Over the past year fraud has become an increasingly prevalent word in property circles.
Two major cases hit the headlines in 2011: the former City head of valuations at Dunlop Haywards, Ian McGarry, was sentenced to seven years imprisonment for his involvement in a £49m commercial mortgage fraud; while tycoon Achilleas Kallakis and his business partner Alexander Williams were at Southwark Crown Court defending alleged claims of a £60m mortgage fraud. That case was adjourned until September this year, after Williams was taken ill.
Now, for the first time, the National Fraud Authority has quantified the level of property fraud in the UK.
Its Annual Fraud Indicator, published last week, reveals that there was more than £500m of property fraud in 2011 and some £1bn of mortgage fraud.
In total, fraud cost the UK £73bn last year, approaching double the £38bn recorded in 2010. The NFA says much of this increase is due to better reporting of the crime rather than a significant rise in activity. However, the figure is still potentially just the tip of the iceberg.
The report shows that within the property sector, smaller firms suffered most as victims of fraud last year, losing £350m. Larger businesses within the property sector, those employing more than 250 people, appear to have been better protected, but still lost £151m.
Some £488m of property fraud was perpetrated through private rental scams, according to the NFA. This type of fraud sees would-be tenants deceived into paying an up-front fee to rent a property that later turns out to be non-existent, is already rented out, or is rented to multiple victims at the same time.
Using YouGov research from 2010, it estimates that around 315,000 people a year fall victim to the scam, each losing an average of £1,550.
More recently, the Metropolitan Police has warned of a residential property fraud that targets landlords in an attempt to steal their identities and subsequently sell their assets.
A Serious Fraud Office spokesman says: “The NFA report provides a valuable understanding of the scale and distribution of fraud. Professionals in the property sector and elsewhere need to be vigilant and thereby help protect their businesses and the public.”
Patrick Bullick, chairman of the National Association of Estate Agents, London region, agrees: “I think there has for a long time been a lack of knowledge about how serious property fraud is, and until there are large cases highlighted, many don’t treat the subject seriously enough. This information is good for demonstrating the problem.”
Jim Gee, director of counter fraud services at business advisory firm PKF, adds: “The property sector needs to be proactive in its approach by developing a strong anti-fraud culture, creating a meaningful deterrent effect and revising processes and systems to remove weaknesses that provide opportunity for fraud.”
And the likes of the Land Registry and the RICS have started to make more moves to help stamp fraud out in the property sector. Last year both signed up to the Fighting Fraud Together initiative, launched and managed by the NFA.
The SFO is also doing its bit in the fight. Since 2008 it has increased its conviction rate from 62% to 84%. And with almost £250m of alleged property fraud-related cases on its books, the agency is keen to see that success rate rise further in 2012.
joanna.bourke@estatesgazette.com
The National Fraud Authority calculates fraud cost the property sector £501m in 2011
Smaller agents and developers are the biggest victims
