I purchased a house from someone who is a fraudster and is not the true seller after all. What do I do?  

  D Rosen  You buy a property. You use solicitors or licensed conveyancers for the intended purchase. The seller of the property also has solicitors or licensed conveyancers for the intended sale. You found the property for sale through local estate agents. You have inspected the property and met with the intended seller. A price

Home » David Rosen » I purchased a house from someone who is a fraudster and is not the true seller after all. What do I do?  

 

D Rosen

 You buy a property. You use solicitors or licensed conveyancers for the intended purchase.

The seller of the property also has solicitors or licensed conveyancers for the intended sale.

You found the property for sale through local estate agents.

You have inspected the property and met with the intended seller.

A price is agreed. Contracts are exchanged. There is no mortgage or any charges on the property.

Completion takes place. Your monies are transferred over to the seller’s solicitor.

You then receive a call from the Land Registry to say that…title cannot be registered because the person purporting to sell the property, is not the actual seller. It is a fraud, and the purported seller is a fraudster. Horror of horrors!

It is a criminal matter, you say.

You contact the Police through Action Fraud and receive a crime reference number thinking this can be dealt within hours of being reported.

You do not hear from Action Fraud for weeks if not months because…they are over-burdened with notices of fraud, they have insufficient funding, and insufficient people and support staff.

You look for a civil court remedy. Who do you blame?

Your lawyer? Their lawyer? The fraudster?

Your lawyer and their lawyer should be covered by indemnity insurance. They are regulated by the SRA and have strict guidelines to follow in respect of conveyancing, money laundering regulations, proceed of crime act regulations, not to mention their Code of Conduct.

The fraudster? The fraudster is long gone, as is your money to some foreign land, usually with no prospect of tracing it.

It could never be your fault, you say obviously, because you got duped.

Some practical measures when looking at purchasing a residential property:

Is who you met, the genuine seller?

When you go to the property, you might find that it has not been lived in for some time.

Check the fridge. Smell if the air is stale.

Is the person who intends to sell the property, a relative? Did they say it was left to them in a will? Check for photographs of them around the house. They say they are relatives after all.

Watch closely the mannerisms and appearance of the intended seller. Do they seem nervous, or evasive with certain questions that you ask? Are they rushing you through the property, or allowing you to look around properly?

Are they looking for a quick sale? That is not necessarily the hallmark of a fraud, but it is something which you should be aware is a tactic of a fraudster to seek to rush things through, and not to properly check the viability or plausibility of a seller.

 Speak to a neighbour:

What harm is done to casually knock on a neighbouring door to ask if they know who lives in the property you intend to purchase?

Check the electoral register:

Who is registered as living at that address? Yes. The seller’s lawyer should carry out such checks, but there is no harm in doing this yourself.

Check that your lawyer is a lawyer:

There are many people who pretend to be lawyers in law firms, and they are not. If unsure, check with the Law Society and the Solicitors’ Regulation Authority. Each law firm, carries an SRA number. Each Solicitor has his/her own unique SRA number.

Check that the seller’s lawyer is a lawyer:

Your lawyer should know to do this, but it makes good sense to check who is acting on behalf of the proposed seller.

Do you really have to carry out such checks?

No. I am just giving you some practical measures to consider taking yourself. You should be able to rely upon their lawyer to make the appropriate checks and your solicitor to ensure nothing untoward is going on.

Would your lawyer ever be liable for assisting you to purchase a property where the seller is actually a fraudster?

Ordinarily, no. Your lawyer relies upon their lawyer to be a genuine seller. Your lawyer will ask questions as to title, and usual questions which arise when purchasing a residential property. If the answers are ambiguous, or there is sudden erratic behaviour to questions raised, which pressure you to purchase the property sooner without having carried out sufficient checks, that would suspicious and your lawyer should alert you, and advise you to not proceed. Similarly, if questions raised remain unanswered, that should raise alarm bells.

If your lawyer did not ask such questions, or did not receive sufficient replies, and did not see the signs of something untoward, they could be held liable either to some extent, or fully for your monies. That would allow for a breach of trust and a breach of contract claim to be brought against your lawyer potentially.

A defence for your lawyer would be to rely upon Section 61 of the Trustee Act 1925 insofar as it could be a defence to say that the lawyer acted ‘honestly and reasonably and ought fairly to be excused for the breach of trust’. On that basis, they would seek a declaration from the court that they be relieved either in part or wholly from liability.

Would the seller’s lawyer be liable for assisting the fraudster to sell a property which was not owned by the seller?

Yes. They could well be liable. Each case has to be decided on its own facts. Did they do enough to identify the person who said they could sell the property? Did such identity marry up with the Land Registry proprietorship register? Was sufficient explanation given? Have adequate anti-money laundering regulations been carried out? Have relevant identification documents been checked as to validity? Did the seller’s lawyer find anything suspicious about the transaction? Was the client seller clear with instructions and able to respond properly and fully to questions that lawyer raised? Is there explanation as to why their names do not appear on the Land Registry? A Deed of Trust, a Gift, legacy in a Will? There has to be something evidenced in writing to be relied upon that the seller is who they say they are, in connection with the property to be sold.

In Purrunsing v A’Court & Co, and Ors [2016] EWHC 789 (Ch), this was an unusual judgment in which both buyer and seller’s lawyers were held liable for the loss of funds to the buyer, where the seller turned out to be a fraudster.

The case is very interesting and I commend you to read it. There was not only sloppiness in following the appropriate procedures to check that the seller was genuine, by the seller’s solicitor, but the buyer’s solicitor in asking various questions, and not receiving satisfactory replies, ought to have raised alarm and advised the buyer not to proceed. The seller became aggressive when asked questions, to say that it was delaying tactics and that he would withdraw from the sale, leaving the buyer under pressure to purchase without having had satisfactory replies to questions raised.

What is considered reasonable action for the lawyer either acting for the buyer or the seller to take?

In this case, the court identified a departure from best or reasonable practice to increase the risk of loss by fraud. The relevant act or omission must be connected to the loss See Santander UK v RA Legal Solicitors [2014] EWCA Civ 183.  ‘If the trustee fails to prove that his unreasonable conduct played no material part in occasioning the loss then trustee fails at the threshold stage’.

The solicitor must show that information available to be assessed is consistent with the transaction and of course lawful.

What duties are owed by a seller’s lawyer to a buyer?

A seller’s solicitor does not owe a duty of care to a purchaser Gran Gelato Limited c Richcliff (Group) Limited [1992] Ch. 560, BUT when a seller’s solicitor hold money of the buyer pending completion of the purchase of property, he does so on trust and thereby becomes a trustee of the purchase money whilst it is in his possession pending completion. Breach of trust is established when a solicitor departs from the usual practices and procedures that ought to be in place pursuant to SRA guidelines and Codes of Conduct.

Beware the lawyer for both buyer and seller. Buyer beware.

drosen-1-sbProfessor David Rosen is a solicitor-advocate, partner and head of litigation at Darlingtons Solicitors LLP. He is a Certified Fraud Examiner and former strategic director of the ACFE UK. He is strategic legal advisor to Help4LiPs, a member of the Society of Legal Scholars, RUSI, and SAHCA. He is an honorary Professor of Law at Brunel University where he lectures amongst other things on counter-fraud and counter-corruption issues.

David Rosen • Fraud • Uncategorized

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