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PERILS OF LAND FRAUD

TO "TRUST" OR NOT

WINNING AND LOSING AT LOTTERIES

A CHANGE IN LOCATION

PERILS OF LAND FRAUD

A recent case Ontario has once more proven how susceptible a homeowner is to fraud. This situation is even more acute now that Ontario has gone on to an electronic land registration system. The facts were simple enough. An elderly Toronto man, who had owned a home there for over 25 years, was congratulated one day by his neighbour on the sale of his home. The house had been used as a rental property to support relatives over in Hungary where the owner had come from in 1956. The owner lived close by but was adamant about never selling the rental home as the income was crucial to his family in Hungary. The owner was in utter shock when his neighbour, a real estate agent told him about the sale and he almost collapsed then and there. After some checking, it turned out that the home had in fact been sold under what purported to be a Power of Attorney which document had given the owner's grandson Aaron the power to sell the home on behalf of the owner. Needless to say, the owner one Paul Reviczky, had no grandson named Aaron. After some investigation, the police concluded that it was the last tenants of the homeowner Reviczky who had perpetrated the fraud. Of course, just because the police had suspicions who did it was of not much consolation to Reviczky whose home sold for $450,000.00 to an innocent purchaser who had taken out a mortgage in order to buy this home. The simple fact was that the proceeds of the sale did not go to Reviczky. Now, all is not lost for the homeowner as he has a remedy against the Ontario Land Titles Assurance Fund. What he cannot do is get his property back since Ontario does recognize the paramount rights of a purchaser unaware of a fraud. He can however get compensation Alas, getting the money was not what Reviczky wanted; he wanted the property to enable him to have a regular income stream at a fairly certain rate of return. Even to get the money will take time, legal expenses and aggravation. It would be sad if this were the only fraud case but such is not true. There are many others. This problem of real estate fraud was prevalent for many years but now that Ontario has gone on to an electronic system where there is no requirement that the parties even sign the papers, the opportunities for fraud are much increased. Now, to protect against this possibility, the legal profession is supposed to ask for proof of identity before having a client sign what is known as an Authorization and Direction to the Solicitor to register the particular document. Well, that will work if the solicitor does in fact ask for and obtain the identification. What it would not prevent is the scenario where the parties provided forged ID. In the case in Toronto, the solicitor to the party that transferred the property to the innocent third party buyer, refused to comment as to what steps he took to ascertain the identity of the party executing the Transfer under the so called Power of Attorney. Therefore, I cannot comment as to how or if the system broke down with that lawyer. Still, you can see that this area of land registration is fraught with fraud issues.

TO "TRUST" OR NOT

I have written in the past about the possibility of putting your property into a trust. This kind of vehicle typically is worthwhile for people who have assets that are worth a lot of money and also who are particularly keen on keeping a cottage property ( or for that matter any other kind pf property) in the family for generations to come. Now, the question one might ask right off the top is what amount of money constitutes a lot of money making a trust an idea whose time has come. I cannot give you an exact idea as what is "lots of money" to one person might not be lots to another person. But, if one accepts the premise that the cottage for example is worth say $250, 000.00 and if one also works on the assumption that the owners want to keep that cottage as family asset for the foreseeable future, then in that scenario, it would be useful to explore the validity of a trust. I do know from the various people I have seen over the years that the thought of how to deal with the cottage in terms of the next generation is a challenge that is burdensome and worrisome. One way that some clients of mine have dealt with this problem is to establish a trust in their wills. What the owners do in their respective wills, assuming that it is a husband and wife who are the owners, is to create a fund, usually called a maintenance fund. It would be a large enough sum to be applied to future costs on the cottage such as taxes, insurance utilities, and on going maintenance. This fund takes away a fundamental problem often where one child can afford to share in the payments on an annual basis bit another cannot. The money issue is thereby gone. The trust would also contain a term to allow the cottage to be sold to a third party if all of the parties agree. That kind of unanimity can be applied to other aspects of the continuing ownership by the children but the will could stipulate in the creation of the trust that in other decisions, majority vote carries the day. The trust will be managed by people appointed to do so and that could be the children, later grandchildren and so on. Now, there are some downsides about a trust such as the creation of a fund to be set aside as indicated herein. That kind of money is not available for everyone. And to there are returns that have to be filed each year for the trust detailing the income earned on the funds. And quite significantly, the folks at Revenue Canada apply a little known rule of collecting capital gains on a trust every 21 years. Therefore, one will want to be sure the fund created in advance is large enough to meet that potential obligation. Otherwise, the likelihood is that the family members will have to chip in to make the payments due at that time. Another downside of this kind of planning is that even though the property is in a trust as created in the wills of the parties involved, the fact is that there still will be probate fees to be paid to the Provincial Government on the value of the estates. Once the property is in a trust, the issue of probate fees that will not arise again. In sum then, while I say the trust has its advantages, it is for sure not going to work for everyone.

WINNING AND LOSING AT LOTTERIES

A recent case in Ontario has shown what happens to a friend ship when the winnings of a lottery are involved. A lady named Sandra Phillips won $675,000 in a Scratch & Win but her once good friend Eunice Lillie claimed ½ of it. It took 6 days of trial to get to the end of this dispute. As it turned out, no one actually paid for the ticket. Also, there were two tickets purchased, both of which were given to Phillips, one for her and one for Lillie who was not present when the tickets were given out at the bowling league they attended. In the past the evidence was that the two had shared their winnings. In fact, over the previous 8 to 10 years prior to the 2003 - 04 bowling season, they each contributed equally and bought 7 50/50 tickets. This method allowed them to get 7 tickets rather than six. To deal with the 7th ticket, one would pay for it and the other would buy two soft drinks. When they won, which was rare, they split evenly. In the event one was not present, there were no questions by one of the other as to whether or not there had been a winning ticket. Still sharing on this kind of basis was directly connected to attending the bowling. The evidence also showed there was no expectation of a split of winnings or, for that matter, expenses if wither was absent. At trial the Plaintiff Lillie gave evidence that her understanding was "if either won a large amount, they would share the winnings together." But, she also admitted that she could not recall that actually ever having been discussed. And she also acknowledged that at previous Christmas parties, she had no expectation of receiving a scratch ticket if she were not there. The judge said:"At no time could the Plaintiff point to any time when either did anything to indicate an agreement or mutual expectation of sharing of winnings when one was absent." The judge found also that there was no implied trust created so that it could be said that the Defendant was purchasing the ticket in trust and hence the winnings were trust funds for both parties. What the judge did accept was that the only agreement that could be inferred was the arrangement that partied had for the 50/50 tickets but this was not the case for scratch and win. Now, this case is certainly ins