Landlords beware, don’t fall victim to property fraud

It’s every landlord’s worst nightmare.  You’re happily renting out your property to someone you believe to be a genuine tenant, only to discover the tenant is a criminal, has stolen your identity and sold your property using fake documents.

It’s a fraud known as ‘property hijacking’ or ‘house hijacking’ and it’s becoming a serious problem.  In 2020/21 The Land Registry paid £3.5m in compensation to victims of different types of property fraud, (of which this is just one example), so this crime can happen to anyone.

Given the high value of property in London, second homes and properties that are rented out in London are sadly, top targets for fraudsters

Property Owners without debt are the most vulnerable to property fraud

Properties without loans or mortgages are the prime targets as there’s no bank involved to check and so the fraudster only needs to work with a lawyer who will naturally identify the fraudster but won’t need to verify anything with a bank.

Landlords need to take particular care as they are allowing an individual to live in their property who they don’t know personally, making them vulnerable to property fraud and money laundering in the UK.  And those with second homes or holiday homes that are often vacant must be careful too as again, fraud can be harder to detect quickly.

How does a property hijacking fraud operate?

With property hijacking, a criminally minded person rents a property using fake documents, then changes their name by Deed Poll, adopting the landlord’s name which is on the Land Registry.  With a new ‘name’ and fake documents, the fraudster puts the property on the market with an estate agent.  When a buyer is found and their solicitor begins the conveyancing process, they will enquire about the title of the property.  But now the fake ‘owner’s’ name matches that of the genuine owner and given how trusting most people are, discrepancies are all but impossible to spot.

Fraud isn’t usually discovered until the real ‘owner’ comes to their property or realises they are no longer receiving rent and questions “who the people living there are?” or “where’s the rent?”.  And sadly, the speed with which money is transferred around the world, by this time, the money – and the fraudsters – are long gone.

In 2015, Penny Hastings, (wife of historian Sir Max Hastings) found her investment property in London had been ‘sold’ without her knowing by a criminal who had changed her name by Deed Poll to ‘Penny Hastings’.  The criminal ‘sold’ the property to an innocent buyer using fake documents, with the fraud only discovered when the buyer had received the keys.  The buyer lost £1.3m which was whisked away to an overseas bank account, never to be seen again.

While the situation is resolved with:
– the Law Society or the lawyers’ insurers covering the substantial costs
– the property owner immediately gets their property back into their name (as they would if a car was stolen and found by the police – it would be returned to the rightful owner)

However the stress, hassle and legal costs are enormous.  The situation is incredibly upsetting for all involved but especially for a buyer who may have sold their original home to move into their dream home which in effect they don’t really own and are left to go back to the drawing board seeking a new home to move into!

Lockdowns have made property owners even more vulnerable

Property hijacking has become more common since the pandemic started, partly because many services are now carried out online without any human interaction, but also because many people haven’t been living in their own property during lockdowns, instead moving in with parents or friends, leaving their homes vacant.

The BBC recently reported on a case concerning a woman who found that a Lasting Power of Attorney had been granted, allowing a fraudster called ‘Julie’ to take over her financial affairs and sell her flat.  Thankfully, the woman was warned by the building’s freeholder that someone had tried to sell her flat.  The solicitor employed to sell the property also became suspicious, as documents contained inaccuracies.  Thankfully the sale was stopped.

Read the full story here  Property fraud: ‘My fake sister tried to steal my home’ – BBC News

How to avoid UK property fraud

If you let a property to a new tenant, there are several ways to protect yourself – the first is thorough tenant referencing.

Tenant referencing – spotting the fakes

Accurate referencing is complex, so at Benham and Reeves, we use an independent, highly experienced tenant referencing company to carry out necessary checks – they know exactly what to look out for to catch out criminal intent.

Unbelievably, there are websites providing fake documents including passports, driving licences, bank statements and utility bills which to the untrained eye can be very hard to detect.  Our referencing company tells us they see at least two applicants a week supplying false information but they have robust systems in place to spot fake documents.

To see examples of some of the fraudulent tenant referencing we’ve prevented, see our blog Fraudulent buy-to-let rental applications skyrocket

Be vigilant

There are other measures you can take, particularly if you are referencing a new tenant yourself (although we would strongly recommend against referencing yourself!).

When a tenant signs a rental agreement with you, a couple of weeks later, check they have actually moved into the property.  Fraudsters are unlikely to move in.  But even if they have moved in, carry out regular insp3ctions – we recommend attending a property every 3 months.

Be wary if you are presented with a brand new passport as ID.  It could be fake so ask to see their old passport too.

Always apply for references yourself, don’t accept ones handed to you by a new tenant – eg check the number for their employer on the company website and call them to check.

Every month, check your credit score with a credit agency such as Experian to warn you of possible identity theft.

Let your property through a professional estate agent with a lettings department, not just an agent who “says” that do lettings. Instruct an agent that is a member of ARLA Propertymark who have a strict code of conduct and guidelines for best practice and compliance.

Protect your land and property from fraud

Prevention is better than cure and we have introduced a new service for our clients to protect your property. If  you are looking for a letting agent to help manage your property and/or need advice about protecting your buy-to-let or rental investment, get in touch.