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.
- 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.
Read on to find out the true scale of the issue, how much it could cost you to get caught out and what to look out for in both rental and mortgaged properties.
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.
|Year||Indemnity: fraud and forgery (£m)||Number of claims|
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.”
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.
If someone owns a property they do not live in, a fake seller can take advantage by posing as the homeowner and pocketing the funds. To accomplish this, a fraudster will contact the Land Registry and attempt to change the details on a registered property, transferring control to them if they are successful.
Solution: Ensure the seller is signed up to Property Fraud Alerts from the Land Registry for free. You can also apply for a restriction – the requirement that any sale or mortgage on your property must have your identity confirmed by a solicitor or conveyancer. If you live in the property, there’s a charge of £40. If you don’t, but own it privately, it’s a free service.
Most completions happen on a Friday afternoon, which is where hackers take their opportunity to hack into the solicitor’s email accounts. They will then send you fake bank details for you to send cash to.
Solution: If your solicitor changes their bank details at the last minute, go to the office in person or at least give them a call to check what’s going on. A good, secure and cyber-savvy solicitor wouldn’t send bank details via email anyway.
Similar but not the same as the above, this is where scammers would intercept your house deposit by emailing you from a similar domain as your solicitor. Your solicitor’s email might be firstname.lastname@example.org, and the hacker would send an invoice from email@example.com. They look the same, but a slight punctuation change means you might send your funds to the wrong place.
Solution: Be vigilant with emails. Call your solicitor every time you are due to make a payment. You can also pay a small amount into the account, ring and confirm it’s received by the right person, then pay the rest.
When land is advertised as free/cheap because the only owner has died, or it’s not registered with the Land Registry currently. None of this makes the land automatically free or even sellable in the first place.
Solution: You must obtain the title of the land before buying it, otherwise you don’t own it. Or you must possess it for 12 years before you can apply to own it.
Where you invest in a property (to rent out, AKA buy-to-let) or a piece of land under the guise it will give high returns, but this isn’t true.
Solution: Consider any deals that are too good to be true – if they are a ‘get-rich-quick’ scheme, it’s probably not a good idea. Do the solicitors advertising the property/site seem legitimate? Do some research too – visit the property/site, speak to the council/locals, see if planning permission has been applied for, etc.
When you buy a property through an auction, but it’s not as described.
Solution: Never buy without seeing the property in person.
When properties that are primarily used as holiday homes are advertised as permanent residences to fool potential buyers.
Solution: Make sure you’re 100% certain on the status of a property, checking deeds and speaking to current owners before you sign anything or any money changes hands.
When ‘quick sale’ businesses agree to buy your home for a set amount and drastically drop the offered price at the last minute.
Solution: If you’re dead set on selling through a ‘quick sale’ company, make sure you fully understand the terms of your agreement. You don’t want to get caught out by something in the small print like a substantially lower payday when it’s time to sign contracts.
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.
You lose your deposit because of various made-up reasons like your room wasn’t clean enough, damage you didn’t do, etc. But you can’t challenge it because it’s not in an official scheme.
Solution: The landlord has made the initial mistake by not protecting your deposit, but many renters aren’t aware of this. You can challenge this in court and receive up to 3x your deposit’s amount if it hasn’t been protected properly.
You find a property through SpareRoom or Gumtree in a decent-sized, reasonably priced place in a high demand area of London. But you live in Scotland and need to transfer for your job ASAP, so don’t have time/can’t afford to visit the property in person.
You transfer your deposit and the first month’s rent directly to the landlord, then arrive in London on your move-in date to find out it was a fake listing. You can’t move in and you get ghosted – losing your money.
Solution: Avoid over-keen landlords, go through official channels when paying money and visit the property in person.
Similar to the ‘Fake Landlords’ scam, but this time the fraudster goes one step further. This is where they will have access to an empty property and pass it off as their own. They will show you around and act as if they own it. Then when you go to move in, you can’t get into the property and get ghosted.
Solution: Use the proper channels and avoid over-keen landlords who are giving you a cheap deal that they make out will go fast if you don’t pay ASAP. Also, look out for multiple ads for the same property (different wording but the same pictures) and poorly worded advertisements.
Admin fees were banned in June 2019, but letting agents are still incorporating these into their contracts. You cannot be charged for these any longer, but many tenants aren’t aware of this. This also is the case for cleaning, viewing, checkout fees, etc.
Solution: Say no and state the new ban. Or if you have been wrongly charged, you can complain to trading standards. Even if your tenancy agreement is dated before June 2019, it’s worth complaining to the letting agent to get it waived.
The landlord asks a friend to seem interested in the property and attends a group/open viewing. The friend acts as a fake renter and appears overly interested. You want the property too, so the landlord asks for a bigger deposit/holding fee than on the listing to ensure you get the property.
Solution: Deposits and holding fees are now capped. Do not pay more than the legal amount.
Paying your deposit or rent in cash, then the landlord argues you haven’t paid at all.
Solution: Wanting to be paid in cash isn’t illegal – just make sure to always get a receipt.
You ask for something to be repaired in your property or make some kind of complaint and end up getting evicted out of revenge. If you are evicted, you could lose your deposit then spend a lot more cash trying to find a new property ASAP.
Solution: This is a criminal offence – if it happens to you, follow these steps:
- Call 101 to make the authorities aware
- Get in touch with the local council for advice
- File an illegal eviction injunction
- Get your possessions back from the property
- Take legal action to retrieve your deposit
- Submit a request for compensation