Aug 1 | 2017

Is Your Cottage or Investment Property Vulnerable to Fraud?

Posted by:

Is your cottage or investment property vulnerable to fraud?While people may see the value of getting title insurance for their homes, it is equally important to title insure any property you own – a cottage, summer home or even an investment.

Fraudsters may target properties that appear vacant or are rented out, especially ones that are mortgage free, and can either illegally transfer the deed to themselves and sell it out from under you or take out a mortgage on it and escape with the proceeds.

In one instance, a young man decided to use some of his savings and invest in real estate. He purchased an investment property for $204,500.00, as well as an FCT homeowner title insurance policy. Two years after the purchase, he received a notice stating that the mortgage was in default and that the lender would be taking possession of the property. Confused, he went to a lawyer as he knew that his mortgage was in good standing. An investigation revealed that though the man’s original mortgage was not discharged, the title was fraudulently transferred from the insured homeowner and a mortgage in the amount of $165,000 had been registered on the title. Mortgage funds were paid to the fraudster, who was now nowhere to be found.

Luckily for the young man, he was protected by an FCT title insurance policy. We coordinated and retained a lawyer on his behalf, and ultimately paid out $12,548.09 in legal fees to remove the fraudulent mortgage from title and rightfully transfer title back. The young man was able to keep his investment property, while being spared the time, expense and hassle of having to defend himself against the fraud.

While it’s not feasible to prevent fraud from taking place, the easiest way to protect yourself is to purchase title insurance. It will ensure that you are able to defend and retain the title to your property without experiencing all the stress and the costs associated with it, in addition to protecting you from a host of other title and non-title issues.

Have any questions about fraud protection? Share it with us in the comments section!

Jul 21 | 2017

What We Can Learn From Toronto-Dominion Bank v. Currie

Posted by:

What we can learn about fraud from Toronto-Dominion Bank v. CurrieTo what extent will a private lender be bound by the actions of a mortgage broker working on its behalf?  Will Canadian courts deem the broker to be an agent of the lender?  Will this apply even to fraud committed by the broker?  Earlier this year, in the case of Toronto-Dominion Bank v. Currie, the Alberta Court of Appeal issued a decision on precisely these questions.

Currie was a private lender who used a mortgage broker, Fuoco, to handle some aspects of his mortgage lending business.  In this case, Fuoco arranged for Currie to lend $220,000 to the Craigs, and Currie provided them with a mortgage for their property.  The mortgage instructions stated that all communications regarding the mortgage were to be directed to “DAN CURRIE c/o Fuoco Holdings Ltd.”

Following a default on the mortgage, the Craigs arranged new financing with TD Canada Trust.  The bank’s lawyer wrote to Fuoco requesting a payout statement for Craig’s mortgage.  Fuoco prepared a payout statement for Currie to sign, showing a balance owing of $249,992.55.  For reasons that are not clear from the court’s judgment, Fuoco did not provide this figure to the bank’s lawyer, but instead provided a different payout statement, showing only $75,000.00 as being outstanding, and directing the payout funds be made payable to Fuoco.  Upon closing, the bank’s lawyer sent this amount to Fuoco, who escaped with the funds, never having provided a discharge of the mortgage.

The Court of Appeal had to decide which of the two innocent parties, Currie or the bank, should bear the cost of Fuoco’s fraud.  The Court concluded that, by using Fuoco’s services in his lending business, and allowing Fuoco to receive communications and prepare mortgage payout statements on his behalf, Currie had given Fuoco actual authority to act as his agent, and therefore it was Currie who had to bear the loss resulting from Fuoco’s dishonesty.

This case highlights some important considerations for mortgagees and their lawyers.  When acting for an incoming lender, lawyers should always ensure that they purchase title insurance.  What looks like a valid payout statement or discharge could later be challenged by the previous mortgagee itself. Even if, as in Currie’s case, the new mortgagee is ultimately successful, there can be considerable time and money spent on litigation.  Lawyers should also consider adopting the practice of insisting on having an executed discharge from any outgoing private lender in hand prior to closing.  This is already standard practice in some parts of Canada, and goes a long way toward reducing confusion and risk following closing.

While in this case, it was the mortgage broker who committed the fraud, there are other cases in which it was the lawyer or even the borrower. There are measures that brokers and borrowers can also take to ensure they are not involved in a fraudulent transaction.

Mortgage brokers can protect themselves from fraudsters by verifying all the information provided by their clients. For instance, it is a red flag if their salary doesn’t make sense for their stated occupation. Borrowers can ensure that they purchase title insurance so that their legal costs will be covered if they ever have to defend their title. It will also protect them from a host of other issues such as survey or title defects.

Everyone involved in a real estate transaction has the responsibility to protect themselves from fraud.

How do you make sure that you’re protected? Share it with us in the comments section!

Jun 28 | 2017

Strata Plan vs Title Insurance: Which One Do You Really Need?

Posted by:

Strata plan vs title insuranceDarren* applied to change the use of his commercial condo unit to a medical one, but his request was denied. He was told by the municipality that the site plan agreement had not been complied with as the condo corporation required another 97 parking spaces to be added. The municipality then issued a Notice of Violation of the Site Plan Agreement due to the lack of parking spaces. The condo corporation has to decide whether it will add the parking to comply or try to change this requirement in the site plan agreement. This may mean an increase in common expenses or a special assessment to be paid by Darren and the other unit owners. Because Darren had a commercial title insurance policy from FCT, we are paying for the legal costs to defend him in dealing with the Notice of Violation.

In Darren’s case, the Site Plan Agreement would have needed to be compared with the Strata Plan to make sure they matched. However, having a strata plan would have provided no protection as it would not have covered his legal expenses or potential loss of value to his property if he can’t use it as he planned to.

A strata or condominium plan, like a survey, is created by a surveyor and it documents unit sizes and structures as well as what is common and exclusive use property. It also includes any parking or lockers that are part of the unit. However, if there’s an error in the strata plan or the structure does not match the plans – it’s the owner who may be responsible for part or all of the costs associated with remedying the issue.

A legal professional can provide an opinion on title based on the accuracy of information provided to them and an up-to-date or existing strata plan or survey. However, without a title insurance policy, a strata plan by itself offers no protection for the property owner or legal professional in case of incorrect information or discrepancies.

With an FCT title insurance policy, we protect both the legal professional and owner by providing loss of value coverage, duty to defend, funds to fix most municipal enforcements, fraud protection and more. It benefits lawyers by shifting the risk and liability associated with the title and strata/condo plan to us. Our condo endorsement also covers lack of disclosure in a Status Certificate, if the condo corporation has not been properly created and it results in a title defect. A Status Certificate is not always necessary for a loan policy depending on the insured amount.

While both a strata plan and title insurance are important in a condo or bare land purchase, choosing the one that offers you more protection is a safe bet!

*Name has been changed to protect the privacy of the individual.

Jun 16 | 2017

Title Insurance: What Every Homeowner Needs to Know

Posted by:

Title Insurance: What every homeowner needs to knowYou combed through websites, apps, maybe even the papers and visited dozens of places until finally! You found the perfect house! Your biggest achievement, your biggest asset – how do you keep it safe? Or like in this case, how can you even make sure that it’s all yours?

Before you purchased your home, the property may have changed hands several times leaving room for mistakes like an incorrect survey, a non-existent permit or title-related issues. Even with a new build, somewhere along the way there may have been an error that could affect your ability to sell, mortgage, or lease your property in the future. These are the types of things that a title insurance policy can protect you against.

What exactly is title insurance?

Title insurance is a unique form of insurance. Unlike home insurance where you are insuring the structure and contents, title insurance protects you, the homeowner, against losses related to the title (ownership) and other defects relating to your property. Plus, it may cover fixing issues or legally defending your ownership, which can be very costly and stressful.

Do you automatically get a title insurance policy when you purchase property?

It’s a common misconception that homeowners automatically get a residential title insurance policy when buying property. While a lender policy is required on every purchase, a homeowner policy is not. It’s up to you to make sure that you have the protection available to you through title insurance.

Does the lender or loan policy cover you?

No, a lender aka loan policy covers lenders only  and protects their interests when it comes to priority and enforceability of your mortgage, title and survey defects, municipal issues and title fraud.

What does a homeowner title insurance policy cover?

A typical title insurance policy covers common issues that may have happened both before and after you’ve purchased your home. This is sometimes referred to as pre- and post-policy because the day you take ownership of your home is generally also the effective date of the policy.

The main areas of coverage in the Homeowner Policy are:

  • Fraud — a person fraudulently transfers your property without your knowledge or consent.
  • Forgery — someone forges your signature on a registered document, which allows them to sell or mortgage your property.
  • Encroachments — if a structure built by a previous owner sits outside the property’s boundaries or if a neighbour builds a structure that is partially on your property after you purchase your policy.
  • Lack of building permits — if a previous owner completed work to your property without the required building permits, you could be forced by your municipality to remove or fix the structure.
  • Duty to defend — if you have to protect and restore your title as a result of a covered title risk, FCT will pay for the legal fees and costs associated with it.

How much does a policy cost?

  • For a low one-time premium, you can ensure that you have the protection you need for as long as you own your home. Your lawyer can provide you with a quote within minutes.

Don’t put yourself at risk. For a free quote, visit fct.ca today!

This is provided as general information only. For further details regarding coverage, please review your policy.

 

May 31 | 2017

Does Your Client Really Need Title Insurance?

Posted by:

Does your client need title insuranceThe topic of title insurance may come up when clients are purchasing a new property, and a common question is, “do I really need it?”

Well, title insurance in Canada has come a long way from when we first introduced it to the market over 25 years ago. It offers the best defense against title fraud, as well as survey and title issues/defects. It can also protect your clients from unexpected costs that may threaten their financial status.

For instance, Jason and June* finally found their dream home after years of saving and searching for the right property. Once financing was approved, they happily moved into their newly purchased home. Shortly after moving in, they received a notice from the city about outstanding tax and water utility charges amounting to over two thousand dollars. This was a very unwelcome surprise given their tight budget as first-time homebuyers. Luckily their lawyer had recommended they purchase a title insurance policy, which covered outstanding tax and utility bills. Because of their title insurance coverage, they were spared the extra expense when the claim was paid out by FCT.

Commercial property owners also benefit from protecting their multi-million dollar investments with title insurance as it covers issues like encroachments, zoning violations, unpaid taxes and utilities, etc. For example, a developer Jack*, purchased a golf course with plans to develop it into a larger golf course and resort. The municipality provided confirmation that the land could be developed for these purposes. Unfortunately, after closing, he was notified by the municipality that there was an error and the land was zoned as “open space/residential” and applying for re-zoning was not an option. As a result, the land could continue to be used as is but development plans could not proceed. Because FCT had insured the value of the land along with the approximate value with the improvements, Jack received a claim settlement for the loss in property value because of the zoning error. With the claim settled, he had the choice to use the property in keeping with current zoning, or sell the property without incurring a financial loss.

So does your client really need title insurance? You decide.

*Names have been changed to protect the privacy of our clients. This information is provided as general information only. For further details please review the subject policy.

Apr 19 | 2017

How can you Mitigate Real Estate Fraud?

Posted by:

real estate fraudMortgage fraud has quickly become the fastest growing crime in North America, most often affecting the institutions that lend money to individuals purchasing property.

The most common form of mortgage fraud involves fraudsters who acquire property and then artificially increase its value through a series of sales between themselves and an accomplice. A mortgage is then secured on the property based on the falsely inflated price.

FCT is dedicated to helping our valued lending partners protect themselves against losses inflicted by fraudsters. Since 2012, FCT has identified more than $401 million in suspicious mortgage transactions. A title insurance lender policy from FCT provides the ultimate protection and allows a financial institution:

  • the ability to protect its financial interests
  • to safeguard its reputation and business by easily mitigating risk associated with claims

We have created a list of fraud flags and tips to help you mitigate your risk of becoming a victim of mortgage fraud. Whether you are a bank branch lender, credit union lender, a mortgage broker or a mortgage specialist, these tips can help inform you of what to look for when processing a mortgage transaction.

For more information about how to protect you and your customers against mortgage fraud, please visit www.fct.ca or contact your dedicated Business Development Manager.

Mar 7 | 2017

What You Need to Know About Real Estate Fraud

Posted by:

Real estate and legal professionals need to stay vigilant as criminals are getting craftier with real estate fraud today. We take fraud seriously at FCT and strive to combat it at every step in the process. We have a certified fraud examiner on staff specializing in early detection and protection. We also underwrite for it in our policies, and we defend our clients who fall victim to it.

March is fraud prevention month, so we’ve included a round-up of the real-estate scams to look out for:

  • Title fraud and forgery: The ownership or title of a property is fraudulently changed or documents are forged to allow a fraudster to illegally sell or refinance the property.
  • Mortgage fraud: A mortgage is obtained from a lender under false pretenses. This is also known as application fraud.
  • Value fraud: A lender is led to believe a property is worth more than it really is through conceareal estate fraudlment or intentional misrepresentation of the property’s attributes and value.
  • Foreclosure Fraud: A homeowner in default on their mortgage is deceived into transferring their property title either in exchange for a loan or for assistance with their mortgage. The fraudster imposes payments that are not sustainable for the homeowner and they end up losing their property and equity along with it. The homeowner’s payments are not used to pay off the mortgage and the fraudster can resell or remortgage the home.
  • Shadow flipping: A realtor or investor sells the same property multiple times at increasing prices before the initial sale closing date. The initial seller ends up making less while the last buyer pays an inflated value for the property.

While you cannot prevent fraud from occurring, you can protect yourselves and your clients by carefully reviewing the details of all your deals and by following our recommended best practices.

The best way to protect against title fraud is to get both an owner and lender title insurance policy from FCT.

With a title insurance policy, owners can rest easy knowing their title will be defended in the event it is ever challenged* and they will be protected from other issues like survey and title defects. Lenders will be protected against losses associated with the priority and enforceability of the mortgage, title and survey defects, municipal issues as well as title fraud. Lawyers can rest easy knowing that all parties are protected and FCT has their back in the event of fraud.

Have you come across any fraudulent transactions lately? Tell us about it in the comments section below!

* Insurance by FCT Insurance Company Ltd. This material is intended to provide general information only. For specific coverage and exclusions, refer to the applicable policy. Copies are available upon request.  Some products/services may vary by province. Prices and products/services offered are subject to change without notice.

Jan 26 | 2017

Fraud is Alive and Well in B.C.

Posted by:

Fraud in B.C.I am sure by now many of you have read the Fraud alert: Notices to the Profession published by the Law Society of B.C.  And for those of you who have not, click here for the link.

So as a legal professional, what can you do to protect yourself and your clients from the devastating effects of fraud?  In addition to the tips provided in the Law Society’s publication, as an expert in detecting and deterring fraudulent real estate transactions, FCT has compiled a list of best practices to assist in avoiding fraud:

1. Whether you are acting for a vendor or borrower, always insist that the balance of the proceeds are made payable to the registered owners after payment of secured creditors, taxes, legal fees, bank loans, credit cards, etc. and not to third parties. If the borrower or vendor owes money to a third party that does not appear to be related to this transaction, they can deposit the balance of the proceeds into their bank account and cut their own cheques. In most fraudulent transactions, funds are made payable to third parties, which allow the fraudsters to quickly negotiate the funds and disappear.

2. Be wary of very quick closings where you do not know or have never acted for your clients.  Most fraudsters go to solicitors/notaries who do not know them and hope to pull off the fraud quickly.

3. Question transactions being signed under Power of Attorney.  Why is the Power of Attorney being used and can you contact the Donor?  Review the Power of Attorney carefully.

4. Read your lender client’s mortgage instructions carefully and ensure you comply with their fraud requirements.

5. Get title insurance for both your lender and purchaser clients in order to protect them from the devastating effects of title fraud.

If you didn’t have the opportunity to attend one of our fraud seminars, you can still view it online and obtain CPD credits, by clicking here.

Have you come across any fraudulent transactions recently? Please share your stories with us.

Oct 13 | 2016

Need a leader you can count on for faster, more confident closings?

Posted by:

Commercial real estateIn Canadian real estate circles, FCT has long been recognized for its key role in pioneering the Canadian title insurance industry.

Over the last 25 years, we’ve made it our goal to invest in the success of our customers by investing in the industry itself. Through the development and implementation of innovative solutions that evolve along with a constantly changing industry and customer needs, we continue to fulfill our mission to make transactions simple and secure. This is especially true in commercial real estate where deals tend to be far more complex and multi-faceted compared to residential real estate. Streamlining the process and providing the best coverage available allows all parties to close more confidently while protecting these types of investments.

To hear what some of our commercial customers are saying about working with FCT, I invite you to take a few minutes and watch this short testimonial video of first-hand accounts.

After listening to the wonderful things these professionals have to say, it isn’t hard to see why we have a 94% rating when it comes to customer satisfaction; an invaluable illustration that speaks volumes about the loyalty shown to us by our commercial customers. It is for these customers that we live our motto of Experience Excellence® each and every day, and why we are here to underwrite the risks inherent to complicated commercial transactions. With world-class underwriting done by a team of in-house legal professionals who work on a case-by-case basis, we can offer the utmost in customized protection.

With FCT as your partner, known defects don’t have to equal unknown delays or lost deals.

Do you have a commercial transaction ready to go? Let us show you why we’re the industry leader.

Sep 14 | 2016

How Pat Chetcuti helped write the story of Canada’s title insurance industry

Posted by:

Pat ChecutiDetermined is a good way to describe FCT’s current president and former COO, Patrick Chetcuti, who just happens to be the focus of one of the latest editions of the EXPERT/ease feature: Family comes first.

Since joining FCT in 1992, Pat’s people-first leadership style has been instrumental in launching title insurance in Canada and leading the evolution of the FCT we know today. A CAAMP Mortgage Hall of Famer, Pat’s passion for providing a customer and employee experience that exceeds expectations is what has set FCT apart as both an employer and a service provider.

Pat’s inspirational story which highlights the importance of setting precedents rather than looking back at them, is a tale generations in the making, and proof positive that with an undeterred spirit that makes the most of connections — both family and business — anything is possible.

Do you know another trailblazer thinking differently in the industry today? If so, tell us a bit of their story by commenting below.