Conveyancing Fraud – Who Can You Trust
Property fraud is on the increase and is becoming increasingly more sophisticated, prompting the Law Society and Land Registry to issue joint guidance in order to raise public awareness of the threat.
The guidance points out how fraudsters may try to impersonate anyone in a conveyancing transaction, including buyers, sellers, borrowers, lenders and even conveyancers. Every week seems to bring a new threat – just this week we were alerted by Lloyds Banking Group that another firm of solicitors had been the victim of a fraud attack relating to faxed mortgage redemption statements, as fraudsters had intercepted a small number of genuine redemption statements and reissued copies of the document quoting fraudulent bank account details (of where to send the mortgage redemption monies to).
In one cautionary tale bogus solicitors defrauded unsuspecting buyers of over £700,000, having set up a fake firm in Rotherham which the buyer’s solicitors failed to spot was not legitimate. The buyer’s solicitors denied negligence, stating that they had relied on the Law Society’s Find a Solicitor website which the fraudsters had managed to insert their details on; (see here for an explanation of how the fraudsters achieved this). The Law Society however denied any responsibility, even though they had carried the details of the bogus firm on their website, arguing that they didn’t owe a duty of care to solicitors using the Find a Solicitor website to check whether a firm was genuine or not. (The case is still going through the courts, but at present it is interesting to note that whilst both I and Coles Solicitors are listed on the Law Society’s website, this can in no way be relied upon as proof that we are genuine solicitors!)
Should clients always be warned there is a risk of fraud?
Anyone who reads or watches the news must surely by now be aware that there are fraudsters lurking out there seeking to separate you from your life savings. It should not therefore always be necessary for your conveyancer to warn you at the start of a transaction that there is a risk the person selling the property you wish to buy is actually a fraudster. However, as the transaction progresses, certain “warning signs” may come to the conveyancer’s attention which should start alarm bells ringing and may prompt a conversation with the client about the potential risk of fraud. Examples of such warning signs include:
- a high value property;
- a vacant property;
- there is no mortgage on the property;
- the registered proprietor's address on the register is the property itself, even though the property is unoccupied (which means that no Land Registry notices would reach the registered proprietor);
- the seller is pressing for completion as a matter of urgency;
- the seller’s solicitors are not a local firm that your own conveyancer has dealt with before.
Whilst none of these factors alone would necessarily indicate that anything was amiss, the presence of two or more of them together should make a prudent conveyancer start thinking about whether any further checks are necessary.
No longer just buyer beware
In another case where many of the above warning signs were present, an imposter managed to obtain a driving licence and a television licence in the name of the real owner of an empty high-value house in Kensington, London, and then put the property on the market for sale. The imposter had the false driving licence and television licence certified as true copies by one solicitor, and then provided these certified copies to another firm and instructed them to act on the sale – all the while putting pressure on the buyer (and the buyer’s solicitors) to move quickly, saying that a quick sale was needed as he was getting a divorce.
The solicitors used by the imposter never met their client in person, instead being happy to act on the basis of the certified copy identity documents provided (even though the Law Society’s guidance on acceptable identification documents does not include television licences, and despite the fact that the fraudulently obtained documents listed the imposter’s address as being in Catford and not the address for service listed in the Land Registry Register of Title). The buyer viewed the house and was happy to proceed quickly, instructing his solicitors to progress the matter swiftly to completion, and paying £1.1m to the imposter’s solicitors. The imposter instructed his solicitors to forward this money to another firm, who were then instructed to send the money to China; in the meantime the buyer’s solicitors applied to the Land Registry to register their client as the new owner of the property.
The fraud was uncovered by Land Registry enquiries two months after the transaction took place (the Land Registry having noticed a discrepancy between the Catford address of the imposter and the legitimate owner’s registered address for service), but by then of course the money (and the fraudster) were both long gone. The buyer, finding himself substantially out of pocket, sued both his solicitors and the solicitors acting for the fraudster. In a decision which surprised most conveyancing professionals (and shocked their insurers), the buyer’s own solicitors were ordered to pay almost £1m in compensation to their client, despite the judge agreeing that they had acted honestly and reasonably, and had not been negligent, and despite the fact that the solicitors acting for the fraudulent seller admitted not carrying out sufficient identity checks against their client. (This decision is subject to an appeal which is due to be heard at the end of February). This case did however establish that there is no general duty to warn a client of the potential risk of identity fraud.
Trust Coles to protect you
Unfortunately there is no magic bullet to prevent fraud, and given that the frauds being perpetrated are becoming increasingly sophisticated, the key to prevention is constant vigilance. This is why at Coles Solicitors we proactively monitor the risk level of every transaction that we undertake, not only at the start of the matter but also throughout the transaction, ensuring that should any of the “warning signs” emerge during the course of your purchase that these are flagged up and further investigations carried out. What is more, on every single purchase transaction, for your protection we carry out a Lawyer Checker search in order to be sure that the bank details provided by the seller’s solicitors are genuine and that the firm is a recognised practice known for carrying out conveyancing transactions. This additional check provides a layer of protection for you and your money over and above the Law Society’s recommended procedures.
Finally, after your purchase has been registered at the Land Registry, we encourage every client to take advantage of the free Alert Service provided by the Land Registry which allows you to:
- monitor a property if it’s already registered with the Land Registry;
- monitor the property of a relative – you don’t have to own a property to set up an alert;
- choose up to 10 properties to monitor; and
- you will receive email alerts when there is certain activity on the properties you are monitoring (e.g. a request for office copies, searches or applications).
Stay vigilant – report anything you think is unusual or suspicious about the transaction, particularly if you become aware that one of the “warning signs” is relevant to your transaction – and don’t hesitate to speak to us if you have any questions.
Coles Solicitors have a team of residential property solicitors across our network of 10 offices including Stockton-on-Tees, York, Harrogate & Northallerton. Last year we helped 3 people a day move home locally, regionally and nationally and so you can be sure you are in safe hands when you instruct Coles Solicitors on your property sale or purchase.