Property Fraud Risk For Commercial Businesses: Problems And Solutions

Commercial properties are significant business investments, making them prime targets for fraudsters. Businesses need to be aware of the threats posed to them and their properties.

What is property fraud?
During the COVID-19 pandemic, businesses operating in the property market had to rely on electronic identity verification. Video calls and phone calls became commonplace methods to verify financial details and have remained so since the pandemic ended. Where physical presence was once required, matters can now be resolved online. While this can streamline transactions, it also raises issues in verifying the legitimacy of parties.

There are many ways for fraudsters to exploit online verification to commit fraud. For example:

• Fraudsters can forge documents to impersonate genuine owners.
• Business emails can be intercepted and used to impersonate genuine owners and purchasers during commercial transactions. In Dreamvar, the fraudster used a driver's licence and a TV Licence belonging to a true owner to imitate them and steal £1.1 million.
• Fraudsters can pose as landlords and collect rent or deposits from genuine tenants.
• Fraudsters can, using all the above methods, secure loans against business properties, leaving companies burdened with debt.

One sophisticated fraudster sold houses he had no legal right to sell, under the guise of offering "exclusive deals on repossessed properties." He operated a complex network of aliases to convince victims that his company was legitimate. Victims lost millions as a result.

Who's at risk?
High-risk business properties include mortgage-free commercial buildings, temporarily vacant premises, and unregistered properties. Properties that are not owned locally, such as those with overseas owners, are also at greater risk - read more on transparency requirements for overseas owners of UK real estate.

While any property can be targeted, these characteristics highlight vulnerabilities that owners and their representatives need to be aware of. International businesses and companies with property portfolios managed remotely face higher risks due to limited physical oversight and reliance on digital communication. When businesses hold large commercial property portfolios or operate from extensive retail or office spaces, smaller details can be overlooked - creating opportunities for fraudsters.

How can we avoid and combat property fraud?
To combat property fraud, businesses can implement several key protective measures to safeguard their commercial properties.

With the rise in fraudulent activity, vigilance is essential. Businesses should monitor correspondence carefully and investigate any unusual communications or missing documents. Owners should notify the authorities or seek advice from a law firm, particularly when there are company shareholder fraud concerns.

If a property is unregistered, registering it voluntarily is a simple yet effective protective measure. A solicitor or conveyancer can guide you through the process. The Land Registry also offers a free property alert service, which notifies you if any application is made to change the register for your property. While it will not stop the application, it enables swift action.

In one case, squatters created fake rental agreements to try to take possession of a man's home - a particular risk for properties without on-site staff. Businesses should implement regular monitoring through security services, property management companies, or local contacts. Online correspondence should also be monitored, as unusual or unexpected communications can indicate attempted fraud. Employees should regularly change passwords to prevent hacking and data theft.

The Land Registry can place restrictions on a property's title, requiring a solicitor or conveyancer to certify the applicant's identity before any changes are processed. Consulting a solicitor about this is an excellent step in preventing fraud. If you become a victim, early reporting to the Land Registry can help intercept fraudulent activity and mitigate losses. Reports can be made through a solicitor or via the Property Fraud Line.

In the worst-case scenario - where the title has already been transferred away from the genuine business owners - legal action is necessary. Clients should create a clear timeline for their lawyers and document any unusual correspondence or activity.

Property fraud poses significant financial and operational risks to businesses. Implementing robust verification processes, maintaining consistent property oversight, and collaborating with experienced legal professionals are essential protective measures. Early detection and a swift legal response can minimise damage when fraud occurs. Choosing an effective firm of solicitors can help address all questions and concerns -and is a key part of preventing property fraud.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.