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03-What’s new:NATIONAL
4/12/10
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Beware the straw buyer
What’s New In...
Real Estate
With a bubbling housing market in major metropolitan centres
across Canada, residential real estate lawyers are on the front
lines in the battle against mortgage fraudsters.
By Michael Rappaport
ROBERT JOHANNSEN
W
hen an organized crime
syndicate in Vancouver
attempted to pass a fraudulent mortgage through
Ron Usher, they chose the
wrong real estate lawyer to try to dupe.
Usher, a lawyer at Bell Alliance Lawyers
& Notaries Public in Vancouver, had
been a staff lawyer at the Law Society of
British Columbia for eight years, where
he focused on real estate and technology
matters and frequently lectured on fraud
awareness.
“It was a classic imposter and straw
buyer fraud,” Usher says.
Usher says that he received a call in
May 2008 from a man asking him to act
for the sale of his father’s home. Another
man had been recruited to pose as the
father and assume the identity of the
homeowner. The syndicate also paid a
straw buyer (a phony purchaser) to go
along with the fake transaction.
The fraudsters might have pulled off
the scam against a less seasoned real
estate lawyer. But alarm bells were ringing in Usher’s head.
On the phone, the first man appeared
evasive and Usher noted that the call
display didn’t match his name. He had
found Usher’s firm online so there was
no known referral source. When the
vendor posing as the father arrived at
Usher’s office, Usher checked his ID,
which appeared brand new. There were
no encumbrances on title. The vendor
told Usher that he had received a $665,000 offer on his East
Vancouver home and a $66,500 deposit. He instructed Usher
that the deposit money from the purchaser was to change
hands directly and the money was to be paid to a B.C. numbered company. No realtors were involved in the sale.
Avril · Mai 2010
“[O]ccasionally the lender will attempt to allege
negligence against the real estate lawyer for
not performing the proper due diligence.”
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03-What’s new:NATIONAL
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Ron Usher, Bell Alliance
Lawyers & Notaries Public,
Vancouver
for sale. That’s when Usher contacted the police.
On May 27, 2008, a middle-aged man with hornrimmed glasses and dressed in an ill-fitting blue
suit — which appeared as if it had been purchased
solely for the occasion — arrived in Usher’s office
preparing to sign closing papers.
Unbeknownst to the impostor, the transaction was
being recorded by a hidden surveillance camera and
the articling student seated beside him was actually
an undercover police officer with the Vancouver
Police Department’s financial crimes section. As
soon as the impostor signed the closing papers, the
police slapped handcuffs on him and escorted him
out of Usher’s office.
None of these factors alone would have necessarily made
Usher wary. But taken together? As a vigilant and experienced real estate lawyer, Usher says he follows the motto
“trust but verify.”
Acting on his suspicions, Usher checked the address of the
property, looked up the phone number and dialled it. Needless
to say, the true owner was shocked to learn that his home was
Fraud claims spike
Real estate related fraud remains a concern which
lawyer professional indemnifiers and law societies
across Canada continue to monitor.
Real estate claims involving fraud have trended
upward in Ontario over the last decade, according
to Dan Pinnington, director of practicePRO at the
Lawyers’ Professional Indemnity Company
(LawPRO), the lawyers’ liability insurer for the
province. Pinnington noted that LawPRO has seen
on average 50 real estate fraud related claims each
year, reaching a high point of $3.5-million in 2007.
The type of mortgage fraud that the Vancouver
crime syndicate attempted to pass through Usher is
known as “identify fraud,” whereby a fraudster
impersonates the registered owner of a property and
transfers it to him/herself or a co-conspirator. The
fraudulent transfer is used to obtain a mortgage for the value
of the property, which is defaulted upon in due course.
Also widespread is “value fraud,” whereby the actual
value of the property is artificially inflated by the fraudster —
often through one or more flips to fictitious purchasers — in
order to obtain an inflated mortgage which is subsequently
defaulted upon.
Detecting Real Estate Fraud
something that just doesn’t feel right;
• A middleman who makes all the
lowing red flags, says Deborah Gillis,
Risk and Practice Management Advisor
at the Lawyers’ Insurance Association of
Nova Scotia (LIANS):
• Situations where little or no legal
work is required, but a large sum of
money is expected to flow into and
out of your trust account;
to be very little work;
• Spelling and/or grammar mistakes in
e-mails sent to you by the companies
or individuals asking that you represent them;
a number to contact the client directly;
• Typos on bank drafts/cheques;
• Call display that doesn’t match the
name of the person who is calling.
• A client with no apparent connection
to you, who compliments you on your
“special expertise or qualifications”;
“What’s important is for law firms to
have a total team approach, so that
everyone recognizes red flags and com-
• A client who is prepared to pay higher
• Rushed closings or transactions and a
than normal legal fees for what seems
client who is pressuring you to do
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appointments because you don’t have
N AT I O N A L
municates suspicions with others,” Gillis
advises.
— Staff
April · May 2010
ALISTAIR EAGLE
L
awyers should watch out for the fol-
Quoi de neuf dans...
03-What’s new:NATIONAL
4/12/10
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le droit de l’immobilier
Gare aux imposteurs!
Avec des risques de bulles immobilières au Canada, les spécialistes du droit immobilier
sont au tout premier rang de la guerre contre la fraude hypothécaire.
L
orsque des membres du crime
organisé ont tenté de commettre
une fraude hypothécaire en ayant
recours aux services de Ron Usher, ils se
sont tournés vers la mauvaise personne.
Me Usher, qui travaille au Bell Alliance
Lawyers & Notaries Public, à Vancouver,
a aussi agi comme avocat du Barreau de
la Colombie-Britannique pendant huit
ans, une position qui l’a emmené à se
spécialiser dans les questions de droit
immobilier et de technologie et à donner plusieurs conférences sur la fraude.
En mai 2008, Me Usher a reçu l’appel
d’un homme qui lui demandait d’agir
pour lui dans le cadre de la vente de la
maison de son père. Un autre individu
avait été recruté pour prendre l’identité
de ce dernier. Le groupe avait aussi payé
un faux acheteur pour agir comme
prête-nom.
Au téléphone, les explications de
l’homme semblaient évasives. Me Usher
a noté sur son afficheur que les noms ne
concordaient pas. Quand le vendeur est
arrivé au bureau, ses pièces d’identité
étaient neuves. Et il a demandé que
l’argent soit transféré rapidement à une
compagnie à numéro.
Pris individuellement, aucun de ces
facteurs n’aurait soulevé des doutes dans
l’esprit de l’avocat. Mais ensemble? En
juriste expérimenté, il a suivi la maxime :
« Faites confiance, mais vérifiez ».
Un simple appel au vrai propriétaire
de la maison lui a permis de voir ce dont
il s’agissait. Le jour de la transaction, le
27 mai 2008, une caméra cachée enregistrait tout. Le stagiaire assis à côté de
lui était un agent de police. Une fois les
papiers signés, il n’a eu qu’à passer les
menottes à l’imposteur.
Hausse des fraudes
Les réclamations impliquant des fraudes
ont augmenté au cours de la dernière
décennie en Ontario, selon Dan Pinnington, directeur de practicePRO à la
Lawyer’s Professionnal Indemnity Company (LawPRO), l’assureur responsabilité des avocats de la province. Elles ont
culminé en 2007, à 3,5 millions $.
Le type de fraude orchestré par les
criminels de Vancouver est une fraude
Sidney Troister, a senior partner in the commercial real estate
group at Torkin Manes Barristers and Solicitors says that value
frauds are harder to pull off, since lenders insist on examining the
transaction history of a property and if they notice an inordinate
increase in the purchase price, lenders will apply greater scrutiny.
Troister also says that title frauds, whereby fraudsters steal
title to a property, are no longer a concern, at least in provinces
such as Ontario and British Columbia, thanks to legislative
amendments to land title acts to address title fraud and the protection that title insurance offers against real estate fraud.
“The irony is that real estate lawyers were up in arms
against title insurance 10, 15 years ago. Today, no one [in
Ontario] is willing to do a deal without it,” Troister says.
In most cases of mortgage frauds, the lender, usually the
bank, is left to bear the loss. However, occasionally the lender
will attempt to allege negligence against the real estate lawyer
for not performing the proper due diligence.
Pinnington says LawPRO has worked hard to alert lawyers
about frauds as quickly as possible since they are on the front
lines. “Our first major efforts in this regard date back to 2004,
when several issues of LawPRO Magazine featured information on the growing prevalence of real estate fraud and tips on
how to spot fraud and fraudsters,” Pinnington says. “More
recently, we’ve broadcast e-mail alerts to lawyers alerting them
to fraud scams as they were unfolding, based on information
lawyers were providing to us.”
Avril · Mai 2010
par prête-nom, où une personne usurpe
l’identité du réel propriétaire pour vendre sa maison à un complice, dans le but
d’obtenir un prêt hypothécaire. Un
autre stratagème consiste à augmenter
la valeur de la maison et de l’hypothèque par des ventes successives.
En 2005, le groupe de travail en droit
immobilier du Barreau du Haut Canada
a rendu un rapport public, dans lequel il
a énuméré une série de facteurs expliquant la hausse de ces fraudes. Parmi
eux : le fait que les acheteurs ne doivent
pas rencontrer les prêteurs en personne
et un accès plus facile aux informations
sur les immeubles et leurs propriétaires.
Certaines mesures préventives ont
été adoptées, dont en Ontario, avec, en
2008, la nouvelle règle dite des deux
avocats, qui nécessite que l’acheteur et
le vendeur soient chacun représentés
par un juriste différent. Mais en fin de
compte, le meilleur remède pourrait
bien être de rester à l’écoute de ses intuitions, croit Ron Usher. « Vous devez
faire confiance à votre sixième sens »,
lance le spécialiste. N
In 2005, the Law Society of Upper Canada’s (LSUC) real
estate working group released a report naming several key factors
behind the rise in mortgage fraud — among them the fact that
potential buyers need not meet lenders in person, easier access to
information about properties and homeowners, increased competition within the mortgage industry — all of which tempt parties
to skirt proper due diligence before closing deals.
Malcolm Heins, the chief executive officer of LSUC says
that the law society has taken steps to combat mortgage fraud
in Ontario since the report was issued. In particular, Heins
says that the “two-lawyer rule,” effective April 7, 2008,
whereby both the vendor and buyer in a transfer of real property must each be represented by separate lawyers and the
“new rules on client identification,” effective October 31,
2008, have led to a slight dip in mortgage related frauds since
frauds spiked in 2007. All Canadian law societies have agreed
to adopt similar rules in an effort to fight fraud.
In the end, however, the best remedy against mortgage
fraud is, as Francis Bacon might say, to find out more, and not
keep suspicions in smother. Usher cautions that he has encountered several other real estate lawyers who were hoodwinked
by similar mortgage frauds, despite having had bad vibes
about a client, because they did not act on their suspicions.
“You have to trust your Spidey-sense,” he says. N
Michael Rappaport is managing editor at National and CCCA Magazine.
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