Three essential lessons to avoid property fraud
With property fraud on the rise, law firms need to be increasingly careful to avoid being duped. The risk of professional embarrassment, as well as a hefty increase in their insurance costs should a client bring a claim against them, are too pivotal to ignore.
Here are a few lessons they should heed:
1. Identity checks aren’t a tick-box procedure
A string of recent court cases, including Purrunsing v A’Cort & Co, Dreamvar v Mishcon de Reya and P&P Property Ltd v Owen White & Catlin, have established that the seller’s solicitors must share some of the liability for a fraud if they have not carried out proper checks on their client’s identity.
Fraudsters typically target homes that are:
- Where the owner lives elsewhere
The fraudsters will also often want:
- A quick sale and are willing to accept offers below the market value to get one.
- The funds transferred overseas (Dubai is a favourite location) immediately after a deal goes through.
Any of these should raise red flags that require a closer look into a client’s identity, including a face-to-face meeting.
Raising the possibility of briefly holding onto the sale proceeds while liaising with the Land Registry could be a way of gauging their genuineness.
The reaction might be telling: most legitimate owners would accept a short interval, while fraudsters tend to not want any delay for fear of being found out.
Registering for the Land Registry’s Property Alert service could help prevent a fraud as in the Purrunsingcase.
There the seller’s solicitor didn’t heed that the seller gave an address that didn’t match either that of the property being sold or the real owner’s alternative address that appeared on the Land Register.
There is also insurance that offers specially-designed fraud checks to help uncover a con as well as cover against the buyer’s money being redirected through email scams or being duped into buying a house without the real owner’s knowledge.
2. Fake vendors aren’t the only culprits
The numbers of phishing attacks, in which solicitors are duped into sending homebuyers’ cash to fraudsters’ bank accounts, have jumped.
The amount of money stolen from law firms in this way in the first quarter of 2017 was up 300% on the same period in the previous year, according to a report by the National Cyber Security Centre and The Law Society.
The SRA details over 100 phishing scams against law firms this year alone. So, it’s important you have rigorous procedures concerning verifying last-minute changes in payment details and to encourage your staff to raise any suspicions. Don’t be afraid to halt a transaction if you have doubts.
3. Charge an appropriate fee
Conveyancing is a highly competitive business, but it is a gamble to assign junior lawyers to property transactions to charge a lower fee. Conveyancing is by far the highest-risk line of work, in terms of the number of PI claims it generates.
Law firms should charge a realistic fee and take the necessary time to do the job properly.
High street solicitors will never be able to compete with “conveyancing factories”. However, in my experience, reputation counts for a lot, as does the ability for a client to walk in and discuss any worries they have with their solicitor.
One local conveyancer recently told me that he was so busy he could hardly keep up with the demand for his services, proving it’s not all doom and gloom on the high street.