Home » Guest Blogs » Guest blog: How to tackle the property fraud epidemic

Guest blog: How to tackle the property fraud epidemic

In an overheating housing market, can conveyancers, agents and clients protect themselves this growing threat? Phillip Oldcorn, Chief Underwriting Officer at Dual Asset Underwriting, reports.

Philip Oldcorn

Hands outstretched to house imageWhen the system fails, nosy neighbours prevail – at least they did in the case of one property hijack victim, an elderly man going into care. The fraudster was his daughter (classy girl), spotting an easy opportunity to make herself £340,000.

Apparently, the police, conveyancers and lenders, were all none the wiser, until the neighbours spotted removal men decanting the chap’s possessions into their truck.

The diabolical daughter got three years, but will no doubt be out in one, if she starts to behave herself.

Not the biggest disincentive to misbehave, so when combined with news that there are only 900 police officers to detect and investigate fraud, we need look no further to see why property fraud is rising so quickly.

PROFILE

High profile cases, such as Dreamvar and property development company P&P help to highlight the issue and bring it to the fore, but this is a problem that is escalating fast.

The Land Registry is certainly making every effort to stop it. Their counter fraud unit works closely with the police and other agencies to reduce the risk of property fraud. They have prevented in excess of £130M of attempted property fraud in this year alone – a brilliant effort, given their meagre resources. In the last five years, the number of successful cases has tripled. In 2017, property fraud cost UK homeowners just under £25million.

RISKS

Alasdair Lewis, Director of Legal Services at the Land Registry recently said, “Property is a high-value asset and thus an attractive target for fraudsters. Your property, even your family home, can be sold and mortgaged to raise money without you even knowing. Fixing the mess can be distressing, time-consuming and costly.”

Philip Oldcorn image

Philip Oldcorn

Common cases typically involve people selling properties that they don’t own to innocent third parties. Particularly at risk are mortgage free homeowners, landlords and any home not registered at HM Land Registry. Many properties are advertised on auction sites, such as eBay or Gumtree, but they are not legally owned by the seller.

In the Dreamvar and P&P case, the fraud carried out was relatively simple. A person posed as a homeowner through taking out a tenancy, then found a buyer, engaged solicitors and made off with the cash. The owner of the property had no idea it was going on. The solicitors involved did nothing wrong it seems, all the relevant checks were made, yet an innocent buyer was out of pocket.

TRENDS

Recent cases have been more complicated. There’s a trend for utilising multiple bank accounts and clever marketing ploys or non-existent investment schemes. In more extreme scams, fraudsters are hacking into a buyer’s or solicitor’s email and asking for the purchase money to be transferred to a different account.

Everyone puts a huge amount of pressure on conveyancing solicitors to complete sales quickly. It’s a big part of the overall problem. A committed fraudster can quite easily obtain forged identity documents, making it difficult to establish if people are who they say they are.

Court of Appeal rulings have concluded a fraudulent seller’s solicitor may be held liable for losses to a buyer. This emphasises the importance of thorough identity checks.

Property hijack is an issue that shows no signs of stopping, and with the overheated housing market is likely to escalate. Many cases still go unreported and the effects on the victims can be financially and emotionally devastating.

REDUCE THE RISK

The Land Registry launched a monitoring service called Property Alert, which will notify you by email if there has been certain activity involving the register of the property. You can then decide if the activity is suspicious and take action. It is vital to keep your contact details up to date. Then there is an RQ request, which prevents the Land Registry from registering any sale on the property unless it’s certified by your solicitor.

These are certainly steps in the right direction, but more needs to be done.

In the Dreamvar case, the High Court judge David Railton QC took into account the hardship the financial loss would bring to them and deemed their legal firm Mishcon de Reya to be in a better position to make good the financial loss. It was a landmark decision which rocked the property industry and the legal profession.

A combination of high quality legal services and transactional ‘no-fault’ insurance can pick up the pieces.

There is no simple solution to this, fraudsters find new ways to exploit the housing market. Until the industry shuts down all potential avenues, fraud insurance is the only effective way to protect against this problem – for homeowners and their legal representatives.

What's your opinion?

Please note: This is a site for professional discussion. Comments will carry your full name and company.

This site uses Akismet to reduce spam. Learn how your comment data is processed.