Over the past while, Canadian media has been reporting frequently on real estate title fraud. Many homeowners are concerned about the sale of their home by another person who impersonates their identity without their knowledge. If this happens, it can cause problems for the true owner who may not be able to sell their property with a clear title or free from any claims by other parties.
How is legal ownership of one’s property established?
Legal ownership to a property is established by the title records kept at the Land Registry Office where the property is located. Title is typically obtained when the owner of the property signs transfer documents (i.e. a deed) shifting ownership of the property to a “transferee” or purchaser. The Land Registry Office electronically records the transfer, and anyone who checks the public records will see the latest transfer and the true owner’s name. But what happens when the true owner is unaware that their property has been transferred?
What is title fraud?
Title fraud usually starts with identity theft, which happens when someone steals your personal information. Title fraud occurs when the ownership or title of a property is changed without the true owner’s knowledge. When this happens, the “fraudster” can sell the property or apply for a mortgage using the property as collateral. If the fraudster sells the property, they can disappear with the proceeds of the sale. The true owner may then discover other people living in their house. Alternatively, a fraudster can obtain a mortgage on a property by using a fraudulent deed, fake identification, or a combination of both. The true owner may than discover that a lender is attempting to sell their home for non-payment of the fraudulent mortgage. The property owner must prove that the fraud has occurred.
What is title insurance?
As a one-time cost, an existing property owner may obtain a Title Insurance Owner’s Policy that protects their ownership for as long as they own the property.
Title insurance provides coverage for things such as:
- title to an estate or an insured interest being held (or vested) other than as shown in the policy;
- any title defect and charge, lien, or encumbrance on the title;
- unmarketability of title;
- lack of a right of access to and from the land; and
- certain types of fraud.
Title insurance cannot prevent fraud, but it can protect property owners from the consequences and the resulting stress. If a property owner does not have a title insurance policy when fraud is discovered, it can be costly and time-consuming to restore title or remove a fraudulently registered mortgage. Until the title is restored in favour of the true owner, they will likely be unable to sell or mortgage the property, adding further complications if a real estate transaction is in progress. A title insurance policy can cover legal fees to defend the title, and it can offer peace of mind.
How to order a policy
Title insurance policies can be ordered by a lawyer on the property owner’s behalf. It is worth noting that property owners may already have title insurance from the time they purchased their property, which may include title fraud protection. Checking the documents received during the purchase or contacting their lawyer can help them determine if they already have coverage.