Agents are being warned to be on their guard as property fraud involving identity thefts of sellers grows, with a case due to go to the Court of Appeal this year.

In a new case, a judge has ordered well-known law firm Mishcon de Reya to pay over £1m after a client buying a property fell victim to an identity fraud scam.

This was despite the ruling that as conveyancer, it was not negligent.

It is the latest in a growing number of legal cases concerning fraudulent house sales – with agents, as well as conveyancing firms, likely to be taken to court.

A separate case, which last year cleared an agent, is now to be revisited at the Court of Appeal this year.

In the latest case, law firm Mishcon de Reya was found to be liable for breach of trust after the purchaser was duped into buying a London property from a tenant posing as the owner.

The claim was based on an alleged failure by Mishcon de Reya to seek an undertaking from the purported seller’s solicitors that it had taken reasonable steps to establish its client’s identity.

A claim for negligence against Mishcon, as well as the other solicitors, failed, the Law Gazette has reported.

The publication says it understands leave to appeal is being sought, with identity scams becoming increasingly common.

In the latest case, deputy High Court judge David Railton accepted the firms involved had acted honestly and innocently in carrying out their respective roles, but said that the “only practical remedy” open to the client was to target Mishcon de Reya.

We have not yet seen a transcript of the case, or been able to identify the agent in the case, where the litigation appears to have involved only the solicitors.

However, last year in an unrelated case, the agents – a Winkworth franchisee – as well as conveyancers were sued in P&P Property Ltd v (1) Owen White & Catlin (2) Crownvent Ltd t/a Winkworth,

The property in question was unoccupied and sold to the innocent purchaser for £1.03m, with the sale completing in December 2013. The £927,000 balance of funds was transferred to the imposter’s bank account in Dubai.

The fraud was only discovered when the real owner – ironically, himself an estate agent – walked past his house the following month, only to see builders ripping out the kitchen.

By that time, the fraudster and the money had long gone.

A claim against Crownvent trading as Winkworth, and law firm Owen White & Catlin, was brought by the purchaser, P&P Property – a small family firm specialising in buying and renovating properties to sell on.

In this case, the buyer failed in claims of negligence. The judge said that Winkworth’s ID checks had been “wholly inadequate” but that it was up to solicitors, not estate agents, to establish identity. However, although solicitors’ identity checks are necessary to reduce the risk of fraud, these checks do not provide a guarantee of their client’s identity, nor are they a guarantee that their client is the ‘true’ owner of a property.

The case is, however, now going to appeal.

Niall Innes, a partner at national firm Mills & Reeve representing the Winkworth firm in the case, told the Law Gazette that there is a need for clarity: “I have five cases on my desk around this area. It is a really big area and growing.

‘The courts are stuck in a position where the seller’s estate agent and solicitor, and the buyer’s solicitor, have done all they can.

“There has to be a solution to recognise the purchasers have done nothing wrong, with a window to recover. There needs to be an insurance solution but I suspect that few insurers will be interested as they are not confident they can persuade the general public to protect against identity fraud loss.”

In an earlier case last year, both sets of conveyancers were found to be liable after a seller committed a £470,000 fraud.

Judge Pelling ruled that A’Court & Co made no serious attempt to comply with Anti Money Laundering Regulations and also failed to obtain documentation linking the seller to the property.

The judge also ruled that the buyer’s conveyancer, House Owners Conveyancers, was responsible for not drawing attention to any concerns after asking whether the purported owner was entitled to sell the property.

The unknown fraudster had claimed to be Nicholas Dawson, the registered owner of a property in Wimbledon, and convinced Hurry Purrunsing to transfer the whole purchase price to Dawson’s registered conveyancer. The money then passed through A’Court to an account at a bank in Dubai on the purported instructions of Dawson.

John Hyde’s report about the Mishcon case in the Law Gazette is here

EYE reported the case involving the Winkworth franchise here