Doing your due diligence before entering into a contract or lease agreement with an individual or corporation can be beneficial in the long run. It may seem mundane to double check their credit and making sure they actually own the house they say they do, but these mundane searches can be the evidence needed to support fraudulent conveyances action.
Your client entered into a lease agreement and based on the credit application, it was approved. A few months goes by and you find yourself chasing that client to get paid, or to even recover the vehicle.
What’s your first step? Get the file to your lawyer, including the credit application, and let them to do their due diligence before issuing a Claim.
Why? When lawyers do their due diligence, they know what they are looking for. For example, in your due diligence you discovered that the client did in fact own his house. We go and do our searches and it’s now showing that only your client’s spouse, or perhaps children, or parents, are owning that asset. We can trace back and obtain the necessary documents to determine when the asset was transferred, and the circumstances surrounding that transfer, for example, nature love and affection.
What happened? Generally when we see this, the property was transferred from your client’s name solely into the spouse, or like mentioned about, another family members’ name, and that transfer most likely happened right after they entered into the contract with you, or around the time that they started to default on their payments.
What can you do about it? Now you can seek special permission from the Court to put a stop on all transfers of the property pending the outcome of your action. This is called a fraudulent conveyance action, and allows a Certificate of Pending Litigation to be registered on title to the property, which will protect that asset from being disposed of until your litigation with your client is resolved.
So as you can see, taking those steps early on can help when assets have been transferred without your knowledge, and we can help to secure that asset.
Christine Allan, Law Clerk