Title Fraud is Real - Here's How to Protect Yourself

Recent news stories have highlighted the dangers of real estate title fraud, which take place when fraudsters or scam artists steal ownership of a home in order to benefit from its value.

Once fraudsters have their hands on a property's title, they can re-mortgage it, sell it to an unsuspecting buyer, or extract value from it in some other way and make away with the proceeds.  The real homeowners often don't learn about what's happened until they receive notice of missed payments and the bank comes looking for their money. If the property is mortgage-free, then the homeowners are typically completely unaware until they try and sell it.

According to Stewart Title Company in Toronto, a typical example of fraud can look like this:

1. A fraud artist steals the identity of the legitimate owner of the property.
2. The fraud artist uses this stolen identity to sell or mortgage the property without the homeowner’s knowledge.
3. The fraud artist disappears with the proceeds from the property sale or mortgage. The real owner then discovers other people living in their house or that a lender is attempting to sell their home for non-payment of the fraudulent mortgage.
4. The unsuspecting homeowner is then faced with the stressful and costly burden of proving that he/she has been the victim of title fraud and should get the ownership of their property back and/or not be required to pay back the fraudulent mortgage.

Real estate title frauds are sophisticated crimes that take several forms. Unfortunately, modern technology provides fraudsters with relatively easy access to the knowledge and documentation required to perpetrate these fraudulent acts.

Can you lose your title through fraud?

No. However, being the victim of title fraud can cause a huge legal nightmare for the true owner forced to defend their title to a property against perhaps an innocent purchaser or innocent lender.  

What can you do to protect yourself?

First, make sure you have Title Insurance.  Insuring the ownership of your property (referred to as “title”) is just as important as insuring your property and its contents from physical loss or damage. While victims of fraud may be able to claim compensation from the Land Titles Assurance Fund, the best protection will come from ensuring that you have a Title Insurance policy on your property. 

Homeowners who did not obtain the protection of title insurance at the time they first purchased their home can get an ‘existing homeowner policy’ from a title insurance company. This policy will cover you for any actual losses and, most importantly, typically contain a defence of title provision requiring the insurance company to defend or restore your title.

Why do I need this policy?

Even if you are the rightful owner of a home, there are instances such as real estate title fraud, when your title can come into question. The losses from Real Estate Title Fraud are catastrophic with homeowners paying thousands of dollars in legal fees to defend their title because an impostor has sold or mortgaged their property without their knowledge.

By obtaining an existing homeowner policy, you are purchasing the peace of mind associated with knowing that your policy contains comprehensive coverage for losses due to many forms of Title Fraud. The policy also contains a duty to defend your title which includes paying associated legal fees.

What is the premium?

According to Stewart Title Company, Title Insurance is available for a low premium that is paid only once, and coverage is valid for the entire time you own your home. Your real estate lawyer or their staff can go over the premiums with you and order the policy on your behalf.

What is the coverage amount?

Your policy amount is based on the amount you paid for your property or the fair market value as of the date you order your policy (referred to as the insurance date in the policy), whichever is greater. This is determined by a tax assessment or an Opinion of Value from your Realtor.  Policies usually include an inflation coverage provision that will increase with the value of the property.

If you have purchased your property after the introduction of Title Insurance in Ontario, your lawyer may have obtained the Title Insurance policy for you on the purchase. If you are not sure, check your documents or contact your real estate lawyer. If you do not have a policy, whether it is because you purchased your home before the introduction of Title Insurance in Ontario or because your lawyer did not purchase one at the time of closing, you can still purchase a Title Insurance policy through your lawyer.

A further strategy may be to keep your line of credit registered on your property even if you're not using it. Fraudsters will generally look for properties that are mortgage-free as they are an easier target. If you have a line of credit that is already on title, perhaps keep it there even if you're not using it as a further risk reduction strategy.

Lastly, and always, protect your identity. Guard your personal information and passwords. Shred documents with sensitive information. Review bank statements, utility bills and credit card statements regularly and be alert for suspicious mail, emails or texts which might suggest that somebody has, or is trying, to steal your identity.

We offer complimentary Opinion of Value assessment letters to all our clients so please  contact us should you need one. Also, we can recommend a couple of great real estate lawyers if you need that too.