Property fraud is not new, but it is becoming increasingly sophisticated and affected parties may be surprised to learn that their professional advisers may not be liable for the losses suffered.

Rebecca Francis

In the latter part of last year, the court in P&P Property v Owen White & Catlin grappled with the thorny issue of identity theft in property transactions. Here, a fraudster impersonated the owner of a property and sold it to an innocent purchaser. The court held that the innocent purchaser was not able to claim against the purported seller’s solicitors once the fraud was discovered.

Since the start of the year there have been further property fraud cases in which an innocent party has questioned the conduct of professional advisers on both sides of the transaction, in particular Patel v Freddy’s and a claim against a City law firm by its client, Dreamvar.

In Patel v Freddy’s, the genuine owner of the property was not able to seek rectification of the title register where the property had been fraudulently transferred because the transferee had not contributed towards the mistake. It was held that the buyer’s solicitor was not required to check the identity of the purported seller nor was it required to check that the seller’s solicitor had done so.


Thorough identity checks are key in complex cases

In contrast, proceedings against a City law firm found the firm liable for breach of trust when it released its client’s completion funds to solicitors acting for an imposter who was posing as the true owner of a property. However, the firm was not found to be negligent, so it will be interesting to see whether the decision withstands appeal, given the wider implications on conveyancers and professional indemnity insurance.

Mitigate risks

To mitigate the risks of fraud it’s important to heed the warning signs and scrutinise the seller’s justification for an immediate exchange. Face-to-face meetings should be encouraged and enquiries should be made as to where funds are being sent. You should read and consider the red flags in title reports carefully.

Sign up for the Land Registry Property Alert Service and an email will be sent to the elected email address any time an application is made against the title. This is particularly useful for unmortgaged properties, which tend to be at higher risk of fraud.

When faced with a corporate seller, check the People with Significant Control (PSC) register at Companies House. This could help shed light on the identities of the individuals who should be dealing with the transaction. However, it is also worth noting that the availability of this information could actually enable fraudsters.

Rebecca Francis is a senior associate at Osborne Clarke