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Who Should Pay for House Sale Fraud?

on Thursday, 02 August 2018.

A hot topic in the property world, house fraud could well cause house prices to go up.

In the recent case of Dreamvar (UK) Ltd v. Mischcon de Reya, a fraudster impersonated a property owner and sold a property to an unsuspecting buyer. The Land Registry spotted the fraud but too late to stop the fraudster disappearing with the buyer's £1.1m purchase money.

The buyer, who was the victim of the fraud, wanted to recover the lost money. This resulted in a lengthy court case that eventually reached the Court of Appeal. Was the "seller's" solicitor liable for the loss for not identifying their client properly? Or was the buyer's solicitor liable for not ensuring that they were buying from the real owner?

Rather than leave the buyer having to bear the cost of the fraud itself, the court found that although neither solicitor had been negligent, both solicitors were liable.

This result has led to confusion as to what can be done in practice to avoid such a huge liability falling on an innocent conveyancer.  

Up until now, a buyer and their conveyancer could rely on the fact that the seller's conveyancer was under a professional duty to carry out money laundering and ID checks. This has been changed. Buyers' conveyancers will now be able to ask the seller's conveyancer what steps they have taken to identify the seller and what links there are from the seller to the property being sold.

The effect of this case will be to increase identity and money laundering checks by both buyers' and sellers' conveyancers. There is a time and a cost to this extra work and this, in turn, may delay the house moving process and put up costs.

For more information, please contact David Marsden in our Commercial Property team on 01923 919 303.

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