Don Cayo
Sun

Canada‘s establishment bankers have come up with a way for consumers and businesses to protect themselves from fraudsters who deal at Money Mart or other cheque-cashing companies that don’t belong to the Canadian Payments Association.

The problem, as regular readers will know, is that when someone cashes a legally stopped cheque at Money Mart — and this seems to happen a lot — the company often sues the issuer of the cheque, not the casher. This is true even in cases of obvious fraud, as in the frequent scenario where a scammer pretends to lose a cheque, then cashes both the original and the replacement.

As noted in previous columns, the Bills of Exchange Act, which is more than a century old, does include an arcane provision for “crossed cheques” that, in theory, offer some protection.

In law, crossing a cheque by drawing two parallel lines across the face of it means that only the recipient can cash it. In fact, this law is so little understood in Canada — though the practice is routine in places like the U.K. and Australia — that this is generally impractical. The lines are often misunderstood. They’re thought to void the cheque, not limit the cashing options so a third-party cheque-cashing company like Money Mart can’t sue the issuer if it’s rash enough to accept a properly stopped cheque.

Thus many people won’t accept such cheques, and tellers at many mainstream institutions don’t know enough to process them for payment.

In addition, the Canadian Payments Association, which represents banks, credit unions and trust companies, worries that the parallel lines could interfere with the electronic scanners that handle virtually all cheques these days. So I can see why it discourages crossed cheques, though I’d still advocate them if there weren’t a workable alternative.

Fortunately, however, there is a workable alternative.

True to its word, the CPA has taken this issue seriously since my first columns on the subject. On Thursday Roger Dowdall, the association’s vice-president of communications and education, wrote to me with a solution.

Dowdall cites a section of that same old Bills of Exchange Act that says, “When a bill (legalese for a cheque) contains words prohibiting transfer, or indicating an intention that it should not be transferable, it is valid between the parties thereto, but it is not transferable.”

He suggests writing “for deposit to the account of the named Payee only” or similar words on the face of any cheque you’re concerned about — for example, a post-dated cheque for work not done yet, or a payment to someone you don’t know very well.

“The phrase could be written on the memo line of the cheque, or at the top middle of the cheque (i.e. between the account holder’s information that is normally in the upper-left corner and the date, which is in the upper-right corner), provided that it does not interfere with any key information on the cheque, such as the name of the Payee, the amount, the date, etc.

“This wording would be clearly understood by all parties, and would therefore avoid the potential confusion resulting from crossing cheques.

“Financial institutions have reviewed this option and agree it is much more workable than crossing cheques would be.”

Dowdall’s solution is in line with what a number of readers have suggested over the months I’ve been writing about this issue. I did pass on some of those suggestions, though a bit timidly because I am neither a banker nor a lawyer and I didn’t know if any of these wordings had been legally vetted or tested in court.

I suppose a court challenge of Dowdall’s wording could still lie ahead. But if this solution is good enough for his group’s corporate members, it’s good enough for me. So that’s the wording that’ll I’ll use on the handful of cheques I write to strangers or limited acquaintances each year.

In fact, I see no reason why this phrase can’t be printed on my cheque blanks next time I pick up a new batch.

Meanwhile, there’s still every reason for MPs of every stripe to support the private member’s bill put forward two weeks ago by Vancouver East MP Libby Davies. It would put an end to Money Mart’s ability to routinely pursue people who are already victims rather than the scammers who victimized them.

While I hope and trust that businesses and consumers who see this column will take the recommended steps to protect themselves, it’s unreasonable to assume that the practice will be universally — or even widely — adopted any time soon. So Davies’s amendment will be needed for a long time to come.

© The Vancouver Sun 2008

Sun

It’s hard to imagine someone stealing your home. How would the thief load it into the getaway van?

It’s easier than you might think — so easy, in fact, that the number of cases is climbing.

It happened recently to Norman Gettel. As Vancouver Sun reporter Gillian Shaw explained last week, Gettel learned he no longer owned his Richmond bungalow when his tax bill failed to show up as usual.

A call to the B.C. Assessment Authority confirmed that he was no longer the registered owner and, to make matters worse, the land titles office advised that the new owner had put a $400,000 mortgage on his paid-off home, assessed last July at more than $600,000.

The mortgage is in default and CIBC Mortgages Inc. has demanded payment in full — $403,034.95 plus interest of $53.18 a day and legal cost of $375 — or it will “enforce its security” on the property.

Gettel, who is in his 70s and suffers from lung disease, has paid his lawyer $10,000 and the case is not yet in court. If and when it gets there, a happy outcome is not guaranteed. A B.C. Supreme Court decision in an unrelated case restored fraudulently transferred title to the true owner but it allowed the fraudulently obtained mortgages to stand.

When we raised the alarm about real estate fraud in an editorial about this time last year, we were inundated with calls from lawyers and realtors extolling the virtues of B.C.’s Torrens System of Land Registration, its indefeasibility of title, and comprehensive registry, which purportedly protects homeowners from exactly the situation Gettel finds himself.

There’s nothing inherently wrong with the system, which processes 14 million applications a year and keeps track of owners and lenders efficiently enough. But it cannot detect fraud, a deficiency exacerbated by electronic filing.

It’s instructive to note that the Land Title Survey Authority has paid out through the Land Title Assurance Fund just $389,000 in the past 18 years to settle two claims arising from fraud. The Financial Institutions Commission of B.C. requires one of the leading title insurance underwriters to reserve $4 million for title insurance policies written in the province. Clearly, title insurance protects homeowners; just as clearly, the assurance fund does not.

The one-time premium for title insurance up to a principal of $500,000 with one mortgage is $229, with increments of $1 per $1,000 above that amount, according to a quote one insurance company calculated for us. For this insignificant sum, Gettel could not only have protected his title without the expense of a lawyer, but the outstanding mortgage would have become the insurance company’s problem, rather than his. The insurer either settles with the lender or takes over litigation at no cost or inconvenience to the insured.

Title insurance may even prevent crime. From 2004 to 2007, one title insurance company refused more than $8 million in transactions because it suspected fraud. So far this year, it has turned down $3.5 million worth of deals.

Many lawyers in B.C. actively discourage homebuyers from buying title insurance, but wouldn’t think of waiving fire, theft and liability insurance. Their motives are difficult to understand.

Title and mortgage fraud are easy crimes to commit. Title insurance is inexpensive piece of mind. It should be part of every homebuyer’s protection package.

© The Vancouver Sun 2008

 

Gillian Shaw
Sun

British Columbia homeowners are being warned to check their property title to ensure their property hasn’t been transferred to con artists who then register hundreds of thousands of dollars in mortgage debt against them.

This comes as B.C.’s land title authority is reviewing a system that could see someone fraudulently obtain title to a home and then resell it to an innocent third party, leaving the original homeowners with financial compensation but potentially driven out of their homes.

“We are currently looking at whether or not there are reforms that can be brought into play so at the end of the day the right thing occurs,” said Godfrey Archbold, president and chief executive officer of BC’s Land Title and Survey Authority.

While current fraudulent transfers uncovered in the province have been stopped before the property was resold, Archbold said as the law stands, if a property were to be resold, the new buyer would be entitled to take possession and the original owner would have to seek compensation from the land title assurance fund.

That happened in B.C. in a case where two people owned a home jointly, and one successfully sold it without the other’s knowledge. The victim was compensated from the assurance fund, but didn’t get the property back.

Archbold said the reforms are being looked at for cases in which the facts around the ownership of a property suggest a long-term relationship or a sentimental value.

“If you have only owned a home for six months, the prospect of financial compensation doesn’t bring the same burden,” he said.

The authority is also reviewing a recent B.C. Supreme Court decision that could leave the assurance fund on the hook for mortgages obtained on properties that were fraudulently transferred.

In a rec sent decision, the court ruled that a property be transferred back to the rightful owner, but it said the mortgages taken out by the fraud artist still stand and the owner had to seek compensation from the assurance fund.

Archbold said property owners can safeguard their titles by simply ordering a duplicate.

“You can apply, under the Land Title Act, and obtain a duplicate certificate of the title,” he said. “You get a paper copy of the title which you should hold in safekeeping, and we put a note on that title that a duplicate has been issued.

“That means any time anybody wanted to have any kind of change made to the title — whether we receive an application to transfer, or a mortgage — the duplicate has to be surrendered.

“That gives a person comfort that we are not going to do anything to that title until the duplicate is surrendered.”

A lawyer, notary or real estate agent can obtain such a duplicate, but this would cost homeowners about $50, in addition to any professional fees.

Property owners can also have their lawyers or notaries place an alert on their title so they are informed of any transaction, but that only comes after the transaction has occurred and so it wouldn’t block a fraudulent transfer.

In the wake of news that con artists operating in the province have successfully sold homes without the owners’ knowledge, BCAA Insurance advised consumers Monday to take steps to guard against losing money and the title to their homes.

There has been a dramatic rise in suspicious cases in B.C., according to First Canadian Title, underwriter for the title insurance sold by the BCAA.

Susan Leslie, vice-president of legal, claims and underwriting for First Canadian, said from 2004 to 2007, said the underwriter declined to insure $8.5 million in suspicious cases in B.C. So far this year it has declined almost half that, $3.5 million.

Title insurance with First Canadian comes with a one-time premium that varies with the price of the property. Even when the title transfer and mortgage are fraudulent, Leslie said the owner has to go to some trouble to get it reversed and there have been cases where financial institutions have tried to get the victim to pay off the fraudulently obtained mortgage.

“The owner still needs to hire a lawyer, needs to go to the land title survey authority. They still need to take the steps to rectify their title.

“If a lender has put a mortgage on the property, that lender is not going to walk away from their mortgage,” she said.

“[The victims] are right legally, but that doesn’t save them the cost of the fight.”

© The Vancouver Sun 2008

 

Be realistic about what you can afford, where you are willing to live

MARIA COOTAUCO
Province

Get pre-approved for financing

Real estate in Vancouver. The notion is enough to send a chill down a consumer’s spine. From the well-heeled buyer looking for the next lucrative investment opportunity to a young couple looking to make t h e g i a n t l e a p f r o m t h e precipice of renting, hunting for real estate can be a stressful experience.

This long weekend, whether you’re pounding the pavement in search of a Yaletown loft with exposed brick or a Commercial Drive townhouse with two parking spots, here are six homebuying tips from Gary Friend, a builder and real estate agent based in Surrey:

“We’re all dreamers,” Friend said. “Buyers think they know what they want and what it costs. And of course it’s expensive in Vancouver and they spend a lot of time looking in the wrong price range.”

The price range will inevitably affect your area, so be realistic, he says.

“We all want to live in the nicest neighbourhood but price may not say we have that choice,” Friend said.

Knowing what you can afford will help you to narrow your search on feasible options.

Location, location

“Decide,” Friend said simply. “Pick three different locations in your budget. Until you wear those out, that’s all you do.”

Do you want to live in a condominium overlooking the water or in a townhouse close to the transit system?

Your decision on where to live should be contingent on your needs and wants, not price alone.

And if you’re looking into a new home, look for reputable builders in the area, either those who belong to an organization like the Greater Vancouver Home Builders’ Association or those who have been around for years. Make lists, Friend suggests. Stay organized.

Look at your options

You probably won’t make a bigger purchase in your life, so do justice to your decision and explore all avenues.

“A house is unique,” Friend said. “When you drive down a street with a house with a white picket fence and blue trim, there’s only one like that on that street on that day. If you’re buying a Chevy, there’s a car dealer in every city. You can go anywhere and look at the same car. There’s more emotion in a home than a car because there’s less choice.”

Buyer’s remorse is more difficult to navigate when it’s in the scope of a house, so be informed about the market as best you can.

Give yourself time

“Make sure that you take enough time to shop around,” Friend said. “You need to work hard in this kind of market because it’s so busy and good prices are hard to find. You need need to work hard at it.”

Going house hunting every once in a while for a quick look won’t cut it, Friend says.

For his first-time buyers, Friend says he wears clients out by showing them three houses that they may not even like just so they know why they picked the house they did like.

“Then what happens is you feel more comfortable when you have to sign your life away on your mortgage,” he said.

Choose your neighbourhood carefully

“You have to feel good when you walk up to the house,” Friend said. “I’ve shown houses to lots of people and they go because of the price, but you can tell as they walk in that they don’t even like the street.”

If you can feel good about your neighbourhood and it’s in your price range, even though it may not be your dream spot, you are in a good situation, Friend says.

Start looking now

If you are serious about buying a home, there’s no time like now to start looking, Friend says.

Years ago, there were some months better than others to house-hunt, but it’s no longer the case. So, get out there are start hunting for your dream home.

“Today, there’s no month better than any other,” Friend said. “It’s more important how much time you spend whenever you start to do the process.”

Fiona Anderson
Sun

B.C. drug dealers and other criminals will have a tougher time disposing of their ill-gotten gains as new federal anti-money-laundering legislation cracks down on real estate purchases and currency exchange operations.

The new law, which will be in force Monday, also adds other rules aimed at hindering the disposal of large amounts of cash.

Realtors will have to take more steps to ensure they know who they are dealing with. They will also need to hang on to information identifying their clients for five years.

“We know organized crime buys houses and they buy houses on a regular basis,” said Ken Fraser, executive director of investigations with the Financial Institutions Commission of B.C.

Some purchases are made to carry out more illegal activity, such as marijuana-growing operations and amphetamine labs, Fraser said. Others are aimed at laundering the money to turn proceeds of crime into a legitimate asset.

To date, those purchases have often been made using fake identification, Fraser said.

“It’s not that onerous to assume another identity and purchase property,” he said.

In many cases the person listed on the title doesn’t even know his name has been used, he added.

Under the new rules, realtors have “to ensure the person they are dealing with is the person whose ID is produced,” Fraser said.

Last November, police in B.C. froze $6 million worth of real estate they claim was owned by Yong Long Ye, the alleged mastermind behind a drug syndicate charged with importing thousands of kilograms of cocaine from the United States and supplying local methamphetamine and ecstasy labs with ingredients. At the time of Ye’s arrest, police declared they had “chopped the head off the snake.”

Most of the properties were not in Ye’s name, and police would not say how they had traced the homes back to Ye.

Under the new rules, tracing ownership should be easier, said Peter Lamey, a spokesman for the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC), the organization that collects reports on suspicious transactions.

Real estate is especially vulnerable to money laundering, Lamey said. And requiring realtors to identify their clients will help deter that.

Currency exchanges and money transfer operations — but not cheque cashing companies — are also targeted in the new legislation. Starting Monday, money-services businesses will have to be registered with FINTRAC and will have to make sure that people depositing cash have a legitimate business to support the deposits, said Kim Marsh, managing director of the Vancouver office of IPSA International, Inc., a company that helps others comply with anti-money laundering legislation.

In the past, a person could deposit cash using fake ID and by saying he had a car wash, Marsh said. Now money-services businesses will have to be satisfied that the story, and the ID, are real.

The point is to prevent people from depositing large amounts of cash from crime, he said. And in B.C. that means money from drug trafficking and growing operations.

“Grow-ops generate huge amounts of cash,” Marsh said. “And [the criminals] have to get that cash into the system. If they can get it into an MSB [money-services business] who can get it into a bank account, they’re halfway there.”

Marsh advises companies to ask for lots of documents. A particularly useful one to request is a credit report “because that’s a hard thing to generate,” he said.

“If you don’t have a credit history that’s a huge red flag.”

People will complain, and some will ignore the law, Marsh said.

“And then we’ll be reading about them in the paper some time down the road.”

The new rules — which have been adopted to bring Canada in line with international standards set by the Financial Action Task Force created by the Group of Seven industrialized countries in the early 1990s — also now require companies to report attempted suspicious transactions in which an individual aborts a transaction that would otherwise have to be reported.

© The Vancouver Sun 2008

Richmond man can’t pay property taxes because he doesn’t legally own his house

Gillian Shaw
Sun

When the annual assessment for Norman Gettel’s home didn’t arrive in the mail this year, he phoned the BC Assessment Authority.

“They said, ‘You don’t own the property any more,’ ” said Gettel, a printer who retired from his job at Pacific Press in the late 1990s, a few years after he had paid off the mortgage on his Richmond bungalow.

“I went to the land titles office. They pulled it up and said, ‘You don’t own the property any more.’

“I said, ‘I hate to differ with you, but I didn’t sell it.’ “

The title told a different story.

According to the property documents, not only had Gettel sold his property, assessed at $600,000-plus last July, but the buyer had also immediately put a $400,000 mortgage from CIBC on it.

The buyer never showed up to claim the property.

The mortgage, at $2,600 a month, is in default, and Gettel can’t even pay his property taxes because, according to legal records, he doesn’t own the place.

So far Gettel, who is in his 70s and suffers from chronic obstructive pulmonary disease, has paid his lawyer $10,000, and the case hasn’t even made it to court, although Gettel’s lawyer has filed a notice of pending litigation.

It’s all part of an elaborate scheme that has surfaced recently in B.C. in which con artists are attempting to sell homes without the owner’s knowledge, leaving the homeowner off the title but with hundreds of thousands in new mortgage debt against the property.

In the latest variation of the scheme in B.C., a would-be seller contacts a notary or lawyer to carry out the sale of a home.

A buyer, who is thought to be in on the deal, applies for a mortgage on the property and if the transfer is successfully carried out, the mortgage funds are paid to the seller. The buyer and seller disappear and so does the money, often leaving the homeowner to discover the ruse only when the bank notices the mortgage payments aren’t being made and comes looking for its money.

While such fraud is not new, title insurance company First Canadian Title said B.C. has seen a jump in suspicious cases this year. And a B.C. Supreme Court decision this month ruled that while a true owner could regain title to a property if it was fraudulently transferred, mortgages taken out on the property — even if fraudulently obtained — still stand.

In that case, a plaintiff asked for restoration of title, which had been fraudulently transferred to an imposter. The plaintiff also sought the removal of two mortgages placed by the fraudster against the property.

The court directed land titles to issue a new title reflecting the plaintiff’s ownership. However, it dismissed the plaintiff’s action seeking cancellation of mortgages.

The latest cases have prompted an alert from the Law Society of B.C. to its members.

“As far as I’m aware there have been two or three attempts in B.C. in the recent past to perpetrate frauds of this nature and our notice was to be proactive in raising the awareness of the profession so lawyers could play a role in stopping the attempted frauds,” said Susan Forbes, director of insurance with the Law Society.

“In the cases we have recently become aware of, the fraud is happening at the level where there is an actual transfer of title; it is not simply a mortgage. A fraudster is posing as an owner and conveying the property to another, who is a partner in the fraud.”

Gettel has been told someone claiming to be him showed up at a Surrey law office to sign the property transfer papers.

The property transfer lists the market value of his home at $607,600.

The next line, “consideration” — the transfer price — reads: “$1.00 AND NATURAL LOVE AND AFFECTION.”

The person listed as the buyer, Oleg Balan, took out a $400,000 mortgage on the property, but that appears to be the last the bank heard of him.

Gettel received a copy of a lawyer’s letter to Balan dated Feb. 1, 2008, in which a lawyer for CIBC Mortgages Inc. demanded payment in full of $403,034.95 plus interest at $53.18 a day plus legal expenses of $375. The letter gave notice that CIBC Mortgages “intends to enforce its security” on Balan’s property.

CIBC spokesman Rob McLeod said the CIBC is in contact with Gettel’s lawyer and no foreclosure proceedings have been commenced or are currently contemplated. He said the RCMP is aware of the file.

Such schemes constitute a lucrative sideline to identity theft and have been carried out in other parts of Canada. A 90-year-old Ontario man ended up in court with a bank demanding he pay the $300,000 mortgage that fraud artists had taken out on his property, which was sold without his knowledge. A court eventually ruled that he didn’t owe the money.

Balan’s name has also surfaced in the sale of a Vancouver home that was recently blocked when real estate lawyer Ron Usher doubted its authenticity. In that case, another man was listed as the buyer, but the mortgage proceeds were to be paid to a company, VP Custom Trading Inc., that lists Balan as a director.

A man phoned Usher recently asking if he would act for his father on the sale of the family home. The father arrived at Usher’s office with all the details of a $665,000 offer on his east Vancouver home, for which he said he had received a $66,500 deposit.

His client gave him a phone number, but Usher checked the address of the property and called the house.

“I’m Ron Usher, the lawyer acting on the sale of your house,” Usher said, recounting the conversation. “He said, ‘I’m not selling, and who are you?’ “

The perpetrators had filed a change of address with the post office to intercept mail linked to the fraudulent dealings.

The would-be buyer in that case also turned up as the buyer of a Burnaby property that land title records show was sold recently for $565,000. The buyer got a $518,670 mortgage on the property.

The BC Land Title and Survey Authority put a caveat on the property title after the notary who witnessed the seller’s signature on the deal notified the authority she has been told by police the person who signed the deal was not the true owner.

Gettel’s case also included instructions to the postal service to have mail redirected to a Burnaby address.

Gettel said he went to Richmond RCMP when he found out about the redirected mail, but said he was told it wasn’t something the police would look into. He said he has since talked to Richmond RCMP about his case.

Sgt. Susan Green, of the B.C. RCMP’s commercial crime section in Surrey, said the RCMP can’t release any information about specific investigations.

Ian Smith, director of land titles for B.C. and registrar in the Land Title and Survey Authority’s New Westminster land title office, said such cases are very rare in B.C., but there had been several similar attempts in 2003 and 2004. This year there have been about five others that appear linked to the same perpetrators.

Smith said B.C. has safeguards in place to protect property owners from title and mortgage fraud.

He said B.C. property owners are protected through an assurance fund that compensates them if they are deprived of their title either because of an error in the administration of the land title system or through identify theft and fraud.

“With respect to the mortgage, if it was proved that it was a fraudulent mortgage as well, the bank would be left holding the bag.”

Usher also said he doesn’t know of any cases where the victims lost money in paying off mortgages that were fraudulently obtained.

“I have never seen anybody in all these cases in Ontario — and certainly I’ve never heard of it here — basically an innocent owner having to pay the mortgage of the fraudster.

“It gets solved in some way. What the lawyers are arguing about here is what is the right process.”

© The Vancouver Sun 2008

 

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Tony Gioventu
Province

Dear Condo Smarts: We are in a divided strata of a highrise and a commercial division. Several years ago, we voted to create sections so that the costs that were allocated exclusively to each section would be fairly divided.

In March, the residential owners were voting on a bylaw that would limit rentals to a maximum of five units. Several commercial-section owners registered their votes and voted against the resolution, preventing us from adopting a rental- limitation bylaw.

We lost the vote by one. Can you please explain to us why the commercial section has a right to dictate to the residential section how owners use their strata lots ?

— JWV, Vancouver Island

To understand sections you have to understand the legal authority of a strata corporation.

The Strata Act says that a strata corporation has the power and capacity of a natural person of full capacity. In simple terms, a strata corporation can buy or sell property, mortgage, lease, commence lawsuits, create bylaws and enter into contracts for service or operations, like any normal person.

A section is a corporation and has the same powers and duties as the strata corporation. So a section can do all of the same things, but only those that apply to that section. This also means sections can create their own bylaws that only apply to their section, such as your rental-restriction bylaws, and only that section votes on those bylaws.

The commercial section did not have voting authority at the special general meeting of the residential section as it only applied to the residential section.

Furthermore, when I reviewed your documents and minutes, I discovered each commercial strata lot was counted as one vote, but on the registered strata plan, all of the commercial strata lots have less than one vote, in most cases .49 votes. Therefore, the commercial section did not represent enough votes to defeat your resolution.

Commercial strata lots may have fewer or greater than one vote per strata lot as their voting is based on the relevant area of their strata lot.

Always seek legal advice when creating or amending rules or bylaws that pertain to sections.

Tony Gioventu is executive director of the Condominium Home Owners Association.

E-mail him at [email protected]

© The Vancouver Province 2008

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