ontario government also provides a free online tool that allows any member of the public to check the validity and current status of a driver’s license. Diver license numbers that turn out to be invalid can be a red flag.
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