Stop, thief!

Could a fraudster really sell or mortgage local authority property right under your nose and abscond with the proceeds? With most local authorities owning a sizeable property portfolio, Bill Chandler looks at property fraud and how to protect your property assets.

Property fraud is not a new phenomenon. In the 2008 case of Barclays Bank Plc v Guy ([2008 EWCA Civ 452), a landowner ultimately lost a 48 acre development site worth possibly £30m after a fraudster transferred the land and mortgaged it to Barclays Bank, who were allowed to exercise their power of sale when the mortgage was not repaid.

The value inherent in most properties continues to make property – both residential and commercial – a tempting target for fraudsters. The abolition of physical Land Registry certificates in 2003 has arguably facilitated property fraud, although the Land Registry has responded by requiring increased identity evidence of parties to property transactions.

Modus operandi

The most common form of property fraud occurs where fraudsters attempt to sell or mortgage a property they do not own, either by pretending to be the registered proprietor or, as in Barclays Bank v Guy, by first fabricating a transfer to themselves.

In one property fraud case heard before the Court of Appeal in February 2012 (Lloyds TSB Bank Plc v Markandan & Uddin), the fraudsters impersonated not only the property owners, but also their solicitors, even attending at the buyer’s solicitors’ offices! And this is not the first instance of fraudsters pretending to be solicitors (either real or fictitious) in order to perpetrate property fraud.

Whilst this article concentrates on property already owned by a local authority, there is a corresponding risk to local authorities of innocently becoming embroiled in a fraudulent transaction when acquiring property or providing mortgages.

Other scams targeting potential investors in property, such as the infamous ‘land banking’ investment schemes, are less relevant to local authorities and are therefore outside the scope of this article, as are the various other types of mortgage fraud.

Risk factors

Properties which are occupied by the owner are undoubtedly at less risk of fraud, since the owner’s interest will be apparent on any inspection by the prospective buyer/mortgagee and/or their respective surveyor/valuer.

Whilst less relevant to local authorities, mortgaged properties are also at less risk, since the fraudster would also need to fabricate the necessary evidence to remove the seller’s mortgage.

Empty properties are at much greater risk. In Lloyds TSB Bank Plc v Markandan & Uddin the true owners had emigrated to America, but the risk exists even if the property is only unoccupied temporarily. In Link Lending v Bustard (2010) the true owner was in a care home when the fraudster remortgaged her house, whilst in Ijacic v Game Developments Limited (2010) the true owner had died and the fraud was discovered by his executor.

So, whilst it is unlikely that a fraudster would succeed in selling or mortgaging a working Town Hall, other council property is at much greater risk, particularly unmortgaged vacant properties – which many local authorities will have within their portfolios.

Tenanted properties are similarly vulnerable, either with the fraudster posing as the landlord or perhaps the tenants themselves using their occupation to fool a potential buyer or mortgagee that they are the true owner.

What should I do?

So, how can local authorities protect their commercial and residential property?

• Make sure that a current and appropriate address is given on the Land Registry title of every property owned by the local authority, so that any notices or queries raised by the Land Registry actually reach you. Up to three addresses can be registered for maximum protection, including an email address.
• Inspect the property regularly, which may reveal mail addressed to the property and any evidence that anyone else has been into the property. Regular inspection could protect you not only from property fraud, but also from other problems which can befall local authorities, such as squatters and possible adverse possession claims.
• Register a ‘restriction’ on your own title, perhaps in Land Registry standard form LL which requires a solicitor or other professional conveyancer to certify that the person making any future disposal is really the registered proprietor. For a trial period of six months from 1 February 2012, the Land Registry is allowing free registration of such restrictions against vulnerable residential properties where the owner is not in occupation.
• Be careful what you sign! This should be less of a risk for local authorities than for householders, but property fraud sometimes involves owners who have actually signed transfer or mortgage documents without realising their significance.
• Act quickly if you suspect that you may have been a victim - or target - of property fraud. The Land Registry should be contacted immediately, and possibly the Police. It may still be possible to rectify the position, or at least obtain compensation from the Land Registry.
• The Land Registry also recommends registering any unregistered property you own (around 20% of the country is still not registered at the Land Registry). Arguably it is actually easier to perpetrate property fraud on registered land than unregistered land, but registration at least opens up the possibility of compensation in the event of fraud.

Final word

Unfortunately, the sad reality is that you can never completely protect yourself from property fraud. A determined fraudster will always be able to fabricate the necessary evidence to satisfy a buyer/mortgagee and the Land Registry. The best you can hope to achieve is to minimise the risk and ensure that your property portfolio does not become an easy target for fraudsters.

Bill Chandler is a Legal Director at Hill Dickinson LLP. He can be contacted on 0151 600 8725 or by email at This email address is being protected from spambots. You need JavaScript enabled to view it. This e-mail address is being protected from spambots. You need JavaScript enabled to view it .