Title fraud occurs where an imposter sells or refinances your home without your knowledge. The question then becomes: if it happens without your knowledge, how can you protect yourself?
We see it in the media, “Impersonators posing as homeowners linked to 32 property fraud cases in Ontario and B.C”1. Unfortunately, this is nothing new, it is getting worse, and the current media coverage serves as an important reminder that it can happen to you too.
Let me introduce you to your Title fraud security blanket—Title insurance.
Title insurance protects you against losses related to your property’s Title (which is the legal term referring to your legal ownership of a property). Coverage includes Title fraud protection.
Title insurance was first introduced in Ontario in the 1990s, and since then has become a crucial component of many real estate transactions. It started gaining popularity in the early 2000s, with an estimated 95% of real estate transactions being title insured by 2010.2 However, it is important to note that Title insurance is not mandatory, instead your lawyer can provide a Title opinion which does not protect against the risks of fraud.
There are two broad types of policies: an owner policy and a lender policy. A lender policy is often a condition of mortgage financing and is usually the only policy purchased on a refinancing. The lender policy only protects the lender’s interest in the property.
Imagine you are the victim of Title fraud where you have an outstanding mortgage on title from a refinancing. The fraudsters have sold your home from underneath you or placed a mortgage on title without your knowledge. You purchased your home without title insurance, but on the refinancing, your lender required title insurance to protect its’ interests. The lender policy will only help the lender recover their interest; it will be up to you to recover your Title. This process is stressful, time consuming, and expensive.
Now imagine, in the same fraud scenario, you do have an owner policy for your home. The owner policy didn’t prevent the fraud from occurring, but your insurer does everything that is needed to recover title. Title insurers have the experience and expertise, and the insurer covers all the costs.
If you purchased your home prior to the 1990s, you would not have Title insurance. Even if you refinanced recently, it is not a common practice to add an existing owner policy at the same time. But it does not mean you have to be at risk forever. Although it is more common to purchase Title insurance at the same time you purchase your home, you can buy an existing owner policy at any time for a one-time fee.
Interested? Consider speaking with a lawyer about purchasing an existing owner policy today.
Laura McFalls practices with the Siskinds Real Estate Law department. If you have questions about this article or any other real estate questions, please email laura.mcfalls@siskinds.com or call 519.660.2061.
2 Title insurance – Separating fact from fiction – practicePRO