Organized Crime and An Organized Sale

Documenting the parabolic rise of real estate fraud and what can be done to show it the door

If you’ve watched the news lately, you’ll have seen the reports of fraudulent home sales all around the Greater Toronto Area (GTA). It’s no surprise these types of stories show up in our media. They’re astounding. They’re unheard of. Frankly, they leave most (including this author) questioning how on earth something like this could possibly happen. We would need to look back to January 2022 when homeowners who had taken an extended business trip had come back to find that their house had been sold without their knowledge or consent.

This undoubtedly sounds like a nightmare due to the sheer scope of the crime. But is it worth stressing over as a homeowner or someone who is thinking of entering the housing market? Not necessarily – provided the lawyers conducting the sale act in an organized fashion and obtain title insurance, you should be able to sleep safe and sound. Before we dive into the legal side, let’s take a brief look at the history of the organized crime of fraudulent house sales and mortgages.

Fraud on the Rise

Only a year ago now, a victim of this type of fraud was told to simply, “move on.[1]” But now that CBC has found that at least 30 homes in the GTA have been sold or mortgaged without the owner’s prior knowledge and consent, it seems this is an issue the average person shouldn’t just move on from. Indeed, it’s even more important because this “move on” mindset is something that the fraudsters committing the offences are banking on.

The scheme itself to fraudulently sell or mortgage the property isn’t all too complicated. As CBC detailed, it generally starts with the crime group canvassing certain types of properties (like ones without a mortgage) as targets.[2] Next, there will be people who stand-in as the homeowners, complete with forged identification, to fool the lawyers and real estate agents into thinking it’s a legal transaction.

In the current economic climate of low wages, high housing costs, and inflation following each and every Canadian it would be ill-advised to think this will go away without outside intervention. While lawyers have specific protocols in place to ensure no transactions are done with forged identifications, the general bar is doing your best in the situation. With the level of sophistication in forging these groups are showing, it is likely that more extensive and technical screening procedures will be needed in the future.

A Title Defense

After hearing about the ins and outs of this type of scheme, you might be left feeling pretty helpless. Thankfully, the answer stares real estate lawyers in the face on nearly every real estate transaction. That answer, of course, is title insurance. In these instances, if the lawyer representing the buyer or seller obtains title insurance as part of the standard course of the transaction, both the real owner and the buyer should be protected for losses. The true owner will get their home back and the unsuspecting buyer will be given their money back. Title insurance, while not required in Ontario, is an often-purchased insurance policy to offer protection against a variety of title-related losses in the transaction. Things like liens, fraud, and errors in surveys are all covered in a title insurance policy after the insurance company reviews the transaction. At a price around $200 to $500, title insurance is all but a guarantee in the current real estate environment.

But with the rise of title and mortgage fraud, it leaves us wondering if it is the title insurer that should be footing the bill. While fraud is one of the aspects of their coverage that buyers pay for, it might be a more equitable solution for the government to bulk up identification verification methods for lawyers and banks alike. With title insurance companies losing about $200 million since late 2019 and cases of fraud continuing to rise, we wonder if this will be another cost passed onto the consumer through higher insurance rates. With the  ball firmly in the Ontario government’s court, we will await their response on this issue that often finds its way to the headlines.

~To discuss any concerns you might have about your real estate transaction, please feel free to reach out and we’ll be happy to help!~

[1] John Lancaster, Nicole Brockbank, Farrah Merali, Jan 23, 2023, https://www.cbc.ca/news/canada/toronto/organized-crime-groups-behind-gta-home-sales-mortgages-without-owners-knowledge-1.6719978, accessed Jan 24, 2023.

[2] Ibid.