Buying property represents a major milestone in many people’s lives and can often symbolize stability and security. Property ownership often brings a sense of pride and accomplishment, provides a space you can call your own and can represent a significant investment in your future.
However, property owners must be mindful of title fraud. The recent high profile news reports of fraudsters stealing homes in Toronto and in BC have caused much anxiety to homeowners everywhere.
So what is title fraud? Title fraud can mean many things, but in general, it is a type of fraud that typically involves the fraudulent sale of a home or refinancing of a property that does not belong to the fraudster who poses as the real owner. It can result in the rightful owners losing their property or being encumbered with a mortgage that is not their own. Title fraud often goes undetected until it is too late – so let’s look at how you can safeguard your property and protect yourself from title fraud.
What Is Title Fraud?
Title fraud is a type of real estate fraud in which someone falsely claims ownership of a property and then sells or uses it as security for a mortgage loan. Title fraud can be committed in several ways, including:
- impersonating the rightful owner and selling the property without their knowledge or consent
- impersonating the rightful owner to borrow money secured against property to which the fraudster does not actually own
- creating false documents to support the fraudster’s claim to ownership for nefarious purposes
- falsifying the history of the property to make it appear that it has a clear title when it has liens or outstanding debts on title
- fabricating a chain of title to make it look like the fraudster has a legitimate claim to the property
How Can I Protect Myself from Title Fraud?
You would think that the individuals most vulnerable to title fraud are typically first-time homebuyers, the elderly, and those unfamiliar with the real estate purchasing process. While it’s true that these groups can be more susceptible to these scams, the reality is that the risk exists for all homeowners regardless of your experience or your background.
Here are some tips for protecting yourself and your loved ones against title fraud:
- Conduct a thorough and current title search to verify ownership information before purchasing a property. It’s essential to verify the authenticity of the title deed and any other related documents. This can include searching public records and checking for liens or encumbrances and obtaining a title search from the BC Land Title Office.
- Engage a qualified real estate lawyer to handle the transfer of title and perform due diligence. Legal professionals have experience to help verify the authenticity of title documents and to protect your interests during the process.
- Keep your personal information secure to prevent fraudsters from using it to commit title fraud. That includes your social insurance number, passport information and home address.
- Regularly monitor your credit report to detect any unauthorized activity, such as the opening of a new bank account or line of credit in your name which may suggest that your financial information has been compromised.
- Purchasing title insurance from a legal professional to compensate you in case you suffer a loss due to title fraud. It’s not too late to buy a policy even if you’ve owned the property for a few years now.
- You can also apply to the land title office to physically remove the title itself, known as the ‘duplicate title’ but then you’re responsible for storing the duplicate title in a safe place, and you’ll need to re-deposit the duplicate title when you want to sell or deal with the property. If the duplicate title is removed, transactions involving the home cannot take place, however if you lose the duplicate title, you’ll have to go through a very burdensome process to replace it.
- Sign up for ‘alerts’ on Google or other search engines which will alert you if there are news about your home address. Many properties listed for sale will be published on a realty webpage, and an alert can give you advanced warning if someone tries to list your property, but this method is not fool-proof and is definitely not a replacement for title insurance which protects a lot more than just a home being fraudulently sold. For example, if a fraudster took out a mortgage and borrowed money against your home, that would likely not trigger a google alert and you may still suffer a loss.
What is the impact to innocent home buyers who purchase a home from a fraudster?
- For now, the legal impact on buyers is, surprisingly, muted. That’s because for innocent buyers who paid fair market value for their homes, their rights as homeowners will in most cases be preserved once they register on title under the current land title system known as the Torrens System. This provides certainty of ownership to buyers, as long as they were not part of the fraud, and as long as they paid a fair price their home, that they have the assurance that the home usually cannot be taken away from them just because a fraudster pretending to be the seller sold it to them. In other words, this means that registration of the buyer’s ownership provides certainty and is conclusive of their ownership rights, a concept known in law as ‘indefeasible title’ . However, this also means it’s more difficult for the original owners who are victims of fraud, to get their title back once it is registered to an innocent home purchaser.
- If the buyers paid fair and good money for the house, in most cases, they would be the ones to suffer the loss if they simply gave the house back to the seller, unless they were compensated. However, in most cases, the seller is not going to want to pay additional monies to re-purchase their own house from the innocent buyer. In theory, the Land Title Office in BC has an insurance fund known as the ‘Assurance Fund’ >which should reimburse the owners in case of property fraud. However, in practice, this route is often time consuming, cumbersome, and the owners face significant hurdles to go through the process to get fully compensated from the Assurance Fund. Buyers are encouraged to purchase private insurance known as ‘title insurance’ which will often compensate the buyers if they suffer any loss as a result of title fraud. Title insurance can be purchased through a lawyer or notary public, and provides more protection in the form of financial compensation to title insurance policy-holders affected by the fraud which could include not just individuals but also the banks who lend mortgages registered against a fraudulent title.
Can owners who are defrauded get their house back?
- going back to the concept of ‘indefeasible title’, it may be difficult for the original owners to ‘get their properties back’ as long as the buyers were not part of the fraud, and paid fair market value for the properties. Sellers could in theory re-purchase the property back from the innocent buyers with the financial compensation from title insurance, but there is no guarantee that the buyers would be willing to re-sell the house back to the seller. Of course, each case has to be looked at on a case-by-case basis, and if the buyers did in fact collude or co-operate knowingly with a fraudster to purchase the property, then the defrauded homeowner could take the matter to the BC Supreme Court, but that could still involve lawyers and potentially a trial, hence the necessity of title insurance to potentially pay for the legal expense of doing so.
Real Estate Lawyers in Richmond, British Columbia
If you suspect that you are a victim of title fraud, report to the police immediately and consult a real estate lawyer. Reinstating ownership of a property title can be time-consuming and often times, you must act quickly. At Bernard Lau & Co., we have experience to advise you on protecting yourself from title fraud. If you’d like to learn more about title fraud or would like to order title insurance, call us at 604.285.5242 or complete our contact form to arrange a consultation.
Especially in today’s rising interest rate environment, it’s not always easy to sell a house. Negotiations occasionally fall through even after a contract has been signed. Therefore, it’s essential to hire a real estate lawyer to review and draft legal documents, explain your purchase and sell agreement, look out for your best interests and represent you during the transaction. The reputable lawyers at Bernard Lau and Co. will advise you on your legal rights and obligations under the purchase agreement.
Reasons a Buyer May Withdraw from a Transaction
Buyers might back out of real estate transactions for a number of reasons, including:
- Financing problems: Unforeseen changes in buyers’ financial circumstances, like job losses or significant decreases in income, can lead to collapsing transactions.
- Property issues: During inspections, buyers may discover issues with the property. These can include structural, mechanical or environmental problems such as oil tank discoveries.
- Market conditions: Buyers may reconsider the purchase due to market conditions. For example, if the market has cooled, buyers may no longer want to purchase the property at the agreed-upon price as they may suffer from buyer’s remorse.
- Cold Feet: Buyers can get nervous about making large purchases and back out of the transaction for unrelated or unforeseeable reasons.
- Better deals: If buyers find a property they prefer to the one they’re contracted to purchase or find a similar property at a lower price, they may try to terminate the contract.
How to Protect Yourself During a Real Estate Transaction
There are a few ways sellers can protect themselves in case of or reduce the risk of collapsing transactions. They include:
Requesting a deposit
Requesting a deposit or earnest money from the buyer can protect you from potential financial losses if they back out of the transaction. You can use the deposit as compensation for costs incurred during the transaction or any losses that may arise due to the transaction falling through. You may even ask for the deposit to be paid directly to you as the seller, or ask the buyer to increase the deposit, although be careful asking for too much – too large of a deposit may not be enforceable.
Keeping detailed records
Maintain detailed records of all correspondence and transactions between you and the buyer and his realtor. These records can include emails, text messages and other forms of communication. If a dispute arises, they can help resolve the issue by giving clarity to the circumstances that precipitate a collapsing transaction and sufficient evidence may also deter a buyer from considering backing out of the transaction if it’s clear that he had no legitimate grounds for doing so but simply changed his mind.
Buyers may often try to back out of a contract by claiming that the seller was not truthful to him in describing the property by playing down certain risks or even outright lying about the condition of the property. Oftentimes, a seller’s best defence is to be honest about the state of the property and to respond truthfully if any concerns from the buyer are raised. That being said, a seller usually has no obligation to disclose absolutely everything that he knows about the property due to the principle of caveat emptor (or buyer beware). Sellers have an obligation to disclose latent material defects but it can be tricky to know what constitutes such a defect that must be disclosed. Consult with your lawyer if you are unsure about whether certain disclosures are necessary.
Contacting a lawyer
You should immediately seek legal advice if a buyer backs out of the transaction. An experienced property law lawyer can guide you through the legal process and ensure your rights are protected. They can also help you navigate the dispute resolution process and represent your interests in negotiations or court. Furthermore, they’ll identify and mitigate legal risks arising from the transaction.
Are You Looking for a Real Estate Lawyer in Richmond and Metro Vancouver, BC?
If you’re a property seller dealing with a collapsing transaction, contact Bernard Lau and Co.
Our experienced lawyers will review your purchase agreement and all communication between you and the buyer. They will explore all options to get the transaction back on track and protect your interests if it falls through.
It can be exciting when as a buyer, your offer to purchase your dream home is accepted. However, that excitement can turn into frustration, anxiety and fear if the seller changes his mind and decides no longer to hold to his end of the bargain to complete the transaction. Although there are various legal remedies available to innocent parties in collapsing transactions, figuring out what to do when a transaction fails can be exhausting, frustrating and fraught with risk. When the seller doesn’t comply with the terms of your agreement, it’s extremely important that you immediately obtain legal advice to evaluate the situation carefully before deciding on the next step. The timely hiring of a lawyer with experience handling collapsing real estate transactions can help ensure that your legal rights are protected during this critical period.
Why Would a Seller Back Out from a Transaction?
A seller might back out of a real estate transaction because they:
- changed their mind about selling the property;
- receive a better offer from another buyer;
- encounter financial difficulties preventing them from completing the sale;
- learn that the property has unexpected problems or defects they don’t want to fix, or
- have other personal reasons that prevent or discourage them from completing the sale.
How Can You Protect Your Interests During a Real Estate Transaction?
There are some general steps you can take in the event of a collapsing transaction. They include:
Reviewing the terms of the sale
Before signing the agreement, thoroughly read each page and seek legal advice from a real estate professional to safeguard your interests. Check the terms of the sale agreement to see if there are any provisions for what happens in the event of collapsing transactions. Make sure you understand the legal rights and obligations of both parties to the contract so that you’re aware of what you are entitled to, and what you are obligated to do. Reviewing the contract with a lawyer ensures that the contract reflects what you agreed on and so you won’t be caught off-guard.
How Can a Lawyer Safeguard Your Interests During a Real Estate Transaction?
Filing a lien against the Property
If you have a valid contract and you insist on purchasing the property, one of the first steps you should discuss with your lawyer is preserving the property so that it is not simply sold or transferred to somebody else. Your lawyer may advise you to file a lien known as a Certificate of Pending Litigation to freeze the property and alert other parties that the property is tied up in litigation. This can help ensure that until the dispute is resolved, the property will remain available and under the seller’s name so that hopefully, the transaction may continue in the future.
Suing for specific performance
In addition to filing a lien, you as a buyer may also ask for a remedy known as “Specific performance”. This is a remedy that a buyer may ask for when a seller refuses to complete a contract but insist that the seller carry out his performance of the contract. The idea behind the specific performance is that monetary compensation for a particular breach of the contract won’t always be sufficient. After all, if it’s your dream home, you may not be able to find a replacement so easily. However, specific performance is not easily granted so your lawyer should assess whether there are good grounds to claim this as a remedy.
Suing for damages
Damages that the buyer incurs due to the seller’s breach of contract or misrepresentation may be claimed by the buyer. Damage claims may include expenses such as closing costs associated with the failed transaction, moving and storage costs, additional property or rental costs, interest due or lost because of the breach and professional fees. Your lawyer will be able to consult you for the different types and quantum of damages that you may claim, some of which may not be so immediately obvious.
Seeking legal advice
If you’re concerned about protecting your legal rights under a collapsing transaction, seek legal advice from a qualified lawyer. They can help you understand your rights and advise you on the best actions.
Are You Looking for a Real Estate Lawyer in Richmond and Metro Vancouver, BC?
If you bought a property and are dealing with a collapsed transaction, contact us at Bernard Lau and Co.
We can advise you at every stage of the transaction, from negotiating the details of the contract of purchase and sale to settling disagreements during closing.
When buying a home, one of the most important legal steps is for your lawyer to ensure who holds title to the property. This title verification is often done by way of a title search, and can be certified by a document known as the State of Title Certificate, which is simply a certified copy of the title search. In short, property ownership, whether commercial or residential, can be proven by a title or a state of title certificate. A real estate lawyer can confirm legal ownership by conducting a title search on your behalf so that the registered owner is consistent with the name of the seller on any contract of purchase and sale for that property. Sometimes the legal name on a title search may not always correspond with that owner having beneficial ownership of the property, such as in the care of a bare trust relationship, but that is beyond the scope of this article and you should obtain independent legal advice on this issue if you have any concerns.
What Is a Title?
A title shows the legal rights of ownership of real property consisting of land and buildings on the property. In simple terms, having title often provides the title holder with a bundle of rights, including:
Conveyance rights: This refers to the transfer of title or ownership of property from one person (the seller) to another (the buyer).
Disposition or collateral rights: The title holder often has a right to refinance, gift or transfer ownership of their property to someone else.
Exclusive use: The property owner is often entitled to utilize, occupy and enjoy the property or to allow others to do the same.
Types of Title
A title can be held by one or several persons. A single owner will hold sole title. However, multiple owners who hold title to the same real property can be categorized as either joint tenancy or tenancy in common.
Joint tenancy refers to two or more individuals who hold an equal percentage of interest in a property. Their title rights are equally shared. If an owner dies, the property in many cases, will transfer to the surviving joint owners.
Tenancy in common
Tenancy in common allows two or more people to hold equal or unequal percentages of legal ownership in a property. If one tenant in common owner dies, that share passes in accordance with the deceased’s Will or under the laws of intestacy if there is no Will, rather than automatically to the other surviving owner.
A real estate lawyer can advise you on your property ownership rights and discuss with you some of your options to hold title. Remember, title can be a complicated legal issue and the name you see registered on a title search may not always equate to that individual or company actually holding the beneficial ownership of that particular property, such as in the case of a trust relationship that may not be visible in a title search. Accordingly, if you have questions or concerns about title, it is best that you consult with a legal professional to examine title on a case by case basis since each set of circumstances behind title ownership are unique.
What Is a State of Title Certificate?
A state of title certificate is a certified copy of the title usually issued by the province or the land title office. This legal document identifies the legal owner of that property. The certificate lists key identifiers, including the property’s legal description and parcel identifying number (PID), the legal owner(s) name and mailing address, and any outstanding liens or encumbrances.
Real Estate Lawyer in Richmond, BC
Bernard Lau and Co. would be happy to provide legal advice on real estate law or if you have any questions about title ownership.