Real Estate Frauds continued
Tips on Fighting Value Fraud
Here are some tips on recognizing and fighting value fraud:
- Be cautious about flips—many are legitimate, but in any situation where the seller on the contract is not the same as the registered owner, ask questions to find out the background to the transaction and assess its legitimacy.
- Insist on the documentation and evidence you need to be satisfied of the legitimacy of the transaction—such evidence may include obtaining picture identification from all parties, or obtaining cancelled charges from the Land Title Office if you suspect a large number of background transactions have occurred such as a rapid turnover of mortgage financings with the amounts rising in each case.
- If you suspect that the flips have been happening on separate occasions using different lawyers each time, consider doing historical searches to see if there have been repeated sales at progressively higher prices over a short period of time.
- In any situation where you are being asked to represent both a buyer and a lender, you should review with the clients the provisions of Chapter 3, rules 3.4-5 to 3.4-7 and follow Appendix C of the BC Code 5; if so, you will have advised the parties that nothing can be kept in confidence between them and have received a signed consent letter from both. You can then advise the lender of all the unusual features of the transaction without fear of breaching client confidentiality (e.g., tell the lender that the transaction involves a flip, that there are two contracts and one has a much lower price, that there has been a number of rapid turnovers of ownership with prices rising in each case, that a power of attorney is being used to execute the mortgage, etc.). Having advised the lender, obtain and confirm further instructions in writing before proceeding with any advance under the mortgage.
Identity Fraud—Impersonating an Owner
Quite simply, an identity fraud sees the fraudster pose as the owner of the property. The fraudster then either secures mortgage financing or sells the property and pockets the proceeds. Once the mortgage funds or property proceeds are received, the fraudster disappears.
5 Ideally you will have a signed, conflict consent as required by Appendix
C of the BC Code, rule 5. However, that may not have happened if you have been dealing with a fraudster. But even if you have not been able to obtain the signed conflict consent as required in Appendix C, at least make sure you have advised your clients of all the information contained in Chapter 3, rules 3.4-5 to 3.4-7 of the BC Code. (In essence, tell all clients nothing can be kept in confidence one from the other and that you will be disclosing all relevant information.) Document that advice in your file and it will go a long way toward allowing you to tell both clients all salient information. If for any reason you feel that you are compromised in your ability to discuss the information with the lender, contact a staff lawyer at the LSBC to discuss the best way to proceed.