Real estate fraud up as London investors see $1.4M disappear from Hamilton Rd. development

A private investigator who deals in white collar crime said buyers need to take steps to protect themselves against real estate fraud, which he said has grown in Ontario in recent years. 

"Since COVID, it's like an epidemic in real estate fraud," said Brian King, a private investigator and owner of King International Advisory Group. King said his Richmond Hill-based business typically takes on four to six new cases of real estate fraud in a month.

"In the past two years alone, we've been involved in cases where at least eight lawyers have been implicated in frauds and suspended by the Law Society," he said.

This week, CBC News reported that an Oakville lawyer is facing serious censure from both the Ontario Law Society and the Home Construction Regulatory Authority (HCRA) for his role in a stalled east London real estate development.

And while he is not facing criminal charges, Philip Okpala of Lynphyl Homes has had his law licence temporarily suspended pending a review, while HCRA has moved to not renew his builder's licence.

Both regulators pointed to Okpala's refusal to give clear and fulsome answers about the status of $1.4 million in buyers' deposits as reasons for the reprimands.

Okpala had accepted deposits on purchases for condo units at 1154 Hamilton Rd. Buyers complained to the HCRA when the project failed to move forward and Okpala was not returning their calls. He has not responded to requests for comment from CBC News.

Meantime, King said he increasingly receives calls from investors in real estate projects gone wrong. Many are trying to get their deposit money back. 

A big part of his business is "developer fraud" in which someone acquires a property and begins to sell units for a future construction project that will never see a shovel in the ground. 

"Eventually it collapses and the person involved with that development has made away in some instances with several million dollars in investors' money," he said. 

King recently represented clients in a real estate project in Scarborough where more than $8 million in investors money was lost. 

'Track record is everything'

King said one of the best defences a buyer can have against potential fraud is to have their own independent lawyer represent them on the transaction. It may sound like common sense, but King said sometimes buyers skip it. 

Also, he said if the purchase price for pre-construction units seems well below market value, it could be a warning sign that a fraudulent developer is trying to draw investors in. 

"Sometimes less-than-scrupulous project developers will make the price very low," he said. "In other words, they're looking for multiple investors at a low price point, one that seems reasonable for buyers to invest without getting independent legal advice, which they should always do." 

Toronto real estate lawyer Daniel La Gamba said buyers should look for a history that shows completed construction projects. 

"Business track record is everything," he said. "It's always a gamble when you're going with smaller builders that don't have that." 

Can investors recover money?

In cases where people have lost money due to the dishonest actions of a lawyer, the Law Society does have a compensation fund available. However, according to their website, the fund can only be accessed "as a last resort" after all other efforts to recover the money have been exhausted. 

The Tarion Home Warranty program can compensate buyers of unbuilt housing projects.

A spokesperson for Tarion said the pre-possession warranty protects a purchaser's deposit, including in cases where the builder is acting illegally. 

Purchasers are told to contact Tarion at 1-877-9-TARION or email customerservice@tarion.com for help with their cases.  

Most lawyers are required to carry insurance, which King said can be another way for investors to recover funds. 

In a statement to CBC News, the Law Society said it's working to enhance its rules to protect lawyers' clients from financial misconduct.

"These proposals include a refocusing of its audit functions and additional tools that would be available to the Law Society to facilitate compliance and enforcement in relation to the handling of client funds and property," the statement said.