How fraudulent property sellers could cost you thousands

property

 

Property fraud can be complex. A case against fraudster Edwin McLaren just concluded at the High Court in Glasgow, having taken more than 320 days to present the evidence that saw him sentenced to 11 years. Louise Scott-Nichols, a commercial property lawyer at LHS solicitor comments on property fraud in The Independent.

Neill Blundell, the head of corporate crime and investigations at Eversheds Sutherland, explains: "McLaren clearly set up a scheme designed to defraud the owners that was intricate and clever but also reasonably straight forward. It required the victims to trust him and he got their consent to pay monies into particular accounts and to transfer their ownership. That was why it worked.

"It is a lesson to us all to always probe these type of schemes to ensure their validity and also an indicator that we should take independent legal advice on anything of such importance as the ownership of our homes."

Yet while McLaren's sentence made headlines, many such crimes are barely reported on by the media. And that is despite a growing trend for sophisticated property fraud, fuelled by an overheated market.

No warning

"Essentially, property fraud is where someone steals your identity and sells or mortgages your property by pretending to be you," explains Alex Gosling, CEO of the online estate agents HouseSimple.com.

"You may have no clue your property has been sold until a sold sign appears outside the front door."

Common types of property fraud include people selling properties they do not own to innocent third parties, or obtaining mortgages and pocketing the money. More sophisticated scams involve persuading people to pay into non-existent investment schemes.

Property owners who are particularly vulnerable are landlords, people who own their home without a mortgage, anyone whose home is not registered at HM Land Registry and those who work abroad regularly, leaving their home vacant. With increasing numbers of people going into residential care, there's also a real risk of empty family homes being targeted by criminals.

James Fownes, an associate partner and property litigation specialist at law firm Shakespeare Martineau, warns that the criminals are getting cleverer.

"Fraudulent property schemes are becoming more sophisticated and increasingly take advantage of technology and access to personal data," he explains. "Many schemes involve identity fraud or innocent parties being taken in by compelling and yet plausible marketing ploys that may seem 'too good to be true'."

And this can leave victims considerably out of pocket. "Situations where a property is sold using forged documents, can lead to difficult questions regarding the terms or rights of redress. For example, if a fraudster forges documents in order to sell person A's property to person B, both persons A and B are 'innocent' in terms of the transaction and both may wish to retain ownership of the property."

Corporate targets

There are many different types of property fraud and often the financial victim is a company – perhaps a loan firm or investment firm. However, the inconvenience to the homeowner can be immense, particularly if it is perpetrated as part of a wider identity theft.

Alan Andrews, a spokesperson for KIS Finance, has seen several recent attempts at fraud as his company provides bridging finance for property purchases and this is a popular target for fraudsters.

He says: "Fraudsters seem to be under the false belief that fewer checks are done, meaning they have a great chance of pulling off their fraud.

"In January 2017 a mother and daughter were found guilty of conspiracy to commit fraud. The owner of a valuable London property did not live at the address, had no mortgage on it and rented the property out.

"The mother changed her name by Deed Poll to that of the registered owner. She applied for a bridging loan of £1.2m by duping the loan company, her solicitor and the surveyor, who came to the house to value the property, that she was the owner of the house.

"On completion, the bridging loan was paid into a bank account in Dubai. When the application forms were sent to Land Registry to register the lender's mortgage interest in the property it was identified as fraudulent and the application was cancelled. The genuine owner of the property did not lose the property but the loan company had already paid out the funds."

Unknown victims

Corporate victims of property fraud will suffer but any individuals affected can find themselves potentially out of pocket but also facing legal difficulties.

Louise Scott-Nichols, a commercial property lawyer at LHS Solicitors, says: "Unsuspecting parties to a transaction can not only suffer the loss of significant sums of money and their home from beneath their feet, but in addition damaged credit ratings that take years to build back up, escalating legal fees and in the case of a company, long-lasting damage to its reputation.

"When it comes to mortgage fraud, unfortunately we cannot see the true picture as many victims do not know they have been victims of fraud until they come to sell their property, which may be many years later. It is likely that victims are 'building up' and gradually more and more are becoming aware of the problem and discovering they are victims."

There are steps that property owners who feel they may be vulnerable to this kind of fraud: the most important is ensuring that the home is registered at HM Land Registry, which most will be if they were bought or mortgaged since 1998.

Scott-Nichols adds: "If the owner does fall victim and the property isn't registered at HM Land Registry, it will be extremely difficult to obtain compensation. Therefore, it's vital to check with HM Land Registry."

When a property is registered it's possible for the owner to receive alerts if someone applies to change the register. The owner can also put a restriction on the property title, meaning a solicitor would have to verify the true owner before they could progress with a sale.

More frequent frauds

Even for those who feel they are not likely to fall victim to an investment scam or that their property is not especially vulnerable to thieves, there are still plenty of real-estate-related scams that could cause unwitting victims some serious financial pain.

Paula Higgins, chief executive of the Homeowners Alliance, says that homeowners who live in their properties full time may be less likely to be affected by this type of fraud but they should not consider themselves off the hook.

"The most common form of property fraud occurs during the buying process and surrounds interception of payment. The fraudster will be aware of when transactions will take place and will intercept the process via the conveyancer, who will receive notification to transfer the funds from the sale to a different bank account. The buyer duly sends the necessary funds to this account and the money is lost. Thankfully this kind of fraud is becoming less frequent as conveyancers are become more astute to the practise.

"Other scams to be aware of include quick sale companies who agree to buy your home at a set price and then drop the price just before the deal completes and online shopping and auction platforms, where homes are advertised but they are not legally owned by the seller."