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Dreamvar Case – The Case of an Innocent Buyer and the Fraudulent Seller

In a society where fraud is becoming more prevalent, we are warned that vigilance needs to be tighter than ever. As conveyancers, we adhere to strict compliance, regulatory and due diligence rules including ID, residence and bankruptcy checks and meeting our clients face to face to verify their identity but even this is not a safeguard to fraud.

On 15th May 2018, the Court of Appeal handed down its long awaited judgment on the case of Dreamvar (UK) Ltd v Mishcon De Reya (now commonly known as the “Dreamvar case”). This controversial and highly debated case which sought to clamp down on fraudulent sellers has gone further to clarify that both the solicitors representing the seller and the buyer bear liability as to risk in a fraudulent transaction.

The Facts

The buyer, Dreamvar, a small property company purchased a residential property from the purported seller who turned out to be a fraudster. The fraudulent seller presented the driving licence and TV licence of the true owner of the property having obtained it and represented this to his solicitor after having these certified by another firm. The obligations of law firms are to check the identity of their client by seeing the originals of identification documentation or certified copy documentation by another solicitor having seen the originals, the latter of which occurred in this case. The solicitors certifying the ID documents did not pick up on the discrepancies and thus the fraudulent seller was able to present this to the solicitors instructed to carry out the conveyance. The transaction proceeded to a swift completion and the completion funds transferred to the fraudster.

The Judgment

The judgment handed down in this case held that solicitors representing fraudulent property sellers share liability with the solicitors acting for the innocent buyers. This means that responsibility to verify parties extends to both solicitors. Although, the firms were acting honestly in this case, however the case turned on breach of trust by both the firms acting in the normal course of business.

This blog has been prepared on 11th June 2018 by Dhrina Solanki, a Solicitor at MTG Solicitors.

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Buying your first home?

Being a first-time buyer can be a daunting experience as there are many steps involved in putting your name on your own property for the first time, from searching for your dream home to arranging your mortgage and finally instructing the conveyancers to complete your transaction for you.

The aim of this blog is to give you an overview of the final steps to securing your property once the search is over.

Draft Contract

Once you have chosen your solicitors, they will request a draft contract pack from the sellers’ solicitors. The draft papers will include a contract for sale, but will also include title documents and property information forms which will give the conveyancer and you information about the property. This can include matters such as who maintains each boundary for the properties, whether the sellers are aware of any disputes relating to the property and whether the sellers or previous owners have carried out works to the property which would require building regulations certificates and/or consent from the council.

Enquiries and Searches

Once the draft papers are received and the conveyancer has reviewed these then they will begin to carry out a title investigation by raising enquiries. For example, they will need to establish that there are sufficient access rights to the property, whether there are any restrictions on use for the property, if building works have been carried out then they will request copies of the planning permissions and the building regulations documents to check that the works have been carried out in accordance with the local authority requirements. The investigations are carried out to protect you as the new owner of the property from problems in the future. Although at this stage, you may not be thinking about remortgaging or selling the property, the information and documents collected when the property is being purchased will be valuable to you when you come to remortgage or sell the property.

The conveyancer will also obtain searches for the property. The searches usually include a local authority search, an environmental search and a drainage and water search. The searches will provide key information about the property and the local area. For example, the local authority search will reveal information about whether there are restrictions on development to the property, whether any trees on the property are protected by a tree preservation order and proposals for new transport links in the local area. The environmental search will confirm whether the land on which the property has been built is contaminated and what level of risk the property is at from natural ground subsidence or flooding. The drainage and water search will provide information on who supplies water and sewerage services to the property and will also highlight to you whether there are any pipes running through the property.

It is important during this stage of the transaction to maintain strong communication with your solicitor, and in particular communicate any intentions you have for the property such as an extension or other building works, as this will enable your conveyancer to pick out information specifically relevant to your plans.

Exchange

Exchange is the point at which you can breathe a sigh of relief – this is when a deposit is paid, usually 10% of the purchase price and the transaction becomes legally binding and the moving date is set. Once contracts are exchanged, it is safe to start making moving arrangements in readiness for the long-awaited completion day!

Completion

Completion is the day when the completion funds are sent to the sellers’ solicitors, the keys are handed over to you and you become the proud owner of your new home! Once the transaction has completed your conveyancer will deal with paying stamp duty on your behalf and registering the property into your name, as well as notifying the landlord/managing agents of change of ownership where the property is leasehold.

This blog has been prepared by Madhvi Machchhar, a Paralegal at MTG Solicitors on 5th April 2018.