The news of a property fraud reported in the Daily Mail (http://www.dailymail.co.uk/news/article-3356929/The-thieves-stole-wife-s-house-sold-1-3million.html ) at the weekend should send a chill down the back of all conveyancers across the land.
A young woman — who paid the full amount with no mortgage — had been duped into handing over £1.35 million to the a person purporting to be the legal owner of the property.
The money was last seen on its way to a bank in Dubai.
The real owner was totally oblivious to the fraud until the Land Registry smelling a rat declined to register the property in the name of the young woman.
There were two primary fraudsters. One who took out a rental agreement on the property before the property was placed on the market, and the other who stole the identity of the real owner. Between them they were able to fool the letting agent, the selling agent and both the selling and buying conveyancers.
This was a fraud perpetrated at the highest level.
So what could have been done to prevent it? Probably not very much given the sophistication of the perpetrators.
The question of whether negligence lies with either the seller or the buyer’s conveyancers must also be a vexed issue.
So what lessons as conveyancers can we learn from these circumstances?
From a sale perspective there was nothing on the surface which would have alerted the seller’s conveyancer. The ID supplied for the registered owner, that is the seller, was fake but unless it was obviously fake there was not much more one could expect the seller to do to identify the fraudulent activity.
Interestingly, had the seller made use of the Land Registry Alert procedure there is a possibility that the true owner would have been alerted about the proposed sale when the purchaser undertook the OS1 search before exchange. Clearly conveyancers should all be advising buyer clients, especially the Buy To Let clients, to register for this type of alert. Failure to do so may in the future be viewed as a negligent omission.
So what additional checks or alert factors should conveyancers as result of this incident consider?
Property of high value with no mortgage are at highest risk especially if they are rental properties. Conveyancers dealing with this type of property should perhaps check on the internet to see whether the property has been advertised for let recently. In this case the fraudster tenant had only just taken out a rental agreement and had, which is unusual, paid the rent in cash.
If instructed on this type property perhaps conveyancers should also look at the ID documents more closely and always arrange for the file to be referred to a senior member of staff for a second review.
Suspicion should be heightened if the registered proprietor is abroad and there is a third party purporting to act for the owner. In this case the property had been put on the market purportedly on behalf of the owner by the person who had taken out the rental agreement. Its unknown whether this was known to the seller’s conveyancer.
Another alert factor is the instruction for the sale proceeds to be transferred to an account based outside of the Country. If a conveyancer is instructed to transfer any funds abroad following a sale, there is now, I would suggest a strong, good argument to pause and to take a more detailed look at the circumstances. At the very least, the transfer should be referred to a Partner or other senior colleague for checking.
So in short conveyancers acting in transactions of this type should keep a close eye on transactions involving:
• Property with high value with no mortgage of other charge
• Property where the seller is shown as living at an address which is different from that of the property
• A seller looking to sell through an intermediary
• The transfer of funds to an account held abroad.
From a buyer's perspective perhaps there is now a case to consider raising some extra enquiries when it can be seen from the Land Registry Document that the property to be purchased is held by a registered proprietor who is not in occupation and or which is occupied by a tenant.
Questions of this type which conveyancers may wish to consider include:
1 Please produce from the letting agent references for the tenant and confirmation on how the rent has been paid i.e whether in cash or by cheque as well as confirmation that all standard money laundering and identity checks have been carried out on the tenant.
2 Please confirm the date on which the tenant took up occupation.
3 Please confirm that the funds to be transferred on completion are to be paid into a bank account held in the UK. If the funds are to be paid into an account abroad please confirm that these will be held by you for 48 hours before the funds are remitted ( the reasoning here is that if the buyer turns up on completion to find the property occupied without vacant possession ) there may be some time available to prevent the funds from being remitted. In the present case this would not have helped as the property was vacant at the time of completion. If the buyer’s conveyancer had known that the tenancy agreement was only granted prior to the marketing of the property and was now being sold with vacant possession then this may have rung some alarm bells.
I am not sure whether these questions will find favour with the sellers solicitors but at the very least they may put the sellers solicitors on notice that the transaction is a high risk one and as a consequence raise the level of vigilance.
At the end of the day detection of fraud to a large extent is based on instinct and more often luck. All practitioners can do is to ensure all the standard checks are carried out and that staff are trained on what to look out for and to remain vigilant throughout the transaction.