Dreamvar ruling – What will it mean for identity checks?

The Dreamvar decision was handed down by the Court of Appeal yesterday morning, and has unsurprisingly provoked a range of responses among conveyancers.

In a judgment that the industry had been eagerly awaiting, greater clarity was provided on a number of issues such as that the vendor’s solicitor warrants that they act on behalf of the genuine owner of the property and not someone who merely claims to be the owner. As they only have authority to release the purchase monies to the genuine owner, should they do so otherwise, they will be in breach of trust – as Mary Monson solicitors were found to be following the appeal.

In light of this, it’s been suggested that solicitors acting for the seller will need to take greater care to ensure the property vendor, i.e. their client, is really the genuine owner.

However, as former CQS product manager, Graham Murphy considers, to what extent do conveyancers need to go to in order to ascertain the true identity of their client?

‘This all boils down to what is acceptable as ID, who should be verifying that ID, and the reliance which each side of the transaction places on the other to conduct necessary due diligence.

‘I can foresee that the only people to benefit from this outcome over the long term is the insurance market, as buyers will want to insure themselves against becoming victims of this type of fraud. Given that there are over 1M conveyancing transactions every year, fortunately, this type of fraud is still rare. If the whole market were to adopt an insurance backed system, the premiums – I would have thought – would be relatively low and most likely stepped in association with the value of the property being sold.’

He went on to reference point 72 of the judgment relating to the identity checks carried out by Mary Monson Solicitors (MMS). It states: ‘the appeals are not of course cases in which the claim in negligence is based upon any mis-statement which either the solicitors or the agents are said to have made. The particulars of negligence are details of omissions and other alleged failures by the defendants to properly carry out identity checks required under the MLR.’

Graham then went on to discuss the checks made, as well as the difficulties in ever being able to fully guarantee that the vendor is who they say they are.

‘The checks carried out by MMS were not in line with Law Society guidance; these included using a TV licence and a driving licence. The current Anti Money-Laundering practice note from the Law Society states that a TV license is not a valid form of ID and where the driving license was concerned, this was only valid for three years and had only just been issued. This is itself is a red flag in terms of ID fraud. At the original hearing, MMS accepted that they had not acted in a competent manner and the outcome of the appeal has ensured that MMS will have to foot a proportion of the final bill. 

‘However, whilst the vendor’s solicitor can conduct a range of checks, and obtain numerous kinds of identification, evolving criminal practices means this can be increasingly difficult to do. As such, it is likely that these type of frauds will take place in future unless the market can find a solution to the age-old problem of linking an individual’s ID to the property that they are selling.’

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1 Comment

  • test

    Should not some organisation carry out test shopping to assess compliance with Money Laundering Regulations and keep those required to comply on their toes? One for Which? perhaps?

    Reply

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