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Title fraud – how mortgage-free seniors can become a target

Fred Weekley, the mayor of the district of Katepwa Beach in Saskatchewan, remembers the sunny October day in 2013 when a staff member alerted him to an unusual fax.

A title transfer firm wanted a land description of his home on Katepwa Lake, a resort community about 100 kilometres east of Regina in the Qu'Appelle Valley.

When Mr. Weekley called the Vancouver-based company to inquire why, he was told his house had been sold and that the title was about to be transferred to its new owner. As he puts it, he became "unglued," as the home he'd shared with his wife for 15 years had never been put on the market.

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A former senior financial planner, Mr. Weekley suspected a fraudulent title transfer was in the works. He quickly placed calls to his lawyer, the bank that held the line of credit against his home, the country's two credit-reporting bureaus so that fraud alerts could be placed on his accounts, and the RCMP (which he says to this day hasn't returned calls). He also talked to the provincial land title office, which told him all that's required to execute a transfer of title is to have a letter with the owner's signature on it that's been notarized.

Mr. Weekley says he was fortunate to have averted the fraud – which he thinks began with identity theft.

"You can very easily be in real trouble," Mr. Weekley says. "You don't even know what's happened until the truck pulls up with the new owner's stuff. It can be really, really disastrous. … What do you do? You're 60 or 70 years old and your house has been taken and you have to get out. It's a frightening thing."

According to the Financial Consumer Agency of Canada, title fraud can happen in one of two ways. With identity theft, fraudsters can use stolen or fake identification or documents to pretend to be a homeowner and obtain one or more mortgages on the property, then walk away with the cash. Fraudsters can also register forged documents to discharge any existing mortgages then transfer the property to themselves and register a new mortgage against the property's clear title, pocketing the proceeds.

Statistics don't exist when it comes to the annual number of all instances of real-estate fraud but estimates of damages range from $400-million to $1.5-billion in Canada annually, according to First Canadian Title, a title insurance company. In 2013 alone, the firm declined to insure a mortgage twice a week based on the suspicion of fraud; the average mortgage was $360,000.

"We have been tracking and reporting trends in real estate fraud for many years and last year we noted an increasing number of frauds against older homeowners," says Lori Sartor, FCT vice-president of residential solutions.

"Over the last number of years it has become more common. Unfortunately, fraudsters have been successful in some cases, and they're getting smarter. When we see fraud, whether it's with seniors or not, some of them are very, very intricate and quite well-thought-out with multiple parties involved.

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"For people who've been in their home for longer than 20 years," she adds, "they can't understand why anyone would ever do this."

Ms. Sartor can cite many examples of attempted deals: the FCT underwriting team recently refused a transaction for a $500,000 mortgage on a rented Toronto property that had free and clear title where the "borrower" was 98 years old and the mortgage was negotiated by someone identifying themselves as a "relative."

Then there was the case of an elderly woman who bought a condo, also in Toronto, in 2012 with the proceeds from the sale of her home. She rented the unit to a young man who left after five months. Shortly thereafter the owner began receiving notices of default on a loan from a company from which she'd never previously heard. She subsequently discovered that her former tenant had impersonated her and put a mortgage of more than $200,000 on her condo.

Older adults are particularly at risk of title fraud for several reasons. For starters, they're far more likely than their younger counterparts to own their home outright. Although it happened to Mr. Weekley, who had a line of credit on his home, property with quiet, long-standing titles are more easily abused than those with recent or frequent title activity, explains Graham Webb, staff litigation lawyer at the Toronto-based Advocacy Centre for the Elderly.

"The existence of a charge, mortgage or other registered encumbrance on real property diminishes the value of the asset and makes it a less desirable object of financial abuse," Mr. Webb says. "The high incidence of mortgage-free real property ownership makes older adults a gold mine for those who are prone to commit financial abuse."

Then there are other factors that leave seniors vulnerable just as with other types of fraud: medical conditions that might lead to diminished mental capacity; lack of familiarity with computerized documents; and isolation. Older adults living with a spouse or partner are less likely to be abused than those who are single or widowed and living alone, Mr. Webb says, adding that older women are at an even higher risk of all forms of financial abuse, including title fraud, than men.

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Another contributing factor is the use of power of attorney for property. "Power of attorney abuse is so prevalent and harmful that it is rightly called a licence to steal. Older adults owning mortgage-free real property are prone to giving powers of attorney to ensure proper financial planning in the event of mental or physical incapacity. It is not at all surprising that in a small number of these cases the powers of attorney given are in fact used to commit title fraud without the knowledge of the older adult."

Title fraud can be difficult to prevent, but to avoid it, never sign documents you don't understand or when you're feeling pressured, Mr. Webb says. The Financial Consumer Agency of Canada suggests checking with your provincial land registry office to ensure that the title of your home is in your name and reviewing your credit report regularly to make sure the information is correct. Purchasing title insurance is also worth considering, Mr. Webb says.

"Although the incidence of title fraud is rare, the consequences can be devastating and the cost is well worth while."

Prices vary from province to province and company to company, but Ms. Sartor says one-time premiums typically start at around $350.

The FCAC urges anyone who's a victim of real estate fraud to contact the Canadian Anti-Fraud Centre, the police, the country's two credit-reporting agencies (Equifax and TransUnion), your bank, and your provincial land registry office. Mr. Webb also suggests getting legal advice from someone you trust and hire yourself.

According to FCT, which recently launched a website called Retire Your Home to give people more information about title fraud, Toronto, Calgary, Vancouver and Montreal have higher rates of fraud. However, as Mr. Weekley can attest, anyone in the country is at risk. He figures his home was targeted because the value of lakefront properties in Saskatchewan has risen greatly lately.

"People need to be aware that title fraud is out there," he says. "I wouldn't say it's rampant, but it's there. They can steal the house from you."

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