Property Newsletter March 2010
Property fraud - protecting your interest
Property is often the most valuable asset we own. In this article, we provide some suggestions on how property owners can help themselves to prevent would be fraudsters from committing fraud against such assets.
The incidence of property fraud in recent years has increased substantially, with organised criminals using weaknesses in Land Registry systems and processes to help them transfer the ownership of a property fraudulently, sell it or take out a huge mortgage (which the true owner may then be left to repay).
As a result of this increase, the Land Registry has had to pay out millions of pounds in compensation for mistakes and fraud since 2005 by virtue of its state-backed guarantee: on behalf of the Crown, it guarantees ownership of registered estates and interests in land. If a mistake or fraud is committed (and cannot otherwise be fairly rectified), the Land Registry will, in certain circumstances, compensate a person who has suffered loss because of it.
Property fraud commonly occurs by criminals obtaining false identity papers for a true property owner and using them to transfer ownership at the Land Registry from a true owner to themselves. In practice, all claims on which indemnity payments are made are committed by either forgery of deeds or impersonation of the registered proprietor, and the vast majority will involve the registration of a fraudulent charge.
It should be noted, however, that a number of fraud techniques do not give rise to an indemnity payment being made by the Land Registry, (such as mortgage fraud through false valuation where the execution of the mortgage deed is not forged) since there is no error in the register. Equally, where mistakes can be rectified without a loss being suffered by the registered proprietor (such as in the case where a fraudster changes the proprietor's details on the register in anticipation of forging a charge, but has not yet registered the charge), no indemnity will be payable.
Questions have of course been asked as to the causes of the increase in property fraud. Some believe that the Land Registration Act 2002 and some of the procedures used by the Land Registry have created weaknesses that are open for abuse by fraudsters. The register, which has been open to the public since 1990, has been available online since 2005. The Land Registration Act 2002 has allowed copies of documentation in relation to properties, such as leases and mortgage deeds (which amongst other information contain the signatures of the true property owners) to be made readily available.
The obvious concern is that the availability of such information, along with publicly available information from other sources, can be used by fraudsters to steal a property owner's identity.
It is possible to identify certain situations where a property owner is more likely to be vulnerable to property fraud, for example: where a relationship breaks down, where a property is empty or is bought to let, where the owner is abroad or is absent or where the owner is infirm or in a nursing home.
Having come under pressure from various quarters to take action, the Land Registry has recently produced a guidance note setting out some basic steps that can be taken to prevent fraud or forgery in relation to your property interests.
1. Register your title at the Land Registry
If title to your property is unregistered (and your interest in the property is in part proven by physical ownership of the title deeds), you can apply for voluntary first registration. State-backed registration provides greater security of title and, depending on the situation, if you suffered a loss as a result of a fraud you may be able to get compensation from the Land Registry. As mentioned above, the Land Registry's compensation scheme covers situations where mistakes have been made on the register, even when that mistake is not as a result of errors at the Land Registry but as a result of fraud.
2. Ensure your name and address details are up to date
It is important to have up to date details of your name and address with the Land Registry, as having incorrect details may mean that you do not receive letters or notices that the Land Registry sends to you.
3. Put a restriction on your property
If you think you are particularly at risk of fraud being committed against your property you could apply to have a restriction registered against your title. There are many forms of restriction that can be used depending on the nature of the protection required; and the restriction would act to prevent the Land Registry from, for example, registering a transfer without a solicitor having certified that he is satisfied that the transferor is the true owner.
4. If the property is vacant, be sure to visit it regularly
Having a property empty leaves it vulnerable, as would be fraudsters could periodically break in to collect correspondence, or could provide an alternative address to a solicitor using counterfeit documentation. The property could then be mortgaged or sold and the fraudulent transaction could go undetected until the true owner attempted to deal with the property themselves.
Naomi Cunningham is a solicitor within the Property Team at Michelmores. For further information on the issues raised in this article, please contact Naomi at naomi.cunningham@michelmores.com.
General information about this newsletter:
The articles in this newsletter are for general information only and are not intended to constitute professional advice. Though Michelmores LLP is confident of their accuracy, no duty of care is assumed to any direct or indirect recipient of the articles and no liability is accepted for any omission or inaccuracy.
