Despite efforts to combat fraud in property transactions, nearly £10 million worth of compensation claims were received by the Land Registry last year.
See the story as reported by The Times here.
PROPERTY TITLE FRAUD COSTING LAND REGISTRY MILLIONS A YEAR
Those in the property and lending industries are more than aware of the risks of property title fraud and forgery. A series of Freedom of Information requests recently submitted to the Land Registry by Titlesolv has confirmed that despite attempts to weed out deception, fraud claims are on the increase: last year the Registry received more than £23.3 million in claims - almost £10 million (£9,458,414) of which were related specifically to fraud and forgery.
Since 2012, the Registry’s Indemnity Fund has paid out a total of £31 million, although it has received requests for claims worth over £59 million. The data also shows a substantial increase in the amount of claims the Registry is choosing to settle (86% in 2014 compared to 78% in 2012), yet the value of each individual claim has dropped. This suggests that the Registry could have a new strategy of accepting liability in more cases but offering smaller settlements, in order to close cases quickly and possibly avoid incurring extra costs.
As the government department that registers land and property ownership in England and Wales, the Land Registry plays a crucial role in the sale of property. It is the Registry’s responsibility to check the veracity of an owner’s claim when a title is registered, with mortgage lenders then using the records as one of the criteria for approving mortgage applications. One of the key reasons for doing this is to check that a criminal hasn’t stolen an owner’s identity and is attempting to raise an unenforceable mortgage against a property. In recent years, the Registry has made progress in bolstering its governance, processes and records to defend against claims, however the number of claims remains stubbornly stagnant - the costs of which have to be shouldered by its Indemnity Fund.
Worryingly, this trend is unlikely to change any time soon, as many of the issues created pre-recession still lie dormant owing to fewer property transactions taking place during this period, in the course of which defects would be identified and rectified, and to less re-mortgage activity. If the Bank of England chooses to raise interest rates – which it is expected to do within the next 12 months – the rates of property title fraud may actually increase. If interest rates go up, and more mortgages fall into arrears, the Registry is likely to face another wave of claims as defaults tend to reveal or highlight allegations of fraud. If those mortgages become unenforceable, the Registry – and the public purse – are vulnerable to claims of negligence.
Fraud cannot be easily detected, so ultimately the responsibility falls on all parties - Land Registry, solicitors and mortgage lenders alike - to be as vigilant as possible and to collaborate even more to detect the signs earlier. The principle of a State Guarantee on property titles places liability for title fraud squarely with the Land Registry, so it is clearly in its own interest to lead the charge in the fight against fraud and forgery. As a result it is likely that this will continue to be a key priority for the organisation in the coming weeks and months. In the meantime, insurance continues to provide protection to property owners and lenders who are becoming the target of ever more sophisticated methods of fraud and forgery during unscrupulous property transactions.
Titlesolv is a trading name of London & European Title Insurance Services Ltd authorised and regulated by the Financial Conduct Authority.