What happens when a property is sold without the owner(s) knowledge?
A type of real estate fraud that hurts both individual homeowners and their lenders is title fraud, sometimes known as real estate title fraud. It often entails a fraudster transferring the title of a residence to themselves without the knowledge of the actual owner using stolen personal information or fake paperwork. The scammer then makes off with the money after using the title to acquire a mortgage on the house. Then, it is the responsibility of a homeowner to demonstrate that real estate title fraud has taken place.
In Reviczky v. Meleknia, a fraudster pretended to be a relative of Mr. Reviczky, the property’s owner and used a fake power of attorney to sell the property to a buyer who was also a victim. Mr. Reviczky filed a claim against the HSBC Bank and the innocent buyer. The latter admitted that his ownership of the property could be challenged. The bank insisted that the mortgage on the property was legitimate and enforceable, though. According to the court, proof that a party interacted with a fraudster shows that the party had a chance to stop the fraud, and the fact that the party had a chance to stop the fraud renders their interest in the land defeasible in favour of the true owner. In this instance, the bank was aware that the person attempting to sell the property was doing so under the authority of a power of attorney and had the tools necessary to safeguard its interests in such a situation. The bank’s solicitor did not examine the power of attorney, which would have probably prevented the fraud. The court concluded that the bank’s charge was invalid as a result.
How title insurance may protect owners:
All it takes is a valid ID from the imposters, forging documentation and a convinced real estate agent to list a home for sale. The risk of title fraud can be particularly significant for elderly individuals and those who rent out their homes to tenants.
Buying title insurance, which often includes protection against forgery, fraud, and impersonation, is one of the best methods for a homeowner to safeguard themselves against anything like this. Title insurance also covers the cost of retaining the homeowner’s title rights through legal representation.
The idea is that a client is getting insurance on the title of the property rather than the property itself. In other words, it is insurance concerning the ownership of the property. With title insurance, clients pay the one-time fee called premium to the title insurance company and the company undertakes to compensate for any damages or loss suffered because of title issues arising on the property purchased, or other specifically enumerated losses or damages set out in the title insurance policy. The extent of coverage or maximum amount payable in case of loss or damage will be set out in the policy.
Sources:
- CBC News, “How to protect yourself from real-estate title fraud”, January 13, 2023, online:< https://www.cbc.ca/news/canada/toronto/prevent-title-insurance-fraud-1.6711615>
- Reviczky v. Meleknia, 2007 56494 (ON S.C.).
- Government of Canada, ‘Real estate Fraud”, online:< https://www.canada.ca/en/financial-consumer-agency/services/real-estate-fraud.html>
NOTE: This article has been written for general information purposes only and does NOT constitute legal advice. For further questions and/or legal advice please consult a qualified lawyer.