Ont. legal experts pushing to close loophole that allows scammers to mortgage homes without victims’ knowledge

Police forces and legal experts in Ontario are pushing for the provincial government to make legislative changes that would reduce elaborate fraud scams targeting homeowners.

The scams started years ago when illegitimate HVAC companies went door to door selling products to homeowners – typically seniors. Sales for items like air conditioners and furnaces eventually resulted in companies placing Notice of Security Interests (NOSI) on the properties without the homeowners knowing.

A NOSI binds homeowners to a contract they must pay before they can sell or refinance their home.

“With the old 15 or 10 years ago HVAC liens scams, we were looking at dollar amounts in the thousands or the low tens of thousands,” lawyer Dennis Crawford said.

Over the past few years, those scams have evolved. In some cases, police say scammers started looping back and convincing homeowners with NOSIs on their property to sign additional contracts to help pay the existing NOSI off. The victims didn’t know it, but they were agreeing to mortgages.

“Salesmen go to the houses of older Ontarians and effectively bully, browbeat, coerce or otherwise dupe them into signing documents which are misrepresented to the homeowner, but turn out to be contracts to put mortgages on their house,” Crawford said.

“With the mortgage fraud scheme that is proliferating now, we are seeing mortgages in the tens of thousands or even into the hundreds of thousands. I have some clients with quarter-million-dollar mortgages on their houses which they didn’t know were mortgages when they were signing the paperwork.”

Crawford said he’s worked with dozens of people who have been affected by these scams, but said there are hundreds, if not thousands, of others who have been impacted. He said some have lost their homes.

On Tuesday, CTV Kitchener spoke to a Kitchener senior who fell victim to the scheme.

Kitchener's Ian Craig is out thousands of dollars, and on the hook for much more, after falling victim to home improvement-related scams. He spoke to CTV Kitchener's Stefanie Davis on July 31, 2023. (Dan Lauckner/CTV Kitchener)

LEGISLATION LOOPHOLE

Police and lawyers say a loophole in provincial legislation under the Consumer Protection Act makes it possible for NOSIs to be placed without homeowners knowing, leading to extreme fraud.

“The Notice of Security Interest is at the heart of this fraud. Making it so that it can’t be used for that purpose, or removing it, is what’s going to ultimately stop this,” said Det. Adam Stover with Waterloo regional police, who has been heavily involved in investigating these scams across the province.

Crawford said he and others who are advocating for the legislation change would like to see the NOSI practice eliminated all together.

“Amend the act so that the Notice of Security Interest no longer exists on the books, and it can’t be registered against someone’s house without their knowledge,” Crawford said.

“I’ve never heard the legitimate business case for the NOSI. In my opinion, there’s no legitimate commercial interest that is using the NOSI instrument. So it’s outlived its usefulness as a legislative instrument and you’re not harming any legitimate business by taking this off the books.”

Crawford added preventing the scams from happening in the first place is a preferable policy solution, rather than making it easier to fix the problem once it happens.

Lawyer Dennis Crawford says seniors are often bullied or duped into signing contracts they don't understand, which allow scammers to take out mortgages on their home. (Matthias Zomer/Pexels)

CTV News requested an interview with a representative from the provincial government but no one was made available.

In an emailed statement, the Ministry of Public and Business Service Delivery said it’s currently reviewing the Consumer Protection Act following a consultation period.

“These consultations include proposals that would provide new and stronger protections for consumers and include consultations on issues relating to the use of Notice of Security Interest by businesses,” the ministry said in part.

Investigators and lawyers hope those changes are made soon.

“Then everybody else, the lawyers and the police, we can work backwards to try to help these people. But right now, it takes them three days to put on a Notice of Security Interest, and it takes us six months to investigate it,” Det. Stover said.

ONTARIO ‘UNFORTUNATELY A LEADER’ IN LAX LIEN REGULATION: EXPERT

Det. Stover said no other provinces have NOSIs.

“Alberta and B.C. have something similar, and in speaking to the land titles office out there, they’re starting to see the problem,” Det. Stover said.

“They’re watching closely what’s happening in Ontario right now with legislative change.”

Daniel Tsai, a lecturer in law and business at Toronto Metropolitan University and the University of Toronto, said it’s not clear to him why the Ontario government still hasn’t made adjustments.

“Effectively, Ontario is unfortunately a leader when it comes to the lax regulation of liens, and this has been an ongoing problem for many years. What’s happened is the scams have just gotten bigger because fraudsters have realized how lucrative it is and how much money they can extort,” Tsai said.

“There are now thousands of victims. Some of the law firms that specialize in these frauds and prosecuting them and going after the fraudsters, they have reached their capacity. That says that even the civil system can’t even handle the number of complaints here, so this is a major problem.”