Saturday, September 09, 2006

Real Estate Fraud

I saw a story on CTV News last night about real estate and mortgage fraud in Ontario. The frauds are not particularly complicated. A crook forges the owner's signature to either register a mortgage, or transfer the property to an innocent purchaser. The crook then takes the proceeds of the mortgage or sale and runs.

According to this CTV news story, the Ontario government is proposing changes to Ontario's laws to allow innocent property owners to nullify transactions made with forged documents. In other words, if someone fraudulently transfers property to an innocent purchaser, the owner can get the property back.

The story indicates that the Ontario government has also taken steps to make it more difficult to counterfeit drivers licenses, and has set up a land title insurance fund.

The story got me thinking about British Columbia. How prevalent is real estate fraud here? What happens if someone forges documents to sell land to an innocent purchaser in B.C.?

In January 2006, Ian C.B. Smith, Director and Registrar of Land Titles, spoke to the Okanagan Wills and Trusts subsection of the Canadian Bar Association, B.C. branch. He gave us the following statistics from the Land Title Assurance Fund for the previous 21 years:
1) 14.7 million Land Title Transactions
2) Total of 87 successful claims
3) Total payout approximately $2 million
4) All claims except 4 were settled for less than $100,000 and 55 were settled for less than $10,000.00.

These numbers suggests that this kind of fraud has not been very prevalent in British Columbia. But, the effect on the victims can be devastating.

Interestingly, British Columbia's legislation has moved in a different direction than Ontario is proposing. Last year, B.C. amended its legislation in the Miscellaneous Statutes Amendment Act No. 2 2005 (Bill 16). The way it works now, if someone forges the owner's signature to sell the property and transfers the title to an innocent purchaser (a purchaser who in good faith, without knowledge of the fraud, pays for the property), the innocent purchaser may keep the property. The owner--or, I should say former owner--who is the victim of the fraud, can then make a claim for compensation to the Land Title and Survey Authority Assurance Fund. The victim must also sue the perpetrator of the fraud unless the perpetrator is "is dead, or cannot be found in British Columbia," and make reasonable attempts to collect from the perpetrator before he or she can get compensated from the Assurance Fund. The Assurance Fund provisions are set out in Part 19.1 of the Land Title Act, RSBC 1996, c. 250.

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