What has caused this new spike in property fraud?
Identity fraud is not just about credit cards any more, fraudsters are after your property also. Property fraud is booming like never before and fraudsters are finding brand new and smarter ways to con unsuspecting property owners.
A spokeswoman for the Land Registry ( which is a government body responsible for maintaining a record of who owns what land in England and Wales ) said: “We recognise that fraud is a problem and we want to make more stringent checks about who is dealing with sensitive information.”
Paul Doxey, a forensic accountant at Navigant Consulting, told Channel 4 News “In the in the 80s and 90s we saw a lot of property fraud, but what’s different in the recent frauds is the explosion of ID fraud. It’s now far easier for fraudsters to obtain false IDs through the black market, which they can use as a cover while they carry out these frauds.’” The Daily Mail last month reported that Gary Miller, a fraud solicitor with Mishcon de Reya Solicitors, said a lack of enforcement funding meant that property fraud had not been ‘anywhere near high enough on the police agenda’.’ Our experience indicates to us that what we see now is just the tip of the iceberg,’ he added.
Property fraud occurs by con men obtaining false ID papers of a property owner and then going to the Land Registry to transfer ownership to a new name. Under the new name they take out a mortgage and then run off with the money, leaving the owner facing repossession.
The Registry says it received fifty five complaints of information having been obtained from its website for the purpose of fraud, which resulted in a massive payout of£12 million of compensation over the two financial years from 2005 to 2007.
Latest statistics show that the risk of becoming a victim of fraud is highest still following a divorce, when a property is vacant or bought to let, when the owner is overseas or absent, or when the owner is infirm or in a home.
The Land Registration Act 2002 abolished the legal significance of a Land or Charge Certificate, possession of which had until then been an owner’s proof of title to registered land. This is part of the industry’s move towards online conveyancing, but until this system is fully actualized incorporating the use of encrypted electronic signatures, the current situation could leave some homeowners at risk from fraud.
With current sophisticated counterfeit technology, a determined fraudster could, quite easily, obtain sufficient fake ID and obtain all the information he/she requires from the public register at the Land Registry to carry out a fraudulent property transaction.
If we consider the following two hypothetical scenarios, where Landlords and owners of empty properties could be especially at risk from this form of identity theft:
1. A Landlord unwittingly rents out his property to a con man, who has already provided one set of defrauded ID prior to commencement of the Tenancy. As he/she is now in exclusive occupation of the property, it should not present the con man with too much difficulty being able to pass himself off as the registered owner – to an unsuspecting Conveyancer, Surveyor, Estate Agent and Purchaser. As the Land (or Charge) Certificate no does not have to be produced anymore, this leaves the counterfeiter free to sell either the whole or part of the property, or alternatively secure a charge by re-mortgaging to the full market value; in both cases palming the net proceeds before running off to the Carribbean
2. An empty house could also be vulnerable and can either be systematically broken into to collect correspondence, or the fraudster could easily provide a different correspondence address to the lawyer he chooses to instruct, using defrauded documentation. The house would then be charged or sold and the fraudulent transaction could remain undetected for months, or even years, until such time as the true owner later begins to deal with the property.
A recent and alarming Court of Appeal decision has Okayed banks to repossess properties owned by the unwitting victims of property fraudsters.
In Barclays Bank v Guy a fraudster made a transfer of Mr Guy’s property to himself and successfully had the transfer of title approved by the Land Registry so that he became the registered proprietor of the property. He then borrowed money from Barclays Bank and secured the borrowing with a mortgage against Mr. Guy’s home.
Once he became aware of the fraud, Mr Guy applied to the Court of Appeal to rectify the fraudulent transaction and have himself re-registered as the freeholder of the home and the mortgage in favour of Barclays deleted.
The Court of Appeal determined that it was OK to reinstate Mr. Guy as the registered owner of the house but the mortgage to Barclays could not be removed. This meant that Barclays still had a valid power to sell the home for non payment of its loan even though Mr. Guy was not the person who had borrowed the money.
This is the staggering decision which basicaly means any of us could find our property being repossessed because of the actions of a fraudster. Anyone owning property they do not occupy themselves is particularly vulnerable to this type of fraud.
What can be done to protect your property assets? “Prevention is better than cure,” said Malcolm Tarling from the Association of British Insurers. “People need to take reasonable steps” It is imperative that home owners do what they can to help prevent fraud and to ensure their ownership in the same way that they protect other things they own.
A property owner could definately consider adding a standard form restriction on their title register, particularly where their house is not subject to a mortgage (the presence of a mortgage and the usual accompanying restriction hopefully reduces the chance of fraud involving a mortgaged property). The purpose of the restriction would be to prevent the Land Registry from registering a disposition (such as a transfer, lease, charge, or even an easement) without a lawyer certifying that, for example, the transferor is indeed the registered owner.
This restriction provides a degree of protection against an opportunist scammer. Although this would not stop a determined fraudster from succeeding, it does present an obstacle and may go some way to protecting the true owner from any unauthorised dealings.
Find out what you can do to assist preventing property fraud
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fraud, identity fraud, identity theft, illegal mortgages, property fraud