Conveyancing solicitors continue to report cases of property fraud.
Up until the Land Registration Act 2002, the owner of a property would prove ownership of Land Registry registered land by their production of a physical document called a Land Certificate (or if it had a mortgage) a Charge Certificate.
Now, all an owner needs to produce to their conveyancing solicitor is a printout of the property deed held at the central database at the Land Registry, and the person's original passport. Actually, they can avoid either of these, as the conveyancing solicitor will obtain the former, and some conveyancers simply do an online ID check – which simply confirms if that exists (hardly proof of much).
However, it is the Land Registry's plan to now move towards e-conveyancing, with electronic signatures, so the present situation for potential fraud could get even worse.
In today's world, fraudsters are quite able to produce fake identification and they do, costing the Land Registry millions in compensation payouts per year. Consider the following hypothetical scenarios:
A tenant who has rented a property now has physical control of the property, and can allow viewings by unsuspecting buyers. If they ask their conveyancing solicitor to download the registered title deed - after they produce a fake set of ID with the same name as the registered owner - are they not able to pass themselves off as the registered owner?
A sale of a property following the death of the owner. The fraudster pretends to be a legitimate purchaser, and has a mortgage valuer inspect. Once the offer is issued, they withdraw. They use an accomplice to now carry out the same selling fraud as above, and they act as the buyer – only this time two conveyancing solicitors are now unsuspecting parties, and the fraudulent ‘buyer’ is now able to mortgage the property to a Lender, as they still have a live mortgage offer (following a dishonest application). They could produce fake ID to both their respective conveyancers and who would know?
What is the solution?
There is a Land Registry hotline, and calling the police fraud line too. However, if the Land Registry is approached by the dispossessed owner for the return of their property on the basis that they claim there has been a fraud, then the Land Registry will require an Application (AP1) to be made, and the Land Registry must first serve notices on the fraudulent new registered owner and any Lender who may unwittingly have taken a mortgage on the property.
One particular scenario highlights the frustration:
The first attempt at a probate executor sale aborts. A second purchaser proceeds to an exchange. Days before completion the purchaser observes that the registered title has changed to an unknown third party and there was now a mortgage on the property. It turns out that the third party was the first buyer who had withdrawn. They had forged the signature of the deceased and then transferred the property to themselves and mortgage it. Two law firms were involved, though it is not clear if they took part.
The Land Registry are approached and they require an application AP1. They require to serve notices on the new owner and the Lender. This is despite the production of Grant of Probate evidencing a clear fraud as the Transfer (TR1) was purportedly signed by a deceased individual. Weeks go by and unsurprisingly, the registered owner does not reply, and the Lender does but of course the Land Registry conclude there was no merit (again unsurprisingly as a Grant of Probate exists).
In the meantime, conveyancers to the legitimate sale work out a solution to at least allow the buyer into the property without fee – thus mitigating the buyers loss - while the dispossessed owner (still in possession of the keys etc) effects the Land Registry application.
As a result of the lack of substantive and effective reply to the Land Registry notices, the Land Registry reverse title back to the deceased, and remove the registered mortgage, and the original sale can complete.
A happy outcome, but stressful while it lasts.
A lesson to all Executor sellers – and their conveyancing solicitors - is to immediately inform the Land Registry of the death of the owner, so they can place a protective entry on the title, necessitating at least the production of a Grant of Probate as part of the documents to enable a subsequent third party to be registered as the owner.
However, a more general solution that is being widely publicised for anyone who owns registered land and who wants to protect themselves against fraud is to place a Land Registry prescribed form of wording (called a Restriction) on their registered title, which would require a conveyancing solicitor to certify that the owner who is selling is the correct person. That is a tall order for the conveyancer who then takes on a role of a private detective at the point of sale.
That said, the Trethowans Residential Property Team will consider adding such a Restriction for our clients at the point where they purchase their property through us – and for free.