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News update for Q1, 2011

 

Identity Fraud - it can literally cost you your property!


Most people will have heard of cases where someone has been defrauded with bogus transactions on their credit cards, gaining employment with a false identity, or someone having their identity “stolen”.  But perhaps the most serious, for majority of us, would be to lose your property through identity fraud.

In this news article we highlight a case (based on an actual recent event) where the worst nightmare happens, an identity fraudster literally takes possession of someone’s property, then sells it on, and the original owner is unable to get their property back.

Before we go further, there is no need for property owners no need to panic, not every property fits the fraudster's criteria and there are many measures owners can take to protect themselves which we will explain later. So, how does this type of fraud happen?

Having identified the target property [we explain in more detail below] that is most suited to this type of fraud, the first step is for the fraudster to prepare a fake identity which requires at least two documents, one being a passport, the other a proof of address such as a utility bill.

The next step is control of the property, that is the fraudster needs to have access and for the owner to be absent for a reasonable period (ideally several months), most tenanted properties would fall into this category, but it could also be a property undergoing development. The fraudster needs to have control of the property to access correspondence and arrange site viewings.

The fraudster starts by advertising the property for sale on one of the many internet websites (they less likely to use local Estate Agents).  They communicate with the potential buyer by phone and email, and evenutally arrange viewings where they actually meet the prospective buyer in person.  Eventually a price is negotiated and solicitors appointed.

Both the fraudster and buyer will then appoint their own solicitors as with any normal property transaction. The fraudster meets with his solicitor, provides the fake ID documents, and unless the solicitor is sufficiently dilligent, the fraudster will be accepted as the true owner.  At this point we should make it clear that this would only apply to an appropriate target property [ see details below ].

The sale proceeds as normal and the completion takes place, the fraudster collects the sale proceeds and “disappears”.  At some point in the future the original owner will arrive at the property to find the locks are changed, and that they are no longer the title owner of the property.  This is where it gets more interesting, because many people may assume that you contact the police, a solicitor, Land Registry, and the fraudulent sale is overturned.  The reality is often very different.

The fact is the new owner who has also been victim to the fraud is now the " legal owner". As the new legal onwer if they can show they are “in possession”, this means they are either living at the property or they are in receipt of rent (e.g. property has been let to a new tenant), the only recourse the original owner would then have is to be able to prove:

  • That the new owner acted by fraud or lack of proper care to contribute to the “mistake” in the change of title ownership, or
  • It would for any other reason by unjust (this is a clause is rarely applied).

The actual legislation is contained in the Land Registry Act 2002, fourth schedule, paragraph 6(2). Based on this legislation then assuming the new owner is in possession, has acted with honesty, and followed the proper purchase processes with their solicitor then they are most likley to be entitled to keep the property.

The only recourse open to the original owner is then either to make a claim against solicitor acting for the fraudster, or make a claim against Land Registry.  In either case any negligence on the part of the original owner which could have helped the fraud to take place (such as failing to maintain current contact details in the title register) could result in a reduced amount of compensation paid out.

Further information links:

Land Registry Act 2002
Identity and financial checks
Typical "target properties" most susceptible to fraud and actions a property owner can take to help prevent this type of fraud.

 




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