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Jan 2023

Toronto Police Investigating Instances of Real Estate Fraud

What Can Homeowners do to Protect Themselves?

By Slonee Malhotra

In September we posted this article, discussing efforts in British Columbia to combat money laundering in real estate. Real estate transactions are a ripe opportunity for many fraudsters, and recently in Toronto, we have seen a new trend of real estate fraud.

In late 2021, looking for a way to help cover his expenses after moving into long-term care, a local Toronto man unwittingly rented his home out to two fraudsters. These individuals used fake identity documents and information on the lease application. These tenants were found and screened by a local Royal LePage brokerage.

Shortly after the lease started, and the new tenants supposedly moved in, an individual posed as the homeowner and hired two different real estate agents from a different local Royal LePage brokerage to list the property for sale. The property hit the market at $1.29 million.

Luckily for the homeowner, his family caught on to the scheme before the house was sold. However, the fact that the fraudsters were able to get so far into the scam before it was foiled raised concerns amid the public.

Police have confirmed that this case is directly related to another home that was fraudulently sold in Toronto a few weeks ago.[1] Those homeowners were not as lucky. They left Canada in January 2022, for work purposes, and only months later their property was sold out underneath them. The fraudsters, posing as the homeowners, also used a local real estate agent to list and sell the property.

These headlines and stories are prompting homeowners to ask themselves: “how can I prevent this from happening to me?” Here are our recommendations:

  1. Ensure that your local real estate professionals (realtors, brokers and lawyers) are conducting thorough background and identity checks. There are many ways that professionals can ensure that an individual is who they say they are. First of all, ask for two pieces of photo identification. Although this is not foolproof, it is more difficult for criminals to forge two pieces of photo identification rather than one. Further, the Province of Ontario has a free online tool for a driver’s licence check. If a driver’s licence number is fraudulent, the online tool will not recognize it. Additionally, realtors should ask sellers for an original copy of a utility bill delivered to the property in question before they enter into a listing agreement with the individual. Taking a few extra minutes at different phases of the identification process can significantly reduce the risk of unwittingly participating in these fraudulent transactions.
  2. Purchase title insurance. Title insurance is added coverage that you can purchase with your home to help protect your legal title. It is a one time premium, generally between $250 and $400 depending on purchase price. Check out this article we wrote in October to determine if title insurance is right for you. You can purchase title insurance before or after your closing.
  3. Visit the Land Registry Office. A little-known fact is that homeowners can visit a local ServiceOntario to have the Land Registry Office pull a Property Identification Number (commonly referred to as a PIN) Page. By pulling this search, one may confirm that there are no fraudulent registrations or transfers affecting a property. If there is no mortgage registered against the property (if there is, lenders would regularly perform these searches to protect their security), we recommend checking annually.

Legislative Efforts to Protect Homeowners

Canada as a whole has been on the receiving end of criticism for not doing more to prevent fraud in real estate transactions. In large part, preventing real estate fraud will need to come through legal reform. British Columbia has been in active efforts to combat real estate fraud and money laundering. In 2019, they launched the Cullen Commission, which has now made recommendations of a more rigorous identification process, such as always requiring two pieces of photo identification. Further, initiatives such as the British Columbia Land Owner Transparency registry are seeking to bring additional transparency to the ownership of land. Although the Cullen Commission has no jurisdiction here in Ontario, we are hopeful that Ontario legislatures will follow its example.

If you are looking for more information on how to protect your home, contact one of our qualified real estate lawyers today.

[1] Both of these cases are under active investigation and Toronto police are asking for the public’s assistance. Anyone with information is urged to contact the Toronto Police at 416-808-7310 or Crime Stoppers if you wish to remain anonymous.