Purchasing a house is often the largest and most significant transaction we make. Not only does it require an enormous injection of money but dealing with the transaction can often be very stressful. What happens though if, after all this, you discover that you have not, in fact, purchased your home, or that the house which has been transferred into your name is stolen from you?
Property fraud, and the number of people whose houses are stolen as a result of it, has been on the rise in recent years. The amount that HM Land Registry paid in compensation jumped from £2m in 2020 to £3.5m in 2021 reflecting the growing nature of the problem.
Here we take a brief look at how fraudsters may go about stealing your property, how you could be misled when purchasing property and the steps you can take to mitigate these risks.
What is property fraud?
The Land Registry is the definitive record of property ownership in England and Wales. If your name is on the Proprietorship Register of the Land Registry’s Official Copies, this effectively proves that you are the legal owner of that property. If a fraudster manages to trick the professionals involved with a property transaction into believing that they are in fact the true owner of the property with a registered title, the fraudsters can then make off with the proceeds of sale. The innocent purchaser may have acquired valid title to the property, and the original owner could be left high and dry.
A fraudster will often take the following steps:
- Identify a target property. The most frequently targeted properties are generally empty houses, rental properties, unmortgaged properties or properties where the owners are overseas.
- Obtain fraudulent documents which will purport to “prove” that they have the identity of the property owner. Often this involves applying for a replacement driving licence / passport with a substituted photograph of themselves instead of the true owner. It could even involve applying to have their name changed to match that of the owner of the property. These documents can then be used to create a bank account.
- The target property is advertised for sale and a solicitor instructed (using the fraudulent ID documents). The solicitor will be authorised to complete the transaction and to transfer the funds received from the purchaser into the fraudulently created bank account.
- Almost immediately, the money will be transferred through a series of different bank accounts making the transaction trail very difficult to trace and leaving the true owner completely unaware that their property has been transferred to a new owner.
Intervening to stop this chain of events can be very difficult. While solicitors are required to satisfy themselves that their clients are who they say they are, if the documents presented to them have been fraudulently obtained and the photographs match the person giving instructions, even with due diligence, it is almost impossible to detect any wrongdoing.
Steps you can take to protect yourself
There are steps that a property owner can use to protect themselves from the likelihood of this happening.
If you are the owner of a property that is unmortgaged, you live abroad, have property sitting empty or rent out your property, then extra care should be taken as your property is at higher risk from this type of fraud.
As a property owner you should do the following to reduce your risk:
- Check that your property is registered with the Land Registry. You will have to pay a £3 fee to access these documents. Properties that are least likely to be registered are those that were mortgaged or sold before 1990.
- If your property is not registered, you will need to make an application for first registration using form FR1. The fee payable will depend on the value of the property. You can find this out by using the Land Registry’s fee calculator.
- If your property is registered, ensure that your contact details on the Land Registry are where you are currently living. Often people make the mistake of their contact details being at the property itself which makes it easier for fraudsters to intercept letters or indeed for notifications of fraud to be sent to your property without you ever reading them.
- Sign up to the Land Registry Property Alert Service. If you put an alert on your property and ensure that your contact details are up to date, the service will alert you by email when searches and applications are made against the property you are registered to receive updates from. This service does not block these applications but warns you that someone might be making them without your permission. This service is useful for landlords and individuals with property portfolios as it is possible to register and monitor up to 10 properties.
- You can also put a restriction on the title deeds of your property which can stop HM Land Registry from registering a sale or mortgage on your property without the certification of a conveyancer or solicitor that the application was made by you. If you are a business owner or do not live at the property you can request the restrictions without paying a fee. If you live at the property, the fee is £40 and the application forms must be sent to HM Land Registry by post.
If you have any concerns in relation to this you should not hesitate in reporting the matter to the Land Registry (they have a Property Fraud line – 0300 006 7030), to Action Fraud and also to your local police. It is also advisable that you instruct a solicitor to discuss the ways in which you may be able to recover the sums expended / your property.
With many thanks to Thomas Trower, a current trainee in the Dispute Resolution team, for his help in preparing this article.
If you require further information about anything covered in this briefing, please contact Jo Ord, or your usual contact at the firm on +44 (0)20 3375 7000.
This publication is a general summary of the law. It should not replace legal advice tailored to your specific circumstances.
© Farrer & Co LLP, March 2022