Safe as houses? Not anymore – the legal reality of modern property fraud

Fraudsters view properties as attractive assets to target and are increasingly exploiting system weaknesses and technological developments to deprive lawful homeowners of their assets.

The properties that are particularly attractive to fraudsters often have at least one of the following characteristics:

1. Overseas owners or owners who do not live locally to the property;
2. Mortgage-free; or
3. Vacant, at least for a period of time.

During the Covid-19 pandemic, businesses operating in the property market had to rely on electronically verifying identity and other documentation, meeting people only over the phone or via video calls and verifying financial details electronically. These practices have remained in place even as the peak of the pandemic’s effect on businesses has passed. This means that agents, lawyers, owners, buyers, landlords, tenants and other third parties are increasingly relying on electronic communications and verification, in contrast to meeting people face-to-face, seeing original documentation in hard copy and having documentation executed with wet signatures. It has therefore become increasingly challenging for genuine parties to be sure that they are dealing with other legitimate parties.

Fraudsters have seized on the opportunity to exploit these new ways of working to perpetrate property fraud in the following ways:

1. Using forged documents, including for identity purposes, in order to impersonate genuine property owners and other parties;
2. Forging transfer documents to steal properties from the owners, i.e. title theft;
3. Intercepting emails in order to impersonate genuine owners or prospective purchasers and providing fraudulent bank account details;
4. Impersonating landlords in order to collect rent from genuine tenants, sometimes for properties that do not even exist;
5. Diverting funds intended for genuine sellers or landlords; and
6. Securing loans against properties, leaving the genuine owner saddled with the debt.

How to reduce the risk of property fraud

The Land Registry recommends that homeowners sign up to the Property Alert service, which alerts those that sign up when changes are made or activity occurs in relation to their property’s title.

If homeowners do not live at the property, particularly if they do not live locally, or the property is vacant for a period of time, then it is advisable to arrange for the property to be physically monitored in some way; nosey neighbours can be very useful in these scenarios.

Homeowners should also be alive to any unusual or unexpected correspondence or communications in relation to their property, which may indicate it is being targeted by fraudsters. Homeowners can be particularly vulnerable if their personal details have been leaked or their email account has been recently hacked; identity theft is the first step in many successful property frauds.

If homeowners are concerned, then a restriction can be put on the property title to prevent the Land Registry registering a sale or mortgage on their property unless a conveyancer or solicitor certifies that the application was made by the homeowner.

Early reporting to the authorities, as well as the Land Registry via the Property Fraud phone number or email, can help intercept fraud before it is too late.

Homeowners and professionals in the property market alike can help detect and intercept fraud by remaining vigilant, conducting thorough due diligence, particularly where the owner does not live at the property, and dealing with only reputable organisations and financial institutions. Be aware of red flags like an unexplained urgency to a transaction, a party unwilling to answer straightforward questions and a deal that seems too good to be true.

In some circumstances, particularly if the title to the property has been transferred away from the genuine homeowner, it will be necessary to take legal action to seek to recover the property, as well as potentially other losses and costs.

A rise in new technologies like phone number and voice spoofing is allowing criminals to more convincingly than ever impersonate innocent parties, meaning those operating in the property market need to be more alert than ever to the risk of fraud. Counter-fraud measures are also developing and technology is a key tool in identifying and preventing fraud, although the challenge is always to anticipate what fraudsters may do next and try to get ahead of it.