​Legal Blog

Property Fraud – An Update

by | Jul 06, 2018 |
Property Fraud

Following on from my previous blog “Property Fraud – Are You Protecting Yourself?” a number of recent cases have now been decided in relation to property fraud. One of those cases is highlighted below.

Dreamvar (UK) Ltd v Mishcon de Reya (A Firm) [2018]

The Court of Appeal has recently given its judgment in the case of Dreamvar (UK) Ltd v Mishcon de Reya. In this case, Dreamvar agreed to buy a residential property in London.

Unbeknown to them, the seller was in fact a fraudster who had obtained the driving licence and TV licence of the true owner.

The sale completed and it was only when the registration of the purchase was submitted to the Land Registry that the fraud was picked up. By this point, the fraudster had disappeared with £1.1M.

The key outcomes in this case were as follows:-

  • Mishcon were negligent for failing to advise of the risks of property fraud
  • Mishcon were in breach of trust by paying the purchase monies to the fraudster and not the true owner
  • The seller’s solicitors  were negligent in failing to carry out sufficient client verification checks
  • The seller’s solicitors  were in breach of undertaking for failing to receive the purchase monies on behalf of the actual owner

The High Court initially ruled that the seller’s solicitors were not liable however, Mishcon were found to be in breach of trust, as the purchase was not genuine, although they did not know this to be the case. This left the risk for such fraud cases with the purchaser, rather than the seller. In this instance, Mishcon were to be held accountable (via their professional indemnity insurance).

The Court of Appeal upheld the findings of the High Court however and went on to find that the seller’s solicitors were in breach of trust in relation to the release of the sale proceeds to their client (i.e. the fraudster) and that they warranted they acted for the genuine owner, when this was not the case. This provided for a slightly more balanced ruling across the two firms as opposed to just Mishcon being liable.

What does this mean for buyers and sellers?

The upshot of the decision has made firms both nationally and globally much more aware of the continued and ever increasing risk of property fraud.

Client verification requirements are being tightened to ensure adequate checks are being undertaken both on behalf of sellers and buyers. The ramifications of this could possibly lead to delays in completing purchase formalities, increased fees and possibly even delays at the Land Registry in registering transactions.

How to be vigilant

As previously recommended, we would encourage both property owners and buyers to be aware of the increase in fraudulent transactions. 

Some of the warning signs to look out for are:

  • Is the property vacant/tenanted?
  • Is there a charge over the property?
  • Does the owner live abroad?
  • Is the seller pushing for an urgent completion?

A more in depth guide on how to protect yourself from property fraud can be found here.

If you have any concerns regarding the legitimacy of a transaction, we urge you to contact your solicitor without delay.

For more information then please do not hesitate to contact our commercial property experts

*Disclaimer: While everything has been done to ensure the accuracy of the contents of this article, it is a general guide only. It is not comprehensive and does not constitute legal advice. Specific legal advice should be sought in relation to the particular facts of a given situation.

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