Estate agents warned to carry out crucial legal checks

Paul Offley
Paul Offley

Estate agents are being advised to obtain evidence of the legal ownership for a seller to ensure they meet best practice standards.

Compliance officer for The Guild of Property Professionals, Paul Offley, says that while it is an Anti Money Laundering (AML) requirement to identify the legal owner of a property, obtaining a copy of land registry documents is not specifically mentioned in the legislation, although it is certainly something which HMRC recommend as best practice and if an agent was ever subject to a HMRC review.

Offley said: “In my opinion, whether it is a requirement for the AML process or not, it is still the right thing to do as it identifies who the legal/beneficial owner of the property is, and not just that the person instructing the agent is named on the title deeds.”

“Other benefits include the fact that it allows the agent to complete their AML checks on all legal owners. It also prevents any delays to an agreed sale at an advance date and the potential of any Consumer Protection from Unfair Trading Regulations (CPR) claim against an agent from a buyer who backs out due to delays with a previously unknown owner suddenly appearing.”

Offley continues that in the instance where an agent is taking any instruction from a landlord to let a property, it then confirms that person instructing the agent is actually the landlord and owner of the property.

“Plus, and importantly, it is a requirement of The Property Ombudsman code of conduct which states that the agent must take reasonable steps to confirm legal ownership, such as a land registry search or copy of the title deeds, or similar,” advises Offley.

How do agents go about confirming legal ownership? Offley advises there are a few ways, such as obtaining a copy of the title register from Land Registry at a cost of £3.

Agents can get their client to forward a copy of the same or a copy of the title deeds or they can get the seller’s solicitor to confirm all legal owners – this should only be used where the previous two options are not available, and the agent should ensure that it confirms that no other names are listed on the title deeds.

“Regardless of the option an agent decides to choose, the important bit is that they can demonstrate legal ownership and know that the person who has instructed them to either sell or let the property has the authority to do so as the owner,” Offley added.

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15 Comments

  1. ComplianceGuy

    For sure every agent should be running a land registry check. Sure, it can become expensive depending on an agent’s volume of properties, but it saves so much time and reduces fall-through. Not only do you get to establish beneficial ownership, but you get to confirm the tenure, the lease length, any restrictions such as “Only those who work or have lived in the area in the last 3 years may purchase”.

    Some companies offer “soft” ownership checks whereby they will confirm if your customer is the sole owner or whether there are any other owners, but such services do not tell you how many other owners or who they are – so if it pops up that it’s joint and then your customer says; “that’s my partner”, you don’t know that only their partner is named on the Title rather than someone else (e.g. a Trustee because it’s held in trust). Obtaining the Title is the only way to know.

    I’m not sure about other people’s experience, but in my experience, the risk of someone renting out a property, when they don’t own it, is low. The main issue encountered is tenants turning properties in drug factories; not sub-lets or fraudulent landlord claims, so I wouldn’t say that every rental property requires a land registry check – just those subject to MLRs really.

     

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    1. Bosky

      It’s the third paragraph that made me give you a thumbs down; you had until then.

      As a letting agent, I have been downloading title docs from Land Registry for a long time; you just have to be sure who the owners are and one has correct authority to let the property, otherwise you risk your PI going up! It is plain good business practice.

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  2. #ImpressiveConveyancing

    If we are instructed at the same time as the Agent is, Trethowans will get the title for them and we are then set as a team moving forward. And we sure will if this function is indeed landed on the Agent.

    Obtaining title is not a function that should be dropped on the Agents and abandoned over.

    Many properties are sold over two or more titles jigsawed together – which catches out selling conveyancers – and some are both freehold and leasehold in whole or part (e.g a garage).

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  3. MarkJ

    For an agent the Land Registry isnt nearly as daunting as it may seem…  you are only ever going to use a relatively small part of it compared to a Solicitor/Conveyancer. I’ve used it for about 8 years now…

    It doesnt cost anything to get a Land Registry Business Eservices account (last time I checked) and you only pay £3 for documents that you need to download via DD. There is a lot of useful information to be had daily without paying for anything.

    The free Mapsearch function in particular I use nearly everyday.

     

    One thing Ive never been sure of though is that if I check the Land Registry and it says that Mr John Smith  of 21 Acacia Avenue  is the registered owner of 21 Acacia Avenue as of 13/10/2000.  How do I know the person in front of me clutching ID is the same John Smith that bought it in 2000?

    Probably easier in the case of an owner occupier but in the case of a Buy to Let I’ve never let or managed before?

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    1. Rob Hailstone

      How do I know the person in front of me clutching ID is the same John Smith that bought it in 2000?

      You should ask to see some kind of documentary evidence linking them to the property.

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      1. aSalesAgent

        A dogged fraudster could rent the property and then have bills for utilities, council tax, etc, using their assumed identity (that of the property’s legal owner). See the case of Sarah Broadbelt – she changed her name and took out a passport under the amended alias Marion Patterson, who was the actual owner of the property she illegally sold.
         
        Notwithstanding, I wholeheartedly agree that agents should have to obtain a copy of the title register on every instruction, unless there access the vendor as lower-risk (for example, the agent had sold the property to the now-seller).

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  4. Woodentop

    Absolute nonsense. There is a reason why this is not covered in the legislation. It is not the agents responsibility. Money Laundering is committed at the time of the sale completing = conveyancing and not listing. Agents are only required to notify suspicious activity, not investigate. Attempting to put additional work on agents outside their remit is not warranted, no matter how good an idea some may think to have it done twice.

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    1. Bosky

      Are you saying agents should just take the persons word that they own a property?

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      1. Woodentop

        The act of money ‘laundering placement’ is the buyer not the seller!
         
        If they don’t own it, then it shouldn’t get through the conveyancing, which is where the buck stops.
         
        Money Laundering is extremely complex and comes at you from both directions, if you do or if you don’t do soemthing. The more an agent gets involved, the higher the risk they will fall foul, particulary of Section 333A

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        1. aSalesAgent

          It’s not unreasonable to expect agents to check clients’ ID against the property’s title register (£3), to confirm they actually own it. Otherwise, the agent could be wasting everyone’s time, and risking  embarrassment and a complaint via the ombudsman. Should be standard practise.

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  5. Rob Hailstone

    “What a nonsense. And what if there is a name discrepancy, or it’s a sale by a PR or attorney? Are the agents then expected to review those documents and consider whether the seller is entitled to dispose of the property?
    A clear division of labour between the various parties involved in a conveyancing transaction would be more beneficial to avoid unnecessary duplication, confusion and cost.” Bold Legal Group Member firm

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  6. ComplianceGuy

    @WoodenTop
     
    Scarily, you are very wrong about only the buyer can launder money. If you claim to be the owner of a property, but aren’t, and you sell it and (illegally) receive the monies, then go on and buy a yacht or another house; you’ve laundered money and the agent who didn’t check you were the owner facilitated the money laundering by not checking you were entitled to it.
    Legislation aside, if you just take the customer’s word for it, find a buyer, then after paying a mortgage broker fee, search fees and a survey fee, it’s discovered your customer isn’t the owner; transaction done and YOU are liable to reimburse the purchaser as per TPOS because your due diligence was insufficient. 

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    1. Woodentop

      NO, not as clear as you think you know, which if you are purporting to be the compliance guru is shocking. Your scenario is Fraud and I was talking about ML.  
       
      Money laundering is the process of changing large amounts of money obtained from crimes, such as drug trafficking, into origination from a legitimate source.   Therefore selling a property which may have been bought with proceeds of crime, was in fact ‘laundered’ at the time of purchase by the seller.
       
      Therefore an agent checking land registry on further resale will not help and near impossible to identify. It would continue as ML to a new purchaser by that same seller … but how do you know! Our industry is more concerned with buyers laundering money where we are more likely to be of help. The legislation on ML is vast and wide and comes at you from both directions and really beyond the expertise of estate agents staff to police, which is why the responsibility is only to report suspicious activity and they need to be very careful with Sec 333A or they can end up with 2 years imprisonment. Therefore the best person placed to do the checks is at the time of legal contracts by the conveyancing who will come up with the same information and even better information when it comes to unregistered title, executors etc and having it done twice.
       
      Organised crime is exceptionally clever at hiding information!
       
      There is far too much liberty taken using estate agents time and resources for free, to police others responsibilities, when they have more important things to do. HMRC already have agents spying on landlords with annual income reports and RTR in England has been deemed illegal, which is why the other devolved nations do not follow.

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  7. PeeBee

    According to the article, Guild Compliance Officer Mr Offley states

    “Plus, and importantly, it is a requirement of The Property Ombudsman code of conduct which states that the agent must take reasonable steps to confirm legal ownership…”

    Actually, no it doesn’t.  The actual wording is as follows:

    “You should take reasonable steps to satisfy yourself that the seller is entitled to instruct you (such as obtaining title information from the Land Registry; declaration of trust; deed of variation; power of attorney) and to sign on behalf of all co-sellers”

    Sorry to nitpick – but surely a compliance bod should be the most pedantic of the bunch in respect of such things.  What else might he be misinterpreting?

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  8. aSalesAgent

    @ComplianceGuy
     
    Isn’t money laundering the act of cleaning dirty money? In your example, wouldn’t the sale of the residential property be fraud, and the purchase of the yacht be an act of money laundering?
     
    I would think checking the title is more likely to stop fraud, rather than money laundering.

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