Why checks must be made to de­ter the bo­gus le­gal firms

Yorkshire Post - Property - - PROPERTY - John Rob­son

I am in the process of buy­ing a prop­erty and the firm of solic­i­tors deal­ing with my trans­ac­tion are a medium-sized, long-es­tab­lished firm I have used a num­ber of times pre­vi­ously. I have a his­tory with this firm both in re­la­tion to my per­sonal and busi­ness le­gal re­quire­ments.

I am pur­chas­ing a flat in a sub­urb of Lon­don to add to my prop­erty port­fo­lio. The seller of this flat has ap­pointed a newly- es­tab­lished firm of solic­i­tors with only one part­ner.

On be­half of both my­self and my mort­gage ad­vi­sor, my con­veyancer has said that he must “check out” this firm. This will be at an, al­beit rel­a­tively mi­nor, ad­di­tional charge.

Is it not the case that firms of solic­i­tors are reg­u­lated and, if so, why is it nec­es­sary for such checks to be made and I should have to pay for them?

So­lic­i­tor firms are reg­u­lated with the Solic­i­tors Reg­u­la­tion Au­thor­ity.

How­ever, prop­erty fraud­sters are clever and de­vi­ous and cases of fraud have sub­stan­tially in­creased over re­cent years in a num­ber of ar­eas, so it pays to be pro­ceed with cau­tion.

More re­cently there have been a num­ber of cases whereby bo­gus/ fake firms have been set up to deal with prop­erty sales and re­ceived money from gen­uine and in­no­cent firms act­ing for their buy­ing clients. Fol­low­ing com­ple­tion, th­ese fake firms have lit­er­ally dis­ap­peared, pock­et­ing the sale pro­ceeds leav­ing both buyer and lender with a sub­stan­tial prob­lems and fi­nan­cial loss.

One such case in­volved a large high street firm whose iden­tity had been used to set up a non- ex­is­tent branch of­fice to fa­cil­i­tate this fraud­u­lent pro­ce­dure.

There is a duty on all solic­i­tors to act dili­gently. In prop­erty trans­ac­tions, con­veyancers are re­quired to carry out a num­ber of checks both in re­spect of their client iden­tity but also, more re­cently, in re­spect of their op­po­nent firm.

Search providers have now de­vel­oped a check process whereby the op­po­nent firm can be vet­ted via a se­ries of checks in­volv­ing the Land Reg­istry and the bank de­tails given by the op­po­nent firm into which the sale pro­ceeds are to be paid on com­ple­tion.

Or­di­nar­ily, most con­veyancers with some ex­pe­ri­ence will recog­nise the op­po­nent firm and be able to as­cer­tain their va­lid­ity. How­ever, if there is any doubt, the duty to carry out the checks lies firmly with the buyer’s con­veyancer. In the ab­sence of such checks, if an is­sue arises, the buyer’s firm will be li­able.

A re­cent case in­volv­ing Na­tion­wide Build­ing So­ci­ety fea­tured a trans­ac­tion whereby checks had been made and both the lender and the Se­ri­ous Or­gan­ised Crime Agency sanc­tioned the trans­ac­tion to pro­ceed and yet the fraud oc­curred. This is very con­cern­ing for us as con­veyancers. Your con­veyancer is cor­rect to ad­vise you to check out the firm. Such checks ver­ify the num­ber of trans­ac­tions via Land Reg­istry made by them. If there is no his­tory or only a few re­cent trans­ac­tions, the sus­pi­cion is af­firmed.

Ti­tle in­sur­ers have also in­tro­duced a prod­uct known as the Se­cure Con­veyanc­ing In­sur­ance Pol­icy (SCIP). This pol­icy is de­signed to cover home­buy­ers and lenders against fi­nan­cial losses as a re­sult of prop­erty fraud.

This pol­icy pro­vides com­fort against th­ese un­fore­seen risks which will only sur­face af­ter the com­ple­tion has been achieved and thus the fraud­u­lent act has suc­ceeded.

Land Reg­istry has in­creased its fraud pro­tec­tion mea­sures since 2006, when the Land Reg­is­ter be­came a pub­lic doc­u­ment.

Land Reg­istry has also in­tro­duced a fraud hot­line to pro­vide ad­vice to home­own­ers who fear a fraud­u­lent sale or mort­gage trans­ac­tion. Fraud­sters are hold­ing them­selves out as solic­i­tors and a few are get­ting away with it.

John Rob­son is Con­veyanc­ing Man­ager at Ford & War­ren Solic­i­tors, Leeds.

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