Compliance risks associated with the selling of a property

When acting for the seller of a property, it is important to ensure that we are aware of the risks associated with a sale transaction. This blog intends to highlight three key areas where risks lie. 

 

1.     Misrepresentation 

Transparency and disclosure of material information are essential for fair property transactions. Material information in conveyancing refers to details about a property that can influence a buyer’s decision. Failure to disclose material information can lead to legal consequences for sellers. This information will be provided via the protocol forms and enquiries raised by the buyers solicitors. There is a duty to notify parties of a change without request.  

National Trading Standards (for agents) and the Law Society (for solicitors) provide guidance to improve compliance in the conveyancing sector. The guidelines lay out an extensive list of essential details that should be included in every property advert, including price, floor plan, EPC, parking etc. 

 

2.     AML 

 

Money laundering can occur through the sale and purchase of a property. Criminals may launder money by buying and selling properties and obtaining and repaying mortgages to cleanse money. 

To establish if this may be occurring, there are several things we must check, including the following: 

Has the mortgage been recently discharged? If so, we will need to be able to establish where the funds have come from in order to repay this.  

Is the seller keen to sell quickly? If this is the case, we will need to know the reason for the transaction to be completed so expediently.  

Was the seller too young to own property at time of its purchase? If this is the case, we will need to establish how funds were accumulated to purchase in the first place. This may include requesting documents from our clients.  

Has the seller previously instructed a solicitor on the same sale? If the answer is yes, we will need to know why they are no longer using the previous solicitor. For example, it is important to be aware of whether the previous solicitor disinstructed our clients or if our clients decided to take their custom elsewhere.  

 

3.     Fraud 

 

Alongside the risk of money laundering is the risk of fraud. It is important to be certain that we are acting for the seller of the sale property. If it is an executor/attorney sale, we must be certain that those we are dealing with have sufficient authority to sell the property.  

Things to check: 

The title register. We much check that our clients are the proprietors named on the title register. If they are not, we need to establish who our client is in relation to the proprietor, if our client is an Attorney or executor, we must obtain certified copies of the relevant documents.  

Does the client live at the property? There may be tenants residing at the property, or the property may be vacant. In this instance, we will send a ‘Fraud Letter’ to the sale address. This includes a request from the proprietor to confirm receipt of the letter and upload a document which shows proof of address, such as a Council Tax or utility bill.  

Is the property unregistered? If a property is unregistered, there is a greater risk of fraud. 

Selling a property involves navigating a landscape fraught with potential risks, from misrepresentation to money laundering and fraud. By staying vigilant and conducting thorough due diligence, sellers and their advisors can help prevent these pitfalls and protect all parties involved.  

This Blog was written by Megan Stevens - Trainee Solicitor with MJP Conveyancing