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UK solicitors warned on growing problem of title fraud

Monday, 11 September, 2017

With reports of fraud in land transactions and registration of title continuing to rise, HM Land Registry and the Law Society have jointly published a practice note for solicitors on some of the indicators of potential title fraud.

New types of title fraud are appearing all the time, as criminals' ingenuity exploits loopholes in the system. They often include the presentation of forged registration or identity documents as part of HM Land Registry applications for transfers by sale or succession.

HM Land Registry has spent several years gathering evidence of identity and other fraud techniques derived from successful and unsuccessful fraudsters' attempts to obtain title to land. With the help of Law Society members, the two organisations have collected some examples of title fraud encountered in daily practice, and described them in the guidance.

Some recent cases that highlight some of the key warning signs were:

  • Purrunsing v A'Court and Another (2016 EWHC 789 Ch);
  • P&P Property Limited v Owen White & Catlin (2016 EWHC 2276 Ch); and
  • Dreamvar (UK) Ltd v Mishcon de Reya and Mary Monson Solicitors Ltd (2016 EWHC 3316 Ch).

Though some methods are in very wide use by fraudsters, they vary in their details and are constantly evolving, so a box-ticking approach to fraud prevention is not good enough, says the guidance. However, checklists of warning signs can be helpful, as well as a general alertness to anything unusual in the transaction.

For example, in the Purrunsing case, there were a number of potentially suspicious fraud indicators, with the seller pressing for completion on an expedited basis, while the official copy entries for the property contained an alternative address for service which was not the address given for communications by the supposed owner.

'Practitioners should look at each transaction as a whole', says the guidance. 'It will rarely be the case that one factor alone will betray a fraudulent transaction. In most cases, it is a matter of looking at all aspects of the case together and taking an informed view on the likelihood of fraud and the appropriate measures to be deployed to guard against it.'

Sometimes fraudsters pose as buyers and adopt fictitious ID to enter into a proposed purchase, only to withdraw before they exchange. The information they obtain through this process can then be used to commit title fraud on the owner of the property. For example, they can impersonate the registered proprietor (or unregistered owner) in order to sell or mortgage a property using the false ID. Proprietors most at risk are sole owners, especially of unmortgaged properties; absent owners, particularly landlords or owners living or travelling overseas; those who are deceased, or who are in a care home or hospital; and long-established owners who may have built up equity in a property and perhaps have a small mortgage or no mortgage.

Factors that may indicate fraud risk include an address for service (that is, the notification address recorded on the register) that is not the address of the property (especially if it is a care home, or overseas); a registered proprietor who has been proprietor for a very long time and may therefore be elderly; or a personal representative responsible for a property where the owner has died and the property is to be sold.

Lenders are sometimes defrauded by the submission of forged discharges. In one example, the Land Registry received a discharge purporting to be received from a lender who was an overseas company. The Land Registry served notices that ultimately identified this discharge as fraudulent.

In other cases, solicitors have been provided with a mortgage discharge document fraudulently purporting to come from the property's owner, which the solicitor then forwarded to HM Land Registry and applied to remove the charge. Such action can lead to the firm being liable for negligent misrepresentation.

It is also possible for a buyer to use false ID, such as a fake passport, to carry through a transaction, and then abscond with the funds raised from a lender.

Even conveyancing firms can be impersonated by the use of fake letterheads copied from real firms. The fraudster typically creates a false email address, differing from the email address of the genuine firm by only a single letter or symbol. Organised fraudsters will go to considerable lengths to mislead a buyer into sending purchase monies to them, sometimes even registering a fake sub-office with the Solicitors Regulation Authority and creating fake websites. However, frauds are not perpetrated only by third party criminals. It frequently happens that the culprits are family members, friends or partners of the proprietor.

Some recent cases of fraud have raised legal issues that now await resolution in the England and Wales Court of Appeal. The guidance will be revised when that happens, says the Law Society.

Sources

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