Been burnt by a Fraudulent Property Transaction?

Identity Fraud has been in the headlines recently and can be a real problem.  A recent case is exemplified below.

On 15 May 2018, the Court of Appeal handed down its decision in a case called (1) P&P Property Ltd v Owen White & Catlin LLP and Crownvent Ltd and (2) Dreamvar (UK) Ltd v Mishcon De Reya and Mary Monson Solicitors [2018]. There were some similar facts in both cases, so the appeals were heard together.

Both cases involved the liability of solicitors in cases of identity fraud. Fraudulent people posed as sellers of properties in London both worth about £1m. They instructed estate agents and genuine buyers were found. The fraudulent sellers and the genuine buyers each instructed their own solicitors.

The sales went ahead – contracts were exchanged, and completion of the sales and purchases took place on the basis of the provisions of the Law Society Code for Completion 2011 (the Code). After completion, but before registration at HM Land Registry, the frauds were discovered.

As completion had not in fact been effected the buyers were entitled to recover the purchase monies paid over on completion, however the fraudsters and the purchase monies had disappeared.  The buyers took action to recover the purchase monies by claiming against the seller’s solicitors for breach of warranty of authority, breach of trust and breach of undertaking. They also took action against their own solicitors for breach of trust.

The judgment transfers the risk of property fraud onto solicitors, but it shifts the position as to which solicitors should bear the losses where a fraudster impersonates the owner of a property in a sale. Solicitors representing imposter sellers can now face exposure to the losses of innocent purchasers on the basis of breach of trust, breach of undertaking and, potentially, for breach of warranty of authority.

Solicitors representing innocent purchasers in an imposter sale scenario will still face a breach of trust finding, but they should be able to obtain a contribution (potentially amounting to a full indemnity) from the solicitors acting for the imposter seller, given that those solicitors are best placed to identify the fraud.  On the basis of the above judgment, they will not be relieved of this breach of trust.

What happens to the Innocent Purchaser?

So what does this mean if you are the innocent purchaser in a fraudulent property transaction? The Courts have confirmed that, as an innocent purchaser, you will have a claim against your solicitors for breach of trust (as a result of transferring the purchaser monies to the seller’s solicitors). Your solicitors can then seek to recover monies from the seller’s solicitors. It will effectively be between the two firms of solicitors to apportion liability between themselves.

Here's a recent case which we have handled

We have recently acted for a client who was the innocent purchaser in a fraudulent property transaction and as a result of our involvement the client recovered all of the money they spent with regard to the fraudulent purchase and also recovered a substantial element of the costs spent as a result of our involvement.

The facts of the case are that 2 individuals purporting to be the owners of a property approached an estate agency to sell a property. The two individuals had fraudulently obtained ID documents for the real owners of the property. In actual fact, despite their names appearing on the title, one of the real owners had lived in a nursing home for years and the other was deceased. This information however did not come to light until after the sale of the property.

An offer was made by the innocent purchasers and promptly accepted. The sale of the property was rushed through in a matter of weeks. There were a number of potential issues that should have been identified and raised by both sets of solicitors throughout the transaction but were not. Unfortunately once the sale of the property went through and the money transferred to the fraudulent sellers they made off with the money. Leaving the innocent purchaser with no option but to pursue their solicitor to recover their money.

If you have been the innocent purchaser in a fraudulent property transaction we can help you to recover your money.

If you have been affected and wish to discuss the matter further please contact us on 0161 785 3500.

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Please note that the information and opinions contained in this article are not intended to be comprehensive, nor to provide legal advice. No responsibility for its accuracy or correctness is assumed by Pearson Solicitors and Financial Advisers Ltd or any of its members or employees. Professional legal advice should be obtained before taking, or refraining from taking, any action as a result of this article.

This blog was posted some time ago and its contents may now be out of date. For the latest legal position relating to these issues, get in touch with the author - or make an enquiry now.