In an increasingly digital world, real estate transactions have become a major target for fraudsters in recent years, with figures showing that property fraud has cost the UK Land Registry more than £70 million over the past 14 years. In 2020 alone, the Land Registry paid out £3.5million in compensation for fraud related cases. Despite advances in security enhancements and rules and regulations, the real estate sector has seen some of the largest instances of fraud, more so than any other industry, and with criminals becoming ever more imaginative this shows no sign of changing.
Fraudsters employ increasingly sophisticated identity theft schemes, modern technology and systems to target innocent individuals, solicitors, financial advisers and mortgage lenders alike in order to circumvent due diligence and defraud innocent parties.
Properties that are either vacant, tenanted or being refurbished which are mortgage free are considered to be more vulnerable to fraud, although this is not a conclusive list and every property is a possible target for property fraud. One of the most common types of property fraud is where criminals attempt to acquire ownership of a property either by impersonating the registered owner, or by forging documents to transfer the property into their own name, so they can then either sell it or raise a mortgage on it. The ever increasing online nature of transactions now makes ‘home hijacking’, as it is commonly known, far more possible, and it is only after the event that the fraud usually comes to light causing huge distress and cost for the victims involved.
Common tactics of ‘home hijacking’
When acting as a ‘buyer’, the fraudster will agree an offer with a seller but will often withdraw from an agreed transaction before contracts are legally exchanged. During the process, they will attempt to gain detailed information about the property that may then allow them to transfer the property into their own name at a later date using fraudulent documentation.
When acting as a ‘seller’, the fraudster will impersonate the home owner and try to sell the property to a cash buyer in a quick transaction. The fraudster may change their name via deed poll to reflect the name of the home owner and obtain fake ID. It is also common for criminals to pay others to pose as tenants and rent a property using fake identities to obtain as much information as possible about the property. Perhaps more worryingly, and since Covid-19, houses are being sold online through selling agents and auction houses negating the need to even gain entry to your house in order to sell it. The fraudster may then look for a ‘quick sell’ to a cash buyer for quite often under the market value to fool the buyer into thinking they are getting a good bargain.
Alternatively, the fraudster may impersonate the property owner and steal the home owners’ identity in order to apply for a mortgage. Once the mortgage has been approved and the funds drawn down, the fraudster will disappear with the loan facility.
So what can you do to protect the property you already own?
Keep your contact details up to date
It is important to keep your correspondence details on the title register up to date and correct, this is especially important if the property is rented out or vacant.
If you do not live at the property you own then notify the Land Registry and provide them with your current postal address and/or email address. This will ensure that any notifications or alerts from the Land Registry will be delivered to you and not the property itself whereby it could come into the hands of fraudsters. Whilst it is important to ensure the title deeds reflect your current contact details, it is also important to ensure that you have updated any relevant utility companies and/or financial institutions with your correct contact details to prevent any personal data also being sent to the incorrect address and falling into the hands of fraudsters.
- Set up an Alert
In light of the increase of fraud, the Land Registry now allows property owners to sign up to a free ‘alert’ service. Owners will receive an email alert when there is certain activity in relation to their property, such as an application to change ownership details. If the activity is unusual and/or suspicious, the owner can then notify the Land Registry, their lender and the police. The service is free to any home owner and up to 10 properties in England and Wales can be monitored on one account.
If preferred, you can ask your conveyancer or solicitor to set up the alert for you.
Please see here
for further information.
- Enter a restriction
You can enter a restriction on the title register for your property which will prevent the processing of a transfer and/or mortgage unless a conveyancer or solicitor confirms the application was made by the rightful owner. Having a restriction on the title to your property serves as a ‘burglar alarm’ by deterring fraudsters when they are searching for properties to target, reducing your chances of being defrauded.
If you do not live at the property then there is no fee for registering a restriction against the title. If you do live at the property, there is a fee of £40 payable to the HM Land Registry.
- Keep an eye out on your Property if it is vacant
While visiting your property regularly and not leaving it unattended for long periods of time may seem obvious; you would be surprised to hear how many properties are left unattended, increasing the risk of the property being a target for fraud. We would strongly recommend that you visit the property regularly or ask a neighbour to keep an eye on it on your behalf. If you are not able to do either of these, then there are specialist certified companies who can be employed to carry out regular patrols of your property on your behalf, and who will alert you to any issues and act as a deterrent to fraudsters.
What can your solicitor do to protect you?
When acting for a seller, the solicitor should ensure that they have sufficient evidence to show that the property belongs to their client and if the property is not the client’s primary residence they will want to see evidence of the seller’s connection to the property.
When acting for a buyer, the solicitor should ask the seller’s solicitor to confirm that they have adequately verified their client’s ID and that they are satisfied that their client is legally entitled to sell the property.
Communication is key to preventing fraud. When you come to sell or buy a property you should ensure that you are regularly corresponding with all parties involved not only via email, but face to face and over the phone. This includes your solicitor, estate agent, financial advisor and the related seller or buyer.
If you are a buyer and feel that the seller is putting you under constant pressure to exchange and complete quickly, or refusing you access to the property then communicate this with the estate agent and your solicitor to seek advice. Do not allow yourself to be pressurised into a situation you are not comfortable with and insist on viewing any property more than once.
It is clear that despite tighter procedures and rules and regulations, the rise in property fraud is not showing signs of slowing down, so all parties involved need to be vigilant and work together to prevent property fraud.
If you would like to discuss anything raised in this article then please contact Rachel Cragg in our Real Estate & Construction team.
ABOUT THE AUTHOR
Rachel is an Associate in the Real Estate team specialising in residential purchases and sales, having joined Kingsley Napley in May 2021. She has a broad range of real estate experience and her clients include property developers, landlords, high-profile and high-net worth individuals.