Monday 15 February 2010

Property theft

Properties can be stolen: if a fraudster is able to convince the Land Registry that they are the property owner, they can sell - or more likely - mortgage the property and disappear with the proceeds before you are aware anything is wrong. In the case of a mortgage, this might not be until the mortgage lender tries to take possession for non-payment of the mortgage instalments, at which point you would have to prove that you did not sign the mortgage deed that purports to be signed by you.

Properties that are subject to a genuine mortgage are far less vulnerable, as that mortgage would normally need to be cleared off, putting another hurdle in the way of any attempted fraud. However, properties that are free of mortgage are much more susceptible.

The Land Registry’s own identity checks are not very rigorous, relying on either one piece of photographic ID or two utility bills or bank statements, for instance. Though the conveyancer acting for the seller or mortgagee can be expected to check their client’s identity, it is not unheard of for conveyancers to be - deliberately or unwittingly - party to the fraud.

The Land Registry recommends proprietors give multiple addresses for themselves in the register (including an email address, if desired) to help protect against fraud. However, this does nothing at all to combat property theft, as the Land Registry does not check with the registered proprietor that the mortgage deed or transfer has, indeed, been signed by them.

The Land Registry also suggests registering a restriction in the register, requiring a conveyancer to certify that the person who signed the mortgage or transfer that is being registered is indeed the registered proprietor. However, this is really no more than the existing Land Registry requirement of confirmation that the parties to the transaction have all been identity-checked and, in any event, does not cover the situation where a conveyancer is involved in or deceived by the fraud.

The only protective measure we have been able to come up with is to register a restriction on the property’s Land Registry registers, requiring the consent of a third party who is not an owner of the property before the owner (or someone who purports to be the owner) can mortgage or sell it. This third party could be a trusted family member, solicitor or accountant, for instance. If you adopt this suggestion, we strongly suggest that there should be a document (which we can prepare) whereby the third party confirms they have no beneficial interest in the property but is merely acting as a guardian against property theft.

There is a risk of the third party dying, becoming mentally incapable or simply falling out with you. If the third party is a solicitor, chartered accountant or similar, their professional obligations mean that your position would be protected. However, this is not the case with a private individual, so you should think carefully before appointing a private individual to this role.

If you would like to take this idea forward, please speak to us about what arrangements would be appropriate for you.

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