Opening the door to property fraud

Monday 15 June 2015

Mortgage fraud is big business, whether for straight profit, by obtaining finance on a property under false pretences, or as a method of laundering money gained by criminal means. What should a property owner look out for? Here are a couple of studies from cases Blacks has dealt with in the recent past:

Case study 1: The Tenant

The property was let by the owner to a tenant. The tenant obtained a false passport naming him as the owner and purported to sell the property to an innocent third party. The buyer arranged mortgage finance, and the tenant’s forged ID was sufficient for a genuine firm of solicitors to act for him in good faith.

The tenant took the money and disappeared, leaving the buyer to fight with the lender over the mortgage debt once the true owner’s identity became apparent.

Case study 2: The Stranger

Another let property. The first indication the owner had of a problem was when the tenant was served with a possession notice from a mortgage lender. Investigation showed that the property had been transferred to a name being used by a fraudster, who had then obtained mortgage finance over it. The fraudster disappeared, leaving the owners to fight with the mortgage company to get the charge removed from the property. Subsequent investigation revealed that the fraudster had employed a firm of solicitors that was subsequently closed down by the Solicitors’ Regulatory Authority, and who may have been knowingly conducting fraudulent transactions in bulk.

Contact with the police revealed that the fraudster had conducted similar schemes in a number of different cities about the UK. It remains unknown how the fraudster identified the particular qualities that made this property a target, although a previous tenant may have been involved.

 

In the first case, an innocent buyer was left holding a large, unsecured mortgage debt, with the owner also having to deal with a mortgage charge on his property. In the second case there was no buyer, but the owners were forced to engage in an expensive application to a tribunal in order to prevent the fraudster’s lender taking their property. In both cases the villain of the piece got away with the money. What can be done?

These cases have two points in common that laid both properties open to this sort of fraud. Firstly, they were mortgage free. Secondly, the owners did not live there, but had not updated their address at the Land Registry. Property records at the Land Registry are not hard to obtain, and would show what address is listed for the owners, as well as whether the property is charged by a mortgage lender or other party.

When the Land Registry receives an application concerning a property, notification is sent out to any parties named on the property register. This includes the owners and any lender that has registered a mortgage charge. However, if there is no lender, and the owners’ address is that of the property (where the fraudster knows they do not live) then such warnings go unnoticed, and the property can be fraudulently exploited with ease. Most tenants, receiving post addressed to their landlord, will unfortunately not pass it on, either leaving it to pile up until the landlord next inspects the property, or just throwing it away.

It is possible, on paying off a mortgage, to have a small residual sum remain on the account, so that the mortgage itself remains active on the property register. Although some lenders may be reluctant to agree to this, the presence of a charge makes that property far less appealing to this sort of fraudster, as the lender would be notified of any application the fraudster made.

The best protection, however, is simply for property owners to keep the Land Registry updated with their current address. To register a new address involves a relatively simple application, and owners can register several addresses at once (such as a solicitor’s office, for example) so that any notice is served on all of them. Any attempt at exploiting the property should therefore be swiftly detected by the owners, and the simple fact that the owner has listed multiple addresses on the property register may itself send a fraudster off looking for easier prey.