Legal Remedies for Victims of Real Estate Fraud in Canada

Owning a property is a significant part of the Canadian dream. Sadly, fraud cases have increased as real estate values surged over the past five years, especially in Canada’s major cities. 

For instance, criminals may impersonate homeowners to sell their properties and keep the proceeds they unlawfully obtained. In 2023, mortgage and title fraudsters, posing as homeowners and tenants, targeted at least 32 properties in Ontario and British Columbia. 

Real estate fraud can result in substantial financial losses. As a victim, you may discover the loss of homeownership and additional mortgages on your credit report taken out in your name. 

Such situations can be daunting after investing your life savings to purchase your first property. In this article, learn available legal remedies and steps you can take after falling victim to real estate fraud. 

Understanding Real Estate Fraud and Its Common Types

Homes are usually the most significant assets individuals will acquire in their lifetime, making fraud a prominent concern in the real estate industry. 

Real estate fraud involves criminal activities aimed at stealing your home or property. Generally, it can happen when individuals or agencies give false information to conduct fraudulent real estate transactions. 

Fraud in real estate comes in different forms. Understanding each type can help safeguard your dream purchase, preventing it from turning into a nightmare and causing significant financial losses. 

Title fraud

Title fraud occurs when a con artist steals the ownership or title of one’s property to sell it or acquire a new mortgage. Most victims are either mortgage-free or have little remaining debt on the property. 

This type of real estate fraud begins with identity theft, where the fraudster assumes the owner’s identity using stolen personal information. Your identity can be stolen in different ways without your knowledge. But con artists usually use the following methods to commit identity theft and title fraud: 

• Stealing the owner’s purse or wallet
• Pretending to be a legitimate website to deceive online visitors
• Using fake job offers to collect personal information from candidates
• Utilizing a data storage device to capture information during a merchant or ATM transaction
• Searching for the personal information you share online 

Mortgage fraud 

Mortgage fraud happens when someone deliberately misrepresents or withholds information on a mortgage application. Its goal is to obtain ownership of a property or a more expensive one for which they would not otherwise qualify. This real estate fraud can be carried out by the following: 

• Owners of the property 
• Individuals buying the property
• Those who pretend to be the property’s owner

Most victims of mortgage fraud are the financial institutions providing the financing. Sometimes, the broker may falsify documents to secure loan approvals. The owner may only be aware that the home they bought was beyond their means once they struggle to meet payment obligations. 

Foreclosure fraud 

Foreclosure fraud often occurs when you encounter difficulties in making your mortgage payments. In a near foreclosure situation, fraudsters will seize the opportunity to offer you non-traditional financing to consolidate debts or cover expenses. 

In exchange for the loan, the scammers may request upfront fees and require you to transfer the property title to them. They may also manipulate you to submit a statutory declaration, giving them a right on the estate. 

The consequences are severe: the fraudsters can sell the property or re-mortgage it and leave with the proceeds. In the end, you may lose the property and remain in debt. 

Legal Remedies Available for Canadian Real Estate Fraud Victims

Falling victim to real estate fraud can be devastating. Thankfully, legal remedies are available for those who have experienced such deceptive practices in real estate transactions. 

The remedies accessible to victims depend on whether the corresponding fraud is a civil or criminal offence. Below, we’ll discuss what constitutes civil or criminal fraud causes and the differences in the enforceability of remedies between the two. 

Civil fraud cases

Civil fraud entails a private legal dispute between two parties, commonly involving a victim and a perpetrator. 

A civil fraud case arises when an individual deliberately misrepresents information or omits an important fact to deceive another person, causing them harm. Establishing fraud in court can be challenging. It requires the victim to demonstrate every element of fraud. 

The Supreme Court of Canada, in the case of Bruno Appliance and Furniture Inc. v. Hyrniak, identified the elements of civil fraud: 

• There’s a false representation by the defendant. 
• The defendant knew about the false representation, either through recklessness or knowledge.
• The false representation prompted the plaintiff to act. 
• The plaintiff or individual claiming fraud experienced some form of harm. 

Typical remedies available to victims of civil fraud include compensation and rescission. 

Compensation in civil fraud cases seeks to reimburse the losses the victim experienced from a fraudulent act. But unlike other civil wrongs, the compensation isn’t restricted to foreseeable losses at the time of the fraudulent act. The losses can be monetary and non-monetary. 

That means the person legally responsible for the fraud could be held liable for the direct losses the victim suffered, regardless of whether they are reasonably predictable. 

Another common legal remedy in civil fraud cases is rescission. It enables a party to cancel or terminate the agreement on a contract because of the other party’s material breach or misrepresentation. This legal remedy reverses the deal that was established on a fraudulent transaction.

Criminal fraud cases

Conversely, criminal fraud is a public legal matter. It’s considered a criminal offence under the Canadian Criminal Code. Section 380 (1) of the Code provides the legal definition of criminal fraud. 

In summary, a person using deception by any means, whether for personal gain or to cause harm, can face serious criminal charges. Typical examples of criminal fraud encompass general offences or those specific to categories of misconduct, such as the following: 

• Theft by pretense
• Insurance fraud
• Forgery
• Bank fraud 

The legal consequences of criminal fraud include fines and imprisonment. 

For fraud cases where the total value of fraud is below $5,000, the punishment ranges up to a maximum of two years in prison. It can go up to 14 years in jail if the case exceeds $5,000. Meanwhile, fraud involving more than one million dollars carries a minimum sentence of two years. 

The remedy often granted to victims of criminal fraud cases is a restitution order. It requires the offender to repay the fraud victim for the financial losses they suffered due to the criminal offence. 

After a restitution order is issued in a criminal case, it’s the victim’s responsibility to enforce it. CBC investigations have shown how complex, expensive, and time-consuming the process of enforcing a restitution order. Victims often carry the burden of recouping their losses. 

How Diamond and Diamond Law Firm Can Help

Fraudulent schemes in real estate are prevalent across Canada. Although legal remedies exist, retrieving your money, discharging the mortgage, and regaining the equity in your home can be challenging. Therefore, you must learn to protect yourself from the onset. 

Ensure you obtain proper legal guidance from a reliable law firm when dealing with any real estate transaction. An experienced Diamond and Diamond real estate lawyer can help you secure a legally sound deal. Contact us today for further assistance with your real estate matters. 

Seek legal counsel for your real estate transactions at Diamond and Diamond Law. 

FAQs on Real Estate Fraud

What signs of potential fraud should I watch in a real estate transaction?

Recognizing the signs of potential fraud can help you spot and prevent them. Watch out for the following warning signs in your real estate transactions: 

• Resistance to publicly listing or advising the property. 
• Demand for a quick deal without adequate time for due diligence. 
• The purchase price significantly exceeds recent transfers of similar property.
• Utility companies have no record of the vendor owning the home. 

How can you shield yourself from real estate fraud?

Whether purchasing, selling, or investing in property, it’s crucial to understand how to take preventive measures against real estate fraud risks. Here are some of the most essential steps you can take: 

• Confirm the identities of the parties you engaged in a transaction. 
• Ensure the documents are original before signing or paying anything. 
• Work with licensed professionals when seeking a mortgage. 
• Perform a land title search with your provincial or territorial land registry office. 
• Research any company or individual offering you a mortgage loan. 
• Seek legal advice before delegating authority over your home or assets.
• Buy title insurance for protection against losses due to potential fraud losses. 

Why should you hire a lawyer for your real estate transactions? 

Staying informed and vigilant is crucial as various types of real estate fraud become more prevalent. Although optional, hiring a lawyer can help protect your interest and minimize the risk of becoming a victim of fraudulent activities in real estate transactions.