Life is full of risks and Canadians, as a general rule, are very risk averse. Our conservative nature compels us to be heavy users of insurance. Be it car insurance, home insurance, life insurance, disability insurance or business interruption insurance, Canadians generally take advantage of the protection that various forms of insurance offer. Title insurance is another form of insurance which is becoming very popular in Canada and for good reason.

Buying a home is the largest investment many of us will ever make. Aside from the financial commitment involved, owning and maintaining a home is a huge responsibility. Most homeowners would therefore want to ensure that such a large investment is well protected. Imagine for the moment that your largest asset was stolen from right beneath you without you having any idea that this has happened. Most people believe that this simply could not happen. Furthermore, many people mistakenly believe that their lawyer has the ability to protect them from the fraudulent activities of criminals. While lawyers can ensure that you will become the legal owner of the home you purchase, they cannot protect you against the future illegal acts of criminals.

When you become the owner of a home, your evidence of ownership is a document called a Deed. A Deed is a paper document, the registration of which creates a public record that reflects your interest in the property. This means that any member of the public can look at it or even obtain a copy of it. Lawyers are the people who prepare these Deeds and ensure they are registered at the Land Registry Office as legal proof of your ownership. Electronic registration of these documents is now in place in many parts of Ontario.

Since the registration of this document creates a public record, the homeowner has no control over it. In other words, anyone could alter it, change it or reproduce it. Worst of all, this could be done entirely without the owner’s knowledge or consent. The bottom line is that up until title insurance became available, you were at risk of losing ownership and control of your home, likely your largest, most prized and important asset.

The Land Registration system cannot protect you from a sophisticated fraudster going to the Registry office, obtaining a copy of your Deed (the piece of paper that proves your ownership of your home) and doing with it what he or she pleases. This of course, is illegal, but crooks naturally have no regard for the law.

He will then prepare and register a phoney Deed from the real owner to himself. The fraudster can easily prepare the forms to do this. Where electronic registration is in place, the fraudster will use phoney identification and trick an innocent lawyer into registering false documents on his behalf. The fraudster will then approach a lender, seeking to obtain a mortgage on the property. He will use the recently registered phoney Deed as proof of his ownership. The unsuspecting lender will loan the money to the fraudster who will disappear with it. Eventually the mortgage loan will go into default. When the lender comes looking to collect on its debt, the real owner is in for the shock of his life. If you were the unsuspecting owner, you may end up in a legal battle with the lender. This type of legal battle is expensive, time consuming and aggravating for victims of fraud.

If this sounds like a nightmare, it is. My next column will examine how title insurance can protect you from this horrific situation.