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Average property scam costs victims £107,669, research finds

With all property titles in England and Wales published online, and scammers potentially able to access this information to commit property fraud by stealing people’s identities, the chances of scams occurring to you could be higher than many people think.

That’s the warning from ABC Finance, whose research has revealed that there are twice as many property fraud claims than there are prevented cases. This suggests that scams are something that could affect anyone with a stake in the property industry.  

In order to help raise awareness of the risks and possible costs of property fraud, ABC Finance submitted a Freedom of Information Request (FOI) to UK Land Registry to explore the extent of the issue.

UK property fraud – what do the facts and figures say?

Since 2005, 678 property fraud claims have been made – with the total pay-out amounting to £73.3 million. The average property scam pay-out, then, stands at £107,669. By contrast, online scams – which tend to receive a lot of press – set the average victim back by £600.

Within local UK authorities, property fraud accounts for 71% of all fraud – showing the huge scope of the issue. By comparison, council tax has the second-highest rate of fraud but only accounts for 9%.

Average property scam costs victims £107,669, research finds

The figures reveal that it isn’t just homeowners who need to be aware of scammers, with renting also rife with potential for fraudulent activity. Losses of £22.1 million were reported by victims of rent-related fraud between 2014-2018, according to Action Fraud, with scams costing the average renter £1,396.   

How can a property scam be spotted?

Property fraud can be worryingly simple to carry out – it doesn’t, in many cases, need to be sophisticated or hi-tech.

As all property titles in England and Wales can be found online, one way a fraudster could utilise this information for a scam is by taking out a mortgage using the victim’s identity. They would then place some of their cash into an account and make a few repayments for the mortgage before removing the money. The mortgage lender, meanwhile, is only made aware once the dummy account runs out, which then leaves the victim – the property deed holder – liable for the debts incurred.

Additionally, there have 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. In reality, they are actually a scammer looking to apply a mortgage and profit from it.

How can you prevent this from happening, though? ABC Finance spoke to the HomeOwners Alliance, which suggested that homeowners use the free Land Registry Property Alert Service which sends an email alert if there is ever any activity occurring on the deeds of a house. For even more reassurance, homeowners could opt to put a restriction on the title deed of their property, stopping the Land Registry from registering a sale or mortgage unless a conveyancer certifies the application was made by you.

Unfortunately, the above is just one of the many ways in which property fraud can occur. There are seven most common types of rental scams –  surrounding unprotected deposits, fake landlords, fake property, letting agent admin fees, pressure from a fake renter, cash payment scams and revenge evictions.

From 2014-2018, there were 18,645 reports of rental fraud in the UK, with students one of the main groups affected. Some 930 reports of university-related rental fraud were reported, with losses of £1.1 million.

There are, meanwhile, eight main types of mortgage scams to look out for, including Friday afternoon fraud, quick sale scams, holiday home hustles, property auction scams, intercepted deposits, buying a house from a fake seller, ‘free land that isn’t free’ scams, and investments that are too good to be true.    

Is property fraud a growing problem?

The findings above make clear that property scams are, by far, the most common occurrence of fraud reported by the UK’s local authorities. But has there been an increase in the number of property fraud cases?

“Unfortunately, the value of successful frauds of property sales have more than tripled – from £7 million in 2013 to £25 million in 2017,” Paula Higgins, chief executive and founder of the HomeOwners Alliance, said.

“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.”

Various scams including ‘right-to-buy misuse’ and ‘illegal subletting’ make up the 71% of property fraud which local authorities are faced with, which could end with people losing deposits or any additional upfront payments if they are on the receiving end of scammers.

How many cases are prevented and how many cases are not?

The FOI request to Land Registry saw the body reveal the number of fraud cases it had prevented from the financial years of 2009/10 through to 2017/18. In all, there were 279 fraud attempts prevented with an overall property value of £133 million.

Average property scam costs victims £107,669, research finds

While the FOI data only included fraud attempts that were successfully prevented, what about those instances that weren’t successfully blocked? What recourse do people have if their fraud isn’t prevented?

The Land Registry’s official position on compensating registered property owners that are victims of fraud is outlined below:

“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.”

The table below shows how much Land Registry has paid out to victims of successful property fraud attempts in the last nearly two decades.

Year

Indemnity: fraud and forgery (£m)

Number of claims

2000/1

0.2

9

2001/2

1.0

7

2002/3

0.3

4

2003/4

0.3

12

2004/5

0.5

15

2005/6

9.8

31

2006/7

2.1

24

2007/8

3.9

60

2008/9

5.1

62

2009/10

5.0

53

2010/11

7.3

71

2011/12

7.2

52

2012/13

5.1

43

2013/14

7.2

53

2014/15

5.9

54

2015/16

5.9

49

2016/17

3.9

53

2017/18

2.6

26

Total

73.3

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,” ABC Finance said in its report.

This suggests, therefore, that more needs to be done by homeowners and official bodies to prevent property fraud in all its various guises.

The HomeOwners Alliance, when asked if enough was currently being done, said.

“Although lenders, conveyancers and others take property fraud seriously, there needs to be more cross-industry collaboration. 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.”

“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.”

What are the properties most attractive to fraudsters?

To prevent property fraud from taking place, it helps to know which properties are most vulnerable to scammers. The properties most at risk from fraud can be seen below.

Average property scam costs victims £107,669, research finds

Properties that are not registered with the Land Registry are also seen as higher risk when it comes to fraud, with properties most likely to be unregistered those that haven’t been mortgaged or sold since 1990. If unsure, the register can be checked here.

As mentioned above, the Land Registry alert service and restrictions on title deeds are two goods way of avoiding property scams.

If you are concerned about property fraud, Land Registry, Action Fraud and the HomeOwners Alliance are good places to turn to for advice and support.

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