Is the UK in a property fraud crisis?

| Author: Tony Imossi (Secretariat) | Filed under: General News
Is the UK in a property fraud crisis?

Property fraud is a serious ongoing issue in the UK, with millions lost each year through a variety of scams varying from fraudulent Land Registry changes to underhanded landlord practices.

  • KEY FINDINGS
    Through a freedom of information (FOI) request to the UK Land Registry, we’ve crunched the numbers and found that they have received over twice as many fraud claims as they have prevented since 2009.
  • A CIPFA study of 80,000 cases of fraud in UK local authorities found that property fraud accounted for 71% that were either detected or prevented.
  • Our research has found that when split evenly amongst the number of fraud and forgery claims – the payout to victims for property fraud per person reaches upwards of £100,000, compared to an average online scam which only sets people back £600 in comparison.

What’s most shocking is the simplicity with which this fraud can take place. Scammers target vulnerable properties and uninformed people looking to rent or buy using basic identity spoofing and spear-phishing tactics. Sometimes all it takes for them to turn a profit is a fake listing.

THE SCALE OF THE PROPERTY FRAUD PROBLEM
While property fraud may not be the most widely reported issue – people are often more focused on their online data security and purely financial scams – it’s clear that property cons are, by far, the most common occurrence of fraud reported by the UK’s local authorities.

We spoke to Paula Higgins, founder and CEO, at HomeOwners Alliance about whether they had noticed an increase in instances of property fraud.

“Unfortunately, the value of successful frauds of property sales have more than tripled – from £7m in 2013 to £25m in 2017. Email and IT systems (especially those of conveyancers) are being attacked continuously. Scammers are becoming more sophisticated – fake emails can now be very hard to spot, and people may find themselves caught out especially when under the stress of buying a home.”

The ‘Property Fraud’ segment of the graph below focuses on various scams including ‘right-to-buy misuse’ and ‘illegal subletting’, which may end up with you losing out on your deposit or any additional upfront payments if you’re on the receiving end.

PROPERTY FRAUD INSIGHTS FROM THE LAND REGISTRY

One of the most direct and harmful methods fraudsters will use to try to go after your home is by either requesting a change to the Land Registry to either transfer assets into their ownership or impersonate the current owner for financial gain through the property.

The reason it’s so simple for scammers to do this is that land certificates have been made obsolete, with all property titles (in England and Wales) now published online. Because of this, many homeowners may not be made aware that someone is impersonating them to commit property fraud until it’s all over.

For instance, a fraudster could take out a mortgage using a homeowner’s identity, place some of this cash into an account to make a few repayments and keep the rest for themselves. The mortgage lender will only be made aware once the dummy account runs out while the property’s deed holder is left liable for the debts incurred.

There have also been cases of people going to solicitors, impersonating the current owners and asking for the deeds to be transferred to someone they claim is a relative but is actually a scammer who will look to apply a mortgage and profit from it.

We submitted an FOI request to the Land Registry to see how much of an issue this is:

This FOI data from the Land Registry only includes the fraud attempts that were successfully prevented, however, the potential value of each attempt is significant, with the lowest annual value concerning prevented fraud topping £5m.

Now that we’ve seen how many instances are successfully blocked, let’s take a look at what recourse you have if fraud isn’t prevented. The official position of the Land Registry on compensating registered property owners that are victims of fraud is as follows:

“The state guarantee is HM Land Registry’s core function by which every property owner’s title is backed up by indemnity if a mistake is made in the register that causes loss. In recent years the ‘mistake’ that has caused the most loss is the mistaken registration of a forged deed, such as a transfer, mortgage or even the discharge of a mortgage.”

Here is how much it has paid out to victims of successful property fraud attempts and forgery over the past decade. 

Notice that the instances of fraud claims still outstrip the detected instances.

If the indemnity (fraud and forgery) payout total is evenly distributed between the claims, property fraud could be costing victims upwards of £100,000, a figure put into perspective when you consider that an average online scam – which receive a lot more attention and awareness campaigns – only sets the victim back £600 in comparison.

It’s also worthwhile comparing the number of fraudulent cases that have been prevented since 2009 – 279 – with the number of claims in the same period – 678.

Even assuming that some of the claims may not have been eligible for compensation – if we take these figures as read that means that there are over twice as many reported cases of fraud than there are successfully reported preventions by the Land Registry.

This makes it clear that there is a lot to be done both by property owners and official bodies to combat property fraud in all its forms.

On whether enough is being done, the HomeOwners Alliance added:

“Although the lenders, conveyancers and others take property fraud seriously, especially given the sums involved, there needs to be more cross-industry collaboration. And in particular to ensure that estate agents – who may be the first point of contact for fraudsters – are trained and know what to look for. We would also welcome more secure communication systems between conveyancers and home movers to reduce the number of opportunities that fraudsters currently have.

Consumers – as potential victims of fraud – will find taking legal action to recover their losses expensive and time-consuming. Prevention – taking the necessary steps from stopping the fraud in the first place – may turn out to be the best cure.”

HOW TO AVOID THE MOST COMMON PROPERTY SCAMS
While a lot of work is going into the prevention of property fraud, there’s clearly more work to be done. With this in mind, read on to find out what you should be looking out for whether you’re renting, mortgaged up or have multiple properties to your name.

Firstly, it’s crucial to be aware that the most attractive properties to fraudsters tend to fall under the following categories:

We asked the HomeOwners Alliance what their key piece of advice for avoiding property scams and they said:

“If you own a property that is at risk (no mortgage, you live elsewhere), we think the free Land Registry Property Alert service is great. You will get an email alert if there is any activity occurring. But be aware that you need to get in touch with the Land Registry if you note any unusual activity.

For more reassurance, you may want to put a restriction on the title deed of your property. This stops the Land Registry from registering a sale or mortgage unless a conveyancer certifies the application was made by you.”

MORTGAGE SCAMS
If you’re a homeowner, landlord or even if you’re renting there are numerous ways scammers can attempt to profit from your property.

Here we’ll cover the main types of scam to look out for and offer advice on keeping yourself safe from property fraud.

RENTAL SCAMS
It isn’t just homeowners and landlords that have to beware of scammers – renting is also rife with potential for fraud.

From 2014 – 2018, there were 18,645 reports of rental fraud in the UK. The fact that a figure like this isn’t seen as a pressing issue is worrying enough, however, the problem doesn’t end there.

During the same period of time – Action Fraud reported that the amount lost to confirmed victims was £22.1m which they said was equivalent to £1,396 per person affected.

One of the main groups hit were students – in the same period as the figures above, 930 reports of university-related rental fraud, with losses of £1.1m.

Here’s what the most common forms of rental scams are and how to make sure you aren’t caught up in them.

Source:  Property Reporter

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