Fraudulent property transactions – what can be done?

Reverend Hall had been working in North Wales when he received a call from his neighbours telling him that someone was in his Luton home. Reverend Hall drove back to the property and found that the locks had been changed and that there was a man inside carrying out building works. All the furnishings had been removed from the property.

It was established that Reverend Hall’s driving licence had been cloned and a bank account set up in his name by the 'sellers' in order to receive the sale proceeds. The property was sold to the new owner for £131,000. Reverend Hall checked the title deeds of the property on the Land Registry and found that it had indeed been registered in the new owner's name. A man has since been arrested on suspicion of fraud by false representation.

Reverend Hall’s story is unnerving. But what can property owners do to try and prevent this happening to them?

There have been a number of recent cases on property fraud. Un-mortgaged properties, or properties uninhabited by the owner, are the most susceptible. The courts have held that the conveyancers acting for both buyer and seller can be held as equally liable for protecting clients’ money (Purrunsin v A’Court and Another [2016]).

The most well-known recent case is the linked appeal of Dreamvar (UK) Ltd v Mishcon de Reya and P&P Property Ltd v Owen White and Catlin LLP. Mishcon acted for the purchaser. Despite having complied with its obligations in terms of anti-money laundering and other checks (see below) and having acted correctly throughout the transaction, Mishcon was found liable because the purchase funds were sent to the seller's solicitors when a "genuine completion" had not taken place. A genuine completion had not occurred because the transaction had not taken place with the true registered proprietor of the property.

Sophisticated frauds may be difficult or impossible to spot, but conveyancing solicitors are the first line of defence.

A simple thing you can do to prevent property fraud, especially if you own property that you don’t occupy, is to set up a property alert via the gov.uk website. This is very easy to do, it’s free, and you can do it online in just a few minutes.

Once the alert is set up, you’ll receive a notification each time there is significant activity on the property that is being monitored; for example, if a new mortgage is being taken out. The alert will inform you of the activity that is being carried out.

Of course, not all of these alerts will be fraudulent activity. However, it will assist you in taking action promptly if you think one of the activity notifications looks suspicious.

If you do not live at your property, you can also apply to the Land Registry to have an entry (known as a restriction) placed on your property's title. This means that before the property can be transferred to a new owner, a conveyancer must confirm that they are satisfied with the identity of the seller.

You should also keep your address at the Land Registry up-to-date. You can have up to three addresses registered against a property's title, including email addresses.

The above precautions are possibly more relevant for people who do not live at their property the whole time, for example, if they are travelling overseas, or for those who might have a second home.

Finally, if your property is not registered, consider applying for first registration. Unregistered land is particularly vulnerable to property fraud, not least because you cannot set up a property alert or register a restriction unless the property is registered. A solicitor can manage the process for you.

You can also register a caution against first registration which might deter some fraudsters.

Sellers' solicitors will look to obtain information linking the seller to the property, especially if the seller does not live there. This might be buildings insurance documents, council tax statements addressed to the seller at his/her current address, but quoting the address of the property that is to be sold.

Solicitors will look to carry out digital identification checks on their clients. At Russell-Cooke this is done by an electronic anti-money laundering check which matches individual client data against a comprehensive online database. We also use SmartSearch checks which assists us in carrying out higher-level screening checks. All firms are required to check whether their potential client has been identified on a sanctions list or is a 'politically exposed person' or a 'special interest person'.

Different firms are tailoring and implementing their own procedures for staying compliant. Very often, firms will request to see a copy or the original of an identification document (usually a passport or driving licence), a utility bill dated within the last three months and six months of banks statements. Solicitors may also ask for verification of the source of funds. Technology (such as a SmartSearch) can streamline these checks and provide a smarter, more robust process for managing risk.

Although it might seem that conveyancers ask for a large amount of information, some of which may seem unnecessary, conveyancers are required to carry out these checks and it is mandatory to hold the information on file. Ultimately, carrying out these checks adds a further layer of protection to all parties involved against fraudsters.