Fraudulent Mortgage Registered on Your Home in Ontario

Finding a mortgage on your title that you never signed is alarming. It may show up when you try to refinance, when a lender sends a notice, or when you check your property records.

This article explains how Ontario law generally treats a fraudulent charge, the steps people commonly take, and the compensation route through the Land Titles Assurance Fund. Time matters, so consider speaking with a lawyer quickly.

How the law treats a fraudulent charge

Under the Land Titles Act, a registered instrument is generally deemed embodied in the register and effective to create, transfer, charge or discharge the land as its nature and intent require.

There is an important exception. That deemed effect does not apply to a fraudulent instrument, such as a forged charge or mortgage, registered on or after October 19, 2006. Non-fraudulent instruments, including those registered after the fraudulent one, remain effective.

In plain terms, a forged mortgage does not automatically become valid just because it was registered. However, other registrations on your title may still stand, so the full picture on your parcel register matters.

First steps when you find it

• Get a current copy of your parcel register and every registered document behind the charge.
• Write down how and when you found it, and keep any letters, emails or notices.
• Contact the lender named on the charge and say in writing that you did not sign it.
• Report the fraud to your local police and keep the report number.
• Check whether you have title insurance and read the policy for notice requirements.
• Contact a real estate lawyer before you pay anything or sign anything.

Do not ignore lender letters. If a lender takes steps to sell under a power of sale, a notice of exercising the power of sale must be given to listed persons, including those shown on the parcel register, and a sale cannot be made until at least 35 days after the notice is given. A mortgage without its own power of sale clause may instead fall under the statutory power of sale in Part II of the Mortgages Act, which arises only after three months' default; no sale may be made until 45 days' written notice has been given, and that notice may be given at any time after 15 days' default. None of Part II applies to a mortgage that declares Part II does not apply. Act quickly if you receive one.

Challenging the charge

In almost all cases, a charge that has been paid off is removed from title by registering a valid discharge from the current chargee. Whether and how that applies to a forged charge depends on the facts, so a lawyer can confirm the right document.

If the lender does not cooperate, a court application may be needed. The Superior Court of Justice may grant an interlocutory injunction or mandatory order, and courts have general power to grant relief against penalties and forfeitures. The legal tests a judge applies are fact-specific and are best discussed with a lawyer.

If a lender has already sold under a power of sale in apparent compliance with the statute, the purchaser's title generally cannot be impeached on the ground that the statute was not complied with. A person harmed keeps a remedy, such as damages, against the person who exercised the power of sale. This is one reason to act before any sale happens.

Compensation and title insurance

Ontario's Land Titles Assurance Fund compensates people for certain financial losses from real estate fraud or registration-system errors, including reasonable legal costs. Applications, with an affidavit, go to the Director of Titles and must be made within 6 years of suffering the loss. A Hearings Officer decides eligibility and the amount.

Ontario says it will respond immediately in a clear case of fraud. For most straightforward cases where all parties cooperate, title can be returned and a compensation decision made within 90 days. The Director of Titles can be reached at director_of_titles@ontario.ca. That timeline is a target for simple cases, not a promise for every file.

Whether any insurance policy you hold could respond to a loss like this depends on the wording of that policy and the facts of your situation, so it is worth confirming with a lawyer.

What to do next

• Order your parcel register and registered documents today.
• Notify the named lender and your title insurer in writing.
• File a police report and keep copies of everything.
• Calendar the 6-year deadline for a Land Titles Assurance Fund application.
• Book a lawyer to coordinate the lender, insurer and Fund steps.

Every case differs, and the right order of steps depends on whether a lender is cooperating, whether you have title insurance and whether any sale has been threatened.

Frequently asked questions