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Last week's Title Page column, in which I compared Ontario's proposed solution
to the title theft problem with recent legislation in British Columbia, has
produced a storm of reader reaction, most of it passionate.
About half of the many emails I received favour the B.C. solution, which allows
ownership to remain with an innocent purchaser, and the other half support
Ontario's proposal that would restore a stolen title to the owner who lost it.
Toronto lawyer Morris Sosnovitch says that the Ontario government is playing
with fire if it proceeds with the solution it is proposing.
"I think that it is clear that the Ontario proposal of punishing innocent buyers
is clearly the worse choice," he wrote.
"The flip side to a law which would restore title to an innocent owner who has
been defrauded is that virtually no one will be able to say with certainty that
they own their home. It does not matter how many years you have lived there and
how much money you may have put into it, one day someone could knock on your
door and tell you to leave.
"A home, which generally represents the largest monetary investment and always
represents the largest emotional item which a person owns, is not comparable to
a car or coin collection. The current system by which a buyer can rely on the
accuracy of the Land Titles system to know that their deed is valid has to
remain intact."
Ed Huth of Orangeville suggested that the solutions might differ depending on
whether an innocent new owner was able to take possession of the home. "After
all, possession is nine-tenths of the law," he wrote. If an innocent new owner
shows up with a moving truck when the existing owner is still in possession,
ownership should be restored to the original owner, Huth suggested.
From Midhurst, Ont., Erik J. Spek noted that the lenders are too trusting of the
documents they receive in the mortgage application process. He wrote, "I guess
if I was a fraudster, I would be quite happy with either the B.C. or Ontario
approach."
Yvonne Powell was highly critical of the B.C. solution, which awards ownership
to an innocent buyer over a long-time owner so that the public can have
confidence in the land titles system. If that's the case, she wrote (quoting
Charles Dickens), "the law is a (sic) ass."
Another reader, R.S. Tse, emailed to say, "Laws must protect 1) the innocent
existing owner, and 2) the innocent buyer, and in that priority."
Bob Lyeo of Toronto was critical of the B.C. solution. "Justice," he wrote,
"means that people do not lose their property due to crime if they don't have
to, and they especially do not lose their property even if the legal
system/government feel that it is easier that they do lose it."
"It seems inherently wrong," he added, "that a person should lose their
previously lawfully owned property due to fraud. It seems even more twisted to
me that a fraudulent transaction can be recognized as legal by a government (as
it now is in B.C.)."
Wayne Whitehorn mused that clever real estate lawyers should be able to complete
a title search that would uncover "shallow" real estate frauds, and when they
don't, they should be made liable for the innocent purchaser's loss.
Bob Skene agreed with this view. "In my opinion, the lawyer handling the
transaction should be held responsible," he wrote, adding, "Let's see a higher
fee for a house purchase but let's make certain the due diligence is full and
complete."
My response to Whitehorn and Skene is that real estate lawyers are generally
aware of many indicators or "flags" of a fraudulent transaction. The Law Society
is actively involved in educating real estate lawyers about fraud, but it's not
usually possible for a purchaser's lawyer to detect if the seller, who has his
or her own lawyer, is a fraudster using bogus ID.
At last count, there are about 105 lawyers being investigated by the Law Society
for involvement in mortgage fraud, and nine more has been disbarred or suspended
recently as a result of participation in mortgage frauds.
This compares to about 8,000 Ontario lawyers whose practice includes real estate
law. It is important to note that many of the society's investigations may not
result in any charges at all, and none of the 105 lawyers has yet been found
guilty of any misconduct.
Rosemary Pauer, from Bramalea, agrees with the Ontario government proposal. "It
seems to me," she wrote, "that the system which restores title to the original,
wronged, owners is the best one. To lose one's home must be absolutely
devastating... Homes involve more than dollars and cents. They contain lives,
joys and sorrows and it is an emotional loss, not just financial."
Joyce Hubel agreed. "Thank God for Gerry Phillips and the Ontario government in
this matter...Why should I have to hire lawyers to try to get some reimbursement
for something that is mine?"
Civil libertarians might have a problem with an idea proposed by Charles
Boampong, who suggested that banks, real estate agents and lawyers retain
fingerprints of the innocent owner and the innocent purchaser on file. "This,"
he wrote, "would serve as a deterrent to the title fraudster and protect the
innocent owner and innocent buyer."
One final note from my colleague Alan Silverstein. Last week I wrote that there
was no compensation fund for buyers of stolen cars. In fact, wrote Silverstein,
there is a fund, maintained not by the government but by the car dealers
themselves. Compensation through the Motor Vehicle Dealers Compensation Fund is
limited to $15,000 and is subject to other tight restrictions.
More information on the fund is available at
http://www.omvic.on.ca/compfund.htm.
Bob Aaron is a Toronto real estate lawyer. He can be reached by email
at bob@aaron.ca, phone 416-364-9366 or fax
416-364-3818. Visit the column archives at
http://www.aaron.ca. |
