Conveyancing solicitors and their insurers have been alarmed to read a judgement in a recent legal case, Dreamvar (UK) Limited v Mishcon de Reya, where Mishcon de Reya, a very reputable London firm of solicitors, was found liable to pay more than £1million for breach of trust, after its client was duped in to buying a London property from a tenant fraudulently posing as the owner.
The brief background is that Mishcon de Reya acted for Dreamvar in the purchase of a property from an imposter purporting to be the registered owner of the property. The seller was represented by a firm of solicitors and on completion, Mishcon de Reya, on behalf of the buyer, transferred the purchase monies to the seller’s solicitors in the usual way who in turn passed the money on to their client,the imposter.
By the time the fraud was discovered, the fraudster had disappeared with the money. Dreamvar did not become the registered owner of the property and had paid £1million for nothing.
What has concerned conveyancers and their insurers is that the Court found that Mishcon de Reya had not acted negligently but determined that there was an implied duty in Mishcon de Reya’s retainer that they would only release the purchase monies on a genuine completion of the purchase and hence Mishcon de Reya had acted in breach of trust.
Persuasive in the judgement was the feeling by the Judge that someone had to pay to compensate Dreamvar and Mishcon de Reya’s insurance pockets were deeper than those of the seller’s solicitors, even though the “seller’s” solicitors were criticised for not carrying out their verification of ID duties well enough.
The case is being appealed because of course solicitors will verify their own clients’ ID but how can they be held responsible if someone other than their client is a fraudster? It seems that now conveyancing solicitors are put in the impossible position of having to be not only lawyers but also fraud detectors and experts in identity.
However, there are often warning signs for fraudulent property transactions with some of the main red flags for caution being:
- Unoccupied properties
- Seller living abroad
- A mortgage free property
- Relatively high value properties
- An impatient seller who wishes to push the transaction through at an unseemly speed
- A seller who doesn’t seem to know much about the property
If you are buying a property, be alert to these risk indicators and let your solicitor know if
something just doesn’t feel right. It is a truism that if something doesn’t feel right, it often isn’t!
For more information about Residential Conveyancing contact Tina Crow.