Wednesday, August 29, 2012

Fraud in Real Estate Transactions

Many of you have heard of investors in the David Smith/Olint or the Madoff Investment Scheme  being defrauded of millions of dollars. Some of you would have heard of cases of lawyers defrauding clients of funds in real estate deals. Few of you might have heard of the incidents of fraud which were uncovered at the Titles Office now the National Land Agency (NLA) about ten years ago. The fact is that wherever investment takes place, fraud is a possibility and so vigilance is recommended.

When we speak of fraud we simply mean "profiting by means of deception". It involves depriving the public or an individual of money or property by deceitful act(s). Real estate deals provide fertile ground for the perpetuation of fraud as they involve the exchange of money for interest in property.

More and more organizations are implementing controls to mitigate the risk of fraud in light of the negative effects fraud can have on a company's reputation and its bottom line. Interestingly in many cases the fraud is perpetuated by employees, even those at the top. The National Land Agency was in the news not too long after it was transformed as an executive agency. Over 50 cases of fraud were reported to the Fraud Squad. In some cases landowners were deprived of their property through forgery of signatures or uttering entire fake documents. No doubt the "inside job" participant would have played a role.

I was working at the NLA around that time and got the opportunity to see first hand the efforts that were made by the organization to eliminate fraud. This included document tracking and scanning, training and communication and improved technological solutions to facilitate easier searches. Just this year the public was informed of a property watch initiative whereby landowners will be notified if a transaction is done on a title.

Similarly individuals must be aware of risks of fraud and take initiatives to avoid same. Being hoodwinked out of your money or property is no laughing matter and can have far reaching negative effects. It is important that you not be a willing victim.

Some Tips

  1. Never sign a blank cheque.
  2. Research the parties you will be dealing with. This includes the real estate agent, the buyer or vendor, the attorney and the lender.
  3. Ensure that you comprehend the nature of the transaction. Get your own reputable attorney. It is not recommended that the vendor and purchaser share attorney.
  4. Don't pay funds directly to the vendor. Get a reputable attorney.
  5. Make sure you get a proper receipt when you effect payment. It should include all details - your name, the property, the signing officer and the stamp of the organization.
  6. Find out the costs up-front.
  7. Research the property. Make sure it exists and that the owner is in fact selling.
  8. When you pay a deposit, lodge a caveat on the property to give notice to the world that you have an interest in the property. Some deceptive owners or con artists pretending to be owners sell to more than one person at a time.
  9. Keep your title and all other property documents in a safe, secure place.
  10. Bring a healthy dose of skepticism to investment schemes.
As pointed out above in the first paragraph, there have been cases of unscrupulous attorneys defrauding their clients. This is especially the case where clients or mortgage companies pay funds to the attorney's account and the attorney converts the funds to his or her own use. It is for this reason that the emphasis is placed on securing the services of a reputable attorney. Jamaica is not unique in this regard. As reported recently in Law360, claims against attorneys for malpractice in the US are more often a result of their handling of real estate transactions.  Getting an attorney via a good referral is one method of protecting yourself.