Legal Options Available to Victims of Real Estate Fraud in Ontario
Real estate fraud in Ontario generally includes “mortgage fraud” (e.g. fraudsters acquire a mortgage fraudulently through false information or identification and run away with the money, leaving the true home owners with a significant liability) and “title fraud” (e.g. fraudsters use stolen identity or forged documents to transfer a registered owner’s title to him or herself without the owner’s knowledge).
If you are a victim of real estate fraud, there are a number of legal options which may be available to you.
Title Insurance Coverage:
First, you might be able to make a claim to your title insurance company under your policy. Have a lawyer review your policy to determine whether your claim would be eligible for coverage. Claims should be in writing and include your policy number, contact information, and all relevant documents related to your claim. Claims should be submitted as soon as reasonably possible. If your claim is covered, then the title insurance company may (depending on the policy):
* pay your actual loss and out-of-pocket expenses;
* pay the amount required under the policy;
* prosecute or defend a legal proceeding related to the claim (and pay for doing so);
* negotiate a settlement of any claim; and
* pay for rent until you can live on the property or the claim is settled.
It is important to note that, once your title insurance company assumes the claim, your rights are transferred and you will generally have no recourse against that company for failing to pursue your rights or if amounts are not recovered.
Second, if coverage under your title insurance is not available, you may be able to sue the alleged fraudsters in civil court for, where applicable, deceit, conspiracy, and unjust enrichment (among other things). To establish deceit, there must be proof of fraud as demonstrated by a false representation made knowingly, without belief in its truth, or recklessly and carelessly as to whether it is true or false. The motive of the alleged fraudsters is immaterial. If two or more fraudsters are involved, then the tort of conspiracy by unlawful means may apply. Here, there must be an agreement or combination between two or more persons, a predominant intention to injure you (or unlawful conduct which the fraudsters knew would likely result in injury to you), and actual injury or damages suffered by you. Finally, a claim for unjust enrichment may be available. An unjust enrichment exists where there has been an enrichment or conferral of a benefit to the fraudsters, coupled with a corresponding deprivation to you, and no juristic reason for that enrichment. If a court finds that wrongs have been committed it may, among other things, award damages and legal costs and rectify title to the rightful owner.
Third, you may consider contacting the police to have them lay charges against the fraudsters and prosecute them in criminal court. Where applicable, the police may charge the fraudsters with fraud, criminal theft, forgery, uttering forged documents, and possession of property obtained by crime. These are all very serious charges, all of which carry maximum penalties of up to 10 years imprisonment (with the exception of fraud, which carries a prison term of up to 14 years in certain cases).
Fraud under the land registration statutes:
Fourth, real estate fraud offences committed under the Land Titles Act, R.S.O. 1990, c. L.5 or the Registry Act, R.S.O. 1990, c. R.20 carry fines of up to $50,000 for individuals ($250,000 for corporations) or imprisonment of up to 2 years, or both. A court imposing such penalties may also order the fraudster to pay compensation or make restitution.
Ontario Land Titles Assurance Fund:
Finally, the Ontario Land Titles Assurance Fund (“LTAF”) is a government fund designed to compensate people for certain financial losses due to real estate fraud. There are currently two procedural tracks that apply to claims made to the LTAF: (1) the traditional process for claims arising before October 19, 2006 and (2) a new earlier payment process for claims arising on or after October 19, 2006. October 19, 2006 is simply the date that new amendments were introduced to the Land Titles Act which created the two-track system.
In cases of fraud that allegedly occurred before October 19, 2006, the traditional process must be followed. Here, the LTAF can only be turned to as a fund of last resort. The LTAF can cover clear financial losses and reasonable legal fees where a judgment has already been made and/or rectification has been ordered. To be eligible to apply to the LTAF, you must commence your claim within 6 years of the date of the alleged fraud. There are a number of rules concerning eligibility, such as the requirement that you must have tried other avenues (e.g. criminal, civil, title insurance, etc.) to rectify the fraud before applying to the LTAF. You will not be entitled to recover out of the LTAF if (among other things) your negligence caused or contributed to the loss or if you knowingly participated or colluded in the fraud. After a claim is made, it will be assigned to a hearings officer for investigation. You may be asked for additional info or documentation to help clarify the claim. If compensation is not paid out directly, hearings may be held by the Director of Titles to determine if you have met the requirements for compensation and how much you will be paid. You will be notified of the Tribunal’s decision in writing. That decision can be appealed to the Superior Court of Justice within 30 days after the date of mailing of the Tribunal’s decision; in the event of no appeal, no further action will be taken by the Tribunal pending the outcome of the court process.
For frauds that allegedly occurred on or after October 19, 2006, the new earlier payment process is available. This process is available to homeowners and individuals who are purchasers, in good faith and for valuable consideration of land used for residential purposes. Importantly, this new process new makes the LTAF a fund of first resort for eligible fraud victims where the loss is not covered under a policy of title insurance. This means that applicants no longer need to pursue their loss through other means (e.g. civil, criminal, etc.) prior to being entitled to compensation from the LTAF. Straightforward cases can be resolved (and title rectified) within 90 days of being reported where there is no court action and all parties are cooperating.
Remember: if you believe you are a victim of real estate fraud, contact a lawyer immediately to discuss your options.
ABOUT THE AUTHOR: Michael Carabash, B.A., LL.B., M.B.A.
Dynamic Lawyers Ltd. was founded by Michael Carabash, a Toronto business lawyer with Carabash Law. Virtually everyone has a wide range of legal issues they need help with - such as writing a will, fighting a traffic ticket, buying or selling real estate, writing a contract for services, reviewing a lease agreement, having documents notarized or commissioned, dealing with a motor vehicle accident, etc. Michael wanted ordinary people in need of common legal services to be able to conveniently and cost-effectively get answers and quotes from local lawyers. At the same time, he also wanted lawyers to be able to market their services directly and effectively to the public.
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Disclaimer: While every effort has been made to ensure the accuracy of this publication, it is not intended to provide legal advice as individual situations will differ and should be discussed with an expert and/or lawyer. For specific technical or legal advice on the information provided and related topics, please contact the author.