Unfortunately, in January of 2022, this was a reality for two Toronto homeowners who were away on an extended business trip and returned home to discover their property was sold to new owners. While the homeowners were away, two fraudsters impersonated the homeowners, obtained fake IDs, hired a real estate agent, and sold the home to new owners. Those new owners took possession, and the true homeowners did not find out about the fraudulent transaction until they returned home months later.
Real estate agents, sales persons, brokers, and lawyers among other professionals and entities, are required to authenticate and record the personal information of their clients. Despite these requirements, individuals may still find themselves victim of these fraudulent schemes.
In a similar case, Reviczky v. Meleknia et al., 88 O.R. (3d) 699, a fraudster posed as Mr. Reviczky's (the owner of the property) relative and acted pursuant to a fictitious power of attorney to sell the property to a purchaser, who was another victim of the fraud. Mr. Reviczky brought an application against the innocent purchaser and the HSBC Bank. The innocent purchaser conceded that his interest in the property was defeasible. However, the bank maintained that it had a valid and enforceable mortgage on the property.
The court found that the doctrine of deferred indefeasibility is consistent with key provisions of the Land Titles Act and is preferable to the other doctrine of immediate deferability. Under this theory, the party acquiring an interest in land from the party responsible from the fraud is vulnerable to a claim from the true owner because the intermediate owner had the opportunity to avoid the fraud. In summary, the court held that (i) evidence that a party dealt with a fraudster establishes that the party had an opportunity to avoid the fraud, and (ii) having an opportunity to avoid the fraud makes the party's interest in land defeasible in favour of the true owner.
In this case, the bank knew that the person purporting to sell the property was acting pursuant to a power of attorney and had the means of protecting its interests in this circumstance. The solicitor acting for the bank did nothing to scrutinize the power of attorney, which would have likely led to avoid the fraud. As a result, the court found that the bank's charge was not valid.
One of the best ways that a homeowner can protect themselves from something like this is by purchasing title insurance, which typically includes protection against forgery, fraud, and impersonation.
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