Purchasing a home is one of the most important investments a person will undertake in their lifetime. In making that investment the homeowner expects to have full use and enjoyment out of that property, free from any unforeseen problems or defects. This is not always the case, as homeowners can be affected by many issues which can cause them financial loss or limit their ability to realize the full value of their homes.

• Defective title or someone else owning an interest in the insured�s title
• Forgery of an instrument by which someone else claims to own an interest in or have a lien on the insured�s title. This provision provides coverage against losses from many forms of title fraud.
• Forced removal of all or part of an existing structure due to survey defects such as encroachments and set back violations
• Lack of a legal right of pedestrian and vehicular access
• Defective registration of a title instrument
• Liens arising from mortgages, judgments or condominium charges
• Builder liens
• Existing work orders
• Rights of possession arising from leases, options, family law or homestead rights
• Forced removal of all or part of an existing structure due to zoning non-compliance
• Claims for adverse possession
• Realty tax arrears
• Utility arrears (to the extent they have the ability to form a lien against title)

Coverage is provided to the extent that these risks exist as the date of policy, but are unknown by the insured. Certain covered title risks, such as the aforementioned forgery coverage, are also covered post policy date. Please contact Stewart Title for a copy of a sample residential owner policy for full details.

At Stewart Title, we have been contacted by homeowners attempting to make a claim. They purchased a lender policy, but elected not to buy an owner policy, at the time of closing. Regrettably, we must inform them that, as a homeowner, they are not covered by a lender policy and that they should have purchased their own policy at the time of closing. Accordingly, when ordering a title insurance policy for a lender only, we recommend that you advise your purchaser client that they are not covered under the lender policy and that they should consider the benefits of purchasing an owner policy for themselves.

Consider This
We insured a purchase transaction that closed where only a lender�s policy was purchased. It was later discovered that the original survey had a significant error such that there was a dispute over ownership of approximately one third of the land that owner thought they had purchased.

An additional $50 fee would have given the property owner the protection of the coverage in our residential owner�s title insurance policy. Stewart Title would have addressed the claim in accordance with our options under the policy jacket for any loss or damage sustained in connection with this matter including any defence of title obligations.

Added Value for Your Client
Clients look to their legal professional to provide professional guidance in the real estate process, to safeguard their interests and to successfully complete their transaction. With the recent media attention highlighting the growing risk of title fraud, homebuyers need to be informed of the options available to them in protecting their interest in their home. Lawyers/ notaries add value to their services by being informed as to the benefits of title insurance and properly advising their clients in that regard. Stewart Title representatives would be pleased to speak with you regarding the benefits title insurance provides, including the fact that for a modest one time premium coverage lasts for as long as a homeowner owns their home.

Stewart Title looks forward to assisting you in protecting your client�s interests in their real property.

Mortgage Fraud in Alberta on the Rise

The Real Estate Council of Alberta has revealed over 2,700 instances of real estate fraud occurring over a recent 12 month period. Because Alberta law allows a person to assume a mortgage without qualifying, the most common occurrences are �straw buyer� frauds. In these cases, the fraudsters use credit from someone else�s identity to purchase a property and secure financing.

A Closer Look: Fraud Prevention Questions

Over the past year, Stewart Title has implemented questions for residential and commercial clients designed to elicit information and give indication if a transaction may be fraudulent. These carefully worded questions were designed to be as succinct and unobtrusive as possible, for the specific purpose of obtaining salient information to assist in identifying potential frauds. Transactions that are flagged in this process undergo additional underwriting review.  Stewart Title understands the importance of a timely response from our underwriting department on flagged transactions. Your cooperation in responding to inquiries and providing documentation is greatly appreciated, as it assists in our ability to respond.

The basic framework of these questions can be used by lawyers/ notaries as a template to consider when dealing with real estate transactions in general. The few minutes spent answering the additional fraud prevention questions can save a lawyer/ notary from having his or her practice investigated by police, The Law Society, and other investigators. This additional due diligence assists in avoiding the substantial cost, wasted time and potential tarnishing of professional reputation that results from a lawyer/ notary unwittingly acting on a fraudulent transaction.

Why are we asking these questions?
We have received inquiries as to why we question if there has been any amendments with respect to the purchase price and/or deposits after the date of the signing of the Agreement of Purchase and Sale. The reasoning behind this is that such subsequent amendments or further deposits are unusual and may indicate an intention to artificially manipulate the purchase price to obtain mortgage financing for which the individual might not otherwise qualify. Additionally, fraudsters have used this technique to avoid the need to bring in additional funds to close a transaction. Similarly, we ask if any portion of the deposit on a resale purchase is paid directly to the Vendor (not a Real Estate Agent or Solicitor). The mere fact of such a deposit does not necessarily indicate a fraud. However, large deposits paid directly to the vendor, particularly in private transactions, require closer examination as they may be indicative of an attempt to obtain mortgage financing in an amount not appropriate for the transaction or may indicate collusion between two parties in a title fraud scenario.

Stewart requires searches of title to include deleted instruments and we specifically ask if the search has revealed any transfers or mortgages registered within the last six months on a resale purchase. The existence of these instruments may be indicative of a number of types of fraud. This includes value related frauds or �flips� which occur when a series of non-arms length transfers artificially increases the apparent value of the property. It may also indicate title fraud involving identity theft where a property is fraudulently transferred and then a short time later is mortgaged. Where the true owner has a mortgage on title, that mortgage may be fraudulently discharged in order to facilitate this process.

ID requirement
Obtaining, reviewing and retaining Canadian/provincial government issued photo identification are not only requirements of Stewart Title, but that of the majority of Canadian lenders as well. In addition, legal professionals should consider protecting themselves by obtaining Canadian/provincial photo identification from all vendors, as lawyers/ notaries who act on transactions where the vendor client turns out to be a fraudster have undergone increased scrutiny with respect to their due diligence in verifying their client�s identity.

Eliminating fraud is everyone�s business
The prevention of fraud is a primary goal of the entire real estate industry. By taking a leading role in the achievement of this goal, lawyers/ notaries solidify their position in real estate transactions, cement their relationship with lenders and convincingly demonstrate that they are integral and irreplaceable in the transaction.

In addition to traditional tax assessments and certified appraisals, Stewart Title will now accept letters of opinion from realtors, eliminating the requirement for a "market value appraisal" designation. When an existing owner policy is being issued, this letter of opinion will be used in assessing fair market value on property.

Stewart Title has been issuing title insurance policies for more than a century and our financial strength, stability and claims paying ability make us an industry leader

The industry�s foremost rating companies such as Demotech Inc. (A�), Fitch Ratings (A+) and LACE Financial (A) recognize Stewart Title�s outstanding financial performance by awarding impressive marks on our claims paying record. In fact, Stewart Title has posted 31 years of consecutive growth in reserves and policyholder surplus that is unmatched in the industry.

Stories from our most recent files:

Encroachment onto Federal Crown Property
Shortly after taking possession of her waterfront property, our insured received a letter from Public Works and Government Services Canada informing her that a portion of her property along the waterfront was federal crown land. This had occurred because a prior owner had in-filled a portion of the lake in front of the property. This in-filled land was still owned by the federal crown.

Resolution: Stewart Title retained a surveyor to survey the property to confirm the boundaries and size of the federal crown land. Once confirmed, Stewart Title paid more than $8,000 to cover the purchase price, survey fees, legal fees and disbursements to purchase the land from the federal government.

Title Fraud
Our insured lender issued a mortgage to a homebuyer purchasing a property. This mortgage was kept current until the loan went into default six years later. It was later discovered that the mortgage had been fraudulently discharged from title five years prior, with the property being sold twice in that time. The current homeowners were good faith purchasers without any knowledge of the prior fraud.

Resolution: Stewart Title paid the insured lender the full amount owing on the fraudulently discharged mortgage, which amounted to $220,000.

Missing Good Root of Title
When our insured was selling his property, the purchaser�s solicitor refused to complete the transaction on the basis of there not being a good root of title.

Resolution: Stewart Title gave an undertaking and indemnity to the purchaser which allowed the transaction to close in a timely manner. Immediately following the closing, Stewart Title retained a local solicitor to research the complicated title situation and to bring the necessary applications in order to establish a good root of title.

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Refinancing is the perfect time for clients to acquire protection of Stewart�s Existing Homeowner Policy!

Contact your local Business Development Representative or click here for more information on the policy.