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Article > Buying Fresh Air

Article kindly provided by Paul Gelder
383 Bury New Road Prestwich Manchester M25 1AW
Tel: 0161 772 4500

Imagine if you bought a property and then realised that the person you bought it from didn’t own it and had never owned it! This type of fraud is rapidly increasing and often targets Landlords and other absent owners. The chances of this happening to you are growing and growing. This article will help you avoid becoming a victim.

There are inexcusable and unjustifiable problems that are exposing the public, reputable Solicitors and their insurers to unacceptable levels of risk. This article is designed to highlight some of the problems where fraudsters masquerade as owners of Property and ‘sell’ it to an unwitting genuine Buyer. At MS Law we were recently instructed by one of our regular investor clients to act for them in a purchase. A nice house in a nice area of South Manchester at around 40-50% BMV. The ‘Sellers’ instructed another law firm in the centre of Manchester (not MS LAW).

The ‘Sellers’ Solicitor sensed something wasn’t quite right with his clients and he carried out some excellent due diligence. This raised some alarming discrepancies and the Police were contacted. It transpired that the ‘Sellers’ were not in fact the owners of the property but fraudsters masquerading as the genuine owners. The ‘Seller’s’ had provided identification to their Solicitors - including Passports which the Police discovered to be fake. The fraudsters were arrested the next day.

The Solicitors’ prudence meant that they immediately uncovered the fraud before any monies were handed over. Other Solicitors’ may not have been so prudent and this would have meant that the ‘Sellers’ would have received the sale proceeds and, no doubt, disappeared. The Buyer would have been left with nothing as the fraudsters are unable to transfer a property they do not own. This scenario was prevented and the fraud thwarted in this instance.

Fraudsters can be extremely sophisticated, convincing and be a part of serious organised crime. If you are an investor, be aware of fraudsters and have your eyes open. Ask the vendors background questions, are the vendors suspicious in any way, is the deal just too good to be true? Another reason to make sure you chose your Solicitors well!

It appears that incidents of fraud have risen in recent times. No doubt this is in part due to the uncertain economic times but in my view the system has also left itself wide open to abuse. Most systems are open to abuse by any sophisticated fraudsters targeting them with know-how and resources. But fraudsters often also pursue soft targets.

Relatively recently Land Registry documents containing ownership records have been held on downloadable documents available from the Land Registry web site. These records are available to all. Access to these records are generally only needed when a property is being sold, purchased or refinanced etc and in these cases most people appoint legal representatives to act for them who have always been able to access the documents. Therefore, is there a compelling argument that should these documents should be freely available to all ? There probably is a good argument in support but not one compelling enough to warrant the potential for abuse it helps create. It is noteworthy that there is a distinct absence of electronic security measures in the Conveyancing system when compared to institutions like banks.

A Conveyancing Quality Scheme (CQS) has been introduced by the Law Society and MS Law have been awarded accreditation of the Conveyancing Quality Scheme. In future, it will probably be a case that lenders will not allow Solicitors to act on their behalf without those law firms being members of the CQS. This scheme seeks to acknowledge quality so that accredited firms stand out from the unaccredited. However, it is not a specific targeted response to the problem of increasing instances of the type of sophisticated fraud discussed in this article.

Property fraud has been with us a long time, and may well be with us forever. However, the current increase in the rate of property fraud is unacceptable and results in an unjustifiable situation for reputable Solicitors, their insurers, mortgage lenders and honest members of the public. Insurance alone is NOT the answer to the problem. If the relevant authorities cannot get to grips with a problem then insurers won’t happily pick up the tab and insure against an ever increasing risk. Any problem left unchecked will grow and the more instances of fraud there are, the higher any premiums would rise and insurers would eventually either refuse to insure the risk, or offer premiums at totally unattractive prices. The root cause of the problem is what must firstly be addressed.

Land Registry have a number of current operative provisions that could be used so much more effectively to limit instances of fraud. The problem is that Land Registry rely on people to be pro active. However, the man on the street will probably not be aware that they can take measures to help protect themselves. Afterall, why should they be aware of them? I have provided below some working examples:

Peter Jones buys a house on 12 Sheepfoot Avenue Bramhall Manchester:

Option 1:
Land Registry would often only be requested to record this in the exact terms: Peter Jones of 12 Sheepfoot Avenue Bramhall Manchester. BUT Land Registry could be requested to record it like this:

Option 2
Peter Jones of 12 Sheepfoot Avenue Bramhall Manchester AND Care/of MS Law Solicitors 383 Bury New Road Prestwich Manchester AND

The Problems with Option 1
If Peter Jones goes to work in London for a few years but doesn’t sell the house then, in Option 1, if Peter Jones’ identity is taken by a fraudster the only address for him at Land Reg is the house he has now left. Any fraudster would also know this!

NB: Landlords and Investors also do not live at the Properties they hold as the Buy to Let properties and are attractive targets to the fraudsters.

Option 2 better than Option 1
In Option 2, the Solicitors address is also there as a contact address as is an email address. Whilst people may move house regularly their email address tends to remain unchanged for many years. I have had my hotmail address for approximately the last 14 years!

Land Registry also have an existing mechanism called ‘Restrictions’ which could be used to help combat the issues of fraud. In simple terms, a Restriction is basically a condition or act that must be performed before the Property can be dealt with by way of sale or remortgage etc. The Restriction is entered on the Land Registry records. The best way to explain what a restriction is to give you a working example and something similar to the below could be recorded at and Registry:

No sale or remortgage of the Property without the confirmation from the Solicitor acting that they have provided at least x days written notice of the proposed sale/remortgage to Peter Jones of 12 Sheepfoot Avenue Bramhall Manchester AND Peter Jones care/of MS Law Solicitors 383 Bury New Road Prestwich Manchester AND

It could be made compulsory for restrictions like this to be entered on all records. This would obviously need some refinement but this aticle is designed to be a starting point in the campaign and to generate further awareness, talking points and facilitate the improvement of the current problems. MS Law are the investors choice of law firm and carry out a full range of property related legal services for investors.

383 Bury New Road Prestwich Manchester M25 1AW
Tel: 0161 772 4500






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