The Common Auction Conditions provide that, as agent for the seller, an auctioneer has the authority to sell. That’s quite a responsibility.
So there’s nothing better for an auctioneer than when Mr Seller attends the office with paperwork to show who he is and documentation showing that he owns the property he wants to sell, followed by written confirmation from a locally known solicitor that he is acting for Mr Seller.
All good so far, and with a complete legal pack prepared, the property is offered and sold by public auction.
Alas, a few days after the auction, a third-party solicitor contacts the auctioneer to say that a client of his bought the same property four months previously. Oh joy, why didn’t they raise this before the sale?
Another search of the Land Register still shows Mr Seller as the owner, so who are we to believe is the rightful seller?
First port of call is to contact Mr Seller. Surprise, surprise, his phone message says: “Please try later.” In the auction world, “later” is not good enough, so the auctioneer makes enquiries of Mr Seller’s solicitor. He seems quite relaxed about the whole affair and says he will contact his client.
Surprise, surprise, he comes back to say Mr Seller’s phone tells him to “Please try later”. E-mails haven’t been answered, so he thinks he will give it a few more days to try again.
The auctioneer starts to suspect something is awry and, as Mr Seller’s solicitor is still relaxed, he communicates with the auction buyer to explain the situation.
The buyer, who is an auction regular, takes the news in his stride but, naturally, doesn’t want to let a purchase go. Technically it’s not within his gift to withdraw from the sale anyway, and he decides to wait until the completion date.
Meanwhile, the auctioneer uses the time to again try to contact Mr Seller, but without success. He also finds out more from the third-party solicitor about the alleged purchase by his client.
Eventually, investigations show that the property was indeed sold several months previously – now more than five months after the auction – and is still not showing on the Land Register.
Attempts to contact Mr Seller now even defy MI5 and, as suspected, confirm that Mr Seller has attempted to pull a fast one.
The date for completion has come and gone and eventually details of the change of ownership, now almost six months past, show on the Land Register, confirming the inevitable.
By this time, Mr Seller’s solicitor appears to have lost all interest in the case (another surprise?). So, instigated by the auctioneer and his solicitor, an agreement is made with the auction buyer’s solicitor to declare the auction contract invalid and the deposit is returned.
Thankfully, common sense prevails, an awkward situation is resolved and no money has been lost. However, unless a change of ownership is recorded before a property is offered for sale by auction, there is every likelihood that others will be caught short by yet another similar scam.
So what can be done to ensure this doesn’t happen again?
Most mainstream lenders try to protect against this type of activity by not lending on property that has been sold within a six-month period and only if the seller’s name is shown on the Land Register.
But if the person buying the property is a cash buyer, what is to stop them losing a significant amount of money? As far as I can see, not very much.
To help protect the property auction industry from increasingly sophisticated scams, or in this case what appears to be quite a simple scam, the time it takes to register a change of ownership with the Land Registry needs to be decreased considerably.
In the fast-paced world of auctions, a property could have been sold several times in the time it takes the Land Registry details to be updated. So all parties involved in the sale need to be vigilant to spot any potential fraudulent activity before it’s too late.
Fortunately, this type of activity appears to be rare, but the potential impact on a buyer and the industry could be considerable should the issues with the Land Registry not be addressed.
As in the case of Mr Seller, if the new owner’s name has not been registered with the Land Registry, how can we be sure they are the rightful owner?
Philip Waterfield is a director at Strettons
