Property fraud is a real concern and an increasing crime that can cost many thousands of pounds and cause immense stress to a property owner. In this article, Head of Property, Sarah Finn investigates property fraud, the signs to look for and ways to avoid it.
It is estimated that in 2020 over 3.5 million people were affected by property fraud with a cost in excess of £3 billion.
With the Land Registry being open to anyone, more and more people using online services for conveyancing and the high-value nature of property transactions in property matters it is an easy target for fraudsters.
Property fraud most commonly takes two forms: (a) fraudulent transfers whereby fraudsters obtain fake ID and transfer ownership of a property into their name, the end result being they either seek to sell the property or obtain a fraudulent mortgage or (b) payment interception fraud whereby fraudsters hack or duplicate emails between solicitors and clients, change bank details and obtain funds. Both of which are discussed in more detail below.
Fraudulent transfers and registrations are the more dramatic of the two, often making headline news such as the case in Luton whereby the legal owner returned from a work trip to find the locks changed and someone else living in his house. Fraudulent identification had been used to impersonate him and sell the house, with the proceeds going to the criminal. Due to the surrounding law, the new buyer may remain the legal owner of the property, having purchased it in good faith, although the final outcome is still awaited.
In 2020 alone, the Land Registry paid out £3.5 Million in compensation for fraudulent transactions that they had registered. However, it is worth noting that this figure pales in comparison to the number of legitimate transactions the Registry deals with each year.
The risk of fraud is particularly high in properties falling into these groups:
- Buy to let and rental properties
- Empty properties
- Mortgage-free properties
- Properties that are not registered at the Land Registry
- Properties where the owner lives overseas
The second type of fraud common to property transactions is payment Fraud. This is where monies paid either in or out on transactions are intercepted by fraudsters.
Recently, the purchaser of a property had £640,000 stolen when fraudsters intercepted emails between them and their solicitor. The criminals had copied the format and layout of the original emails and ‘swapped out’ the bank details being sent by the firm for their own account. Suspecting nothing was wrong, the client sent the balance to the criminal’s account and ended up having to withdraw from the transaction when they were unable to recover the majority of the funds.
This type of fraud is far more common and happens on smaller value transactions as well are large value ones
There are several ways that you can reduce your property against the risk of fraud, some of which we have listed below:
- An alert can be set up at the Land Registry which means the Land Registry will notify you if someone applies to change the register on your property. Although this will not automatically prevent the application from being made, it will notify you and give you a chance to take steps to prevent it. Anyone can set up an alert themselves.
- A restriction can be placed upon your title that requires a solicitor or conveyancer to certify that the person disposing of the property is you. Whilst firms are under an obligation to verify their client’s ID, this offers an additional level of protection as well as covering against fraudsters who attempt to sell the property without legal representation. These restrictions can require the certification of identity of either individuals or companies and so can be used both by individuals and businesses. Whilst useful these restrictions can be quite difficult to remove if you have a new conveyancer who doesn’t know you.
- If your property is not yet registered you can apply to have it registered. Registering the property also means that if you are the victim of property fraud, you could be compensated by the land registry for any financial loss.
- When conducting any property transaction, ensure you read and re-read any information your conveyancer has sent you regarding their payment procedures before sending any funds. To be safe, we advise sending a small initial sum (£1) and confirming with your conveyancer via telephone (using the telephone number you were provided with when you first instructed them) that it has been received.
If you would like to discuss any options or property matters in general please contact our property team. Sarah Finn is Head of Property at Hatch Brenner Solicitors. If you have any questions at all regarding a residential property or commercial property transaction, please contact firstname.lastname@example.org or call 01603 660 811.