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Conveyancing Fraud and Professional Negligence

Conveyancing Fraud and Professional Negligence


Expert view

Conveyancing fraud has featured regularly in the media recently with people losing hundreds of thousands of pounds to fraudsters through various types of fraud. You can read more about property fraud and how you can protect yourself in our article, Protect Your Home From Property Fraud.

As a result there has been some ongoing litigation about who is responsible for paying back the lost money that was given to fraudsters by solicitors.

The case that is causing so much controversy at the moment is called Dreamvar v Mishcon de Reya. The Court of Appeal issued its judgment last week in this case and this gives a reminder for lawyers around their responsibilities, along with an opportunity for claimants who have lost money through property fraud.

When you instruct a professional now, there is usually some bureaucracy around supplying proof of ID. Although frequently annoying for you, the client, this case shows exactly why these ID procedures are necessary.

In this case, the solicitor didn’t follow the proper procedures to verify her client’s ID. As a result a fraudster managed to pass himself off as the owner of a £1.1m house.

A sale was agreed to a company called Dreamvar and their conveyancer transferred the money. The fraud was only discovered when Dreamvar tried to register their new title, by which time the fraudster had long since disappeared with the money.

What is interesting is that Dreamvar sued not just the careless solicitor acting for the ‘seller’ but also their own conveyancer who had transferred the money.

Both the High Court and the Court of Appeal have sided with Dreamvar.

Although the decision itself is quite technical, the gist of it is that Dreamvar’s conveyancer was only authorised to transfer the money to complete the purchase. Because the sale was fraudulent, completion was impossible, and when they transferred the money, their conveyancer acted in breach of trust.

This may seem surprising because it seems the conveyancer didn’t really do anything wrong. Yet they’re liable for all the money that the buyers ended up losing. The real reason the judgment has gone this way is probably a matter of public policy.

Since the buyers have no chance of getting the money back from the fraudster, the court felt it was fairer for their solicitors to bear the cost of it. All solicitors in the UK have to have Professional Indemnity insurance in place and are insured against this sort of loss, but the buyers themselves have lost their own money.

With property values in the UK being so high and the difficulty of tracking down the guilty parties, there will always be fraudsters wanting to take advantage of unsuspecting buyers.

The experience of conveyancing fraud is traumatic for its victims. They’ve lost the house they thought they had bought and the money they saved and borrowed to buy it. If they are part of a chain and have sold their own property, they may even be left homeless.

It seems likely that Mishcon de Reya will appeal the decision and that it will go on to the Supreme Court for a final decision. But in the meantime, this decision should provide some relief to victims of fraud.

If your conveyancer has paid purchase money to a fraudster, you could be in a position to claim back the lost money against your conveyancer.

You don’t even need to prove that your conveyancer was negligent: in this case, the buyer’s solicitor was held to have acted reasonably, but was still liable for the buyer’s loss.

The Court of Appeal did hold that the seller’s solicitors, who actually made the mistake, were also liable, so the cost will probably end up being shared between the two. The important thing for victims of fraud is that they can now recover all the money that they lost.

If you’ve lost money through conveyancing fraud, call our experienced team of professional negligence solicitors now on 0117 926 4121 or make a Free Online Enquiry.