Thursday, 4 November 2021

Beware the Perils of Property Fraud


In a recent story reported across the mainstream media, a man described his shock at returning to his house and finding it stripped of all furnishings after it was sold without his knowledge.

His identity had been stolen and used to sell the house and bank the proceeds, and the new owner had been registered as proprietor at the Land Registry.

Although the facts in this case were stark, property fraud is on the increase.

The Land Registry paid out a total of £3.5m in compensation for fraud last year. It commented:

"We work with professional conveyancers, such as solicitors, and rely on them and the checks that they make to spot fraudulent attempts to impersonate property owners…Despite our efforts, every year we do register a very small number of fraudulent transactions”.

Some properties are more vulnerable to property fraud than others, especially those that are mortgage-free and unoccupied.

Is there anything you can do to protect yourself?

You can reduce the risk of becoming a victim to property fraud by doing the following:

1.     Make sure your address for service registered at the Land Registry is up to date. This is particularly important if you don’t live at the property and it will enable the Land Registry to contact you if it has concerns about a potentially fraudulent transaction.

2.     Sign up to the free fraud alert service operated by the Land Registry by email. Once they have your details, the Land Registry will email you if an official search or application is made against the property. You then have an opportunity to contact the Land Registry and provided you act quickly you may be able to stop a fraudulent transaction from taking place, or at least from being registered.

If a fraudulent transaction has taken place, then the question is which solicitor is responsible, the one acting for the purported seller, the one acting for the innocent buyer, or both?

This was the subject of litigation in 2018 resulting in the Dreamvar and P&P judgment handed down by the Court of Appeal.

In a complex judgment, the conclusion was that solicitors on both sides in a fraudulent transaction could be held liable for the loss. If the fraudulent seller’s solicitors fail to carry out sufficient checks on their clients, they must share in the responsibility for the loss – it cannot fall solely on the buyer’s solicitors.

However, many argued at the time (me included) that the liability should fall entirely on the solicitors acting for the fraudulent seller, rather than be shared between those acting for the fraudulent seller and those acting for the innocent buyer, and a powerful dissenting judgment given by Lady Justice Gloster in the Court of Appeal expressed that view.

The solicitor acting for the seller is after all in the best position to carry out the identity checks as part of the "know your client" and anti-money laundering processes undertaken when taking on a new client.

Buyers’ solicitors can try to protect themselves by asking for a warranty from the seller’s solicitors that they have carried out all appropriate identification checks.


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