Property scams in Western Australia and the amended Code of Conduct for Real Estate Agents
The two recent property scams in Western Australia cause alarm on two levels. As property professionals we are all concerned about our potential liability to innocent property owners whose property is sold without their consent. Also, for those property owners or prospective property owners, it would be devastating to have such a major asset sold fraudulently.
In both recent cases the owners owned properties in Western Australia and were living overseas. Documents sent to South Africa were fraudulently intercepted, allegedly from persons in Nigeria. The fraudulent parties made a series of telephone calls to real estate agents in Perth in both cases and arranged a fraudulent listing. In the second, most recent case which took place in August of this year, the fraudulent seller advised the real estate agent that the sale should be made urgently to fund the purchase of a petro chemical plant. The properties were sold quickly and the transfer of land forms were lodged and accepted at Landgate. The funds were directed to overseas bank accounts in both cases. In the first case, the owner of the property returned to Australia to be informed by his neighbour that his property had been sold.
Changes to the Landgate title registration process
As of 18 August 2011, Landgate has introduced a new registration process for transactions where documents are being executed outside Australia. The Registrar of Titles will require all transfers to contain evidence that the party executing the document outside Australia has been identified to the 100 point standard by an Australian consular officer.
An Australian consular officer is a person appointed to hold any of the named offices in a country or place outside the Commonwealth and includes, amongst others, an ambassador, minister, high commissioner and consular-general (s 145(4) of the Transfer of Land Act 1983).
It may therefore be difficult for Australians living overseas to gain access to a consular officer. Even in popular Western countries such as the United States of America this may be difficult. Australia does not have many consular offices in America. Most are located within Washington and New York. An Australian citizen working in, say, Texas would not find it easy to meet these identification requirements with a consular officer located in Washington.
The conveyancer acting for the parties must then prepare a statutory declaration describing the circumstances of the identity check and must contain copies of the 100 point identification. Conveyancers should draft their statutory declarations carefully to ensure they do not incur any liability if they have made a statutory declaration where the property was fraudulently sold.
Caveat (Improper Dealings)
For Western Australians looking to travel, a Caveat (Improper Dealings) can be lodged with Landgate. Previously an owner could not lodge a caveat on their own land. A Caveat (Improper Dealings) will act in a similar way to an absolute caveat and prevent dealings with the land.
Changes to the Code of Conduct
Under the previous version of the Real Estate Agent’s Code of Conduct (Code), real estate agents had an obligation to exercise skill, care and diligence in the provision of services. The Code has been amended to require agents to exercise due skill, care and diligence. The guidance notes to the Code state that the inclusion of the word due means that measures should be taken to reduce the risks of identity fraud.
There is now also an obligation on agents to make all reasonable efforts to verify the identity of each person who claims to be the seller of the property or to act for the seller. This applies to every time the seller issues instructions to the agent. To discharge their obligations agents should start by conducting a certificate of title search and check that the name of the person who is representing themselves as the seller exactly matches that on the certificate of title.
If the seller is a company, the agent should perform a company search of the company and check that the person representing themselves as a director or company secretary of the company is named in the company search.
Agents should then ask for 100 points of identification. Ideally the agent will meet with the seller face to face, sight original copies of identification and then take copies of those original documents. If the agent cannot meet with the seller face to face, the seller can produce copies of the original copies of identification if they have been verified by a witness listed in the Oaths, Affidavits and Statutory Declarations Act 2005 ( for example Justice of the Peace, doctor, pharmacist, solicitor, police officer).
Agents should exercise caution when a seller calls from overseas and requests an urgent sale. Other circumstances of concern are where the seller uses a generic email address such as a yahoo or hotmail address and also where the seller directs that the funds should be placed in overseas bank accounts.
A practical approach to identity verification (once the 100 point check has been undertaken) is to consider putting in place security questions so that when their client calls to give instructions they are able to show they have taken all reasonable steps to identify their client. These security questions should require answers only the client would know. A number of organisations such as banks already use this approach in the context of other legislation and codes of conduct. To be in a position to prove this, agents should take notes of the protocols put in place to identify clients and the security questions they have developed.
Changing the way property is sold
These changes appear to create a significant administrative burden for real estate agents. In time, these practices are likely to be more smoothly integrated into day to day work and will assist in protecting innocent property owners from having their property sold without their consent.
For more information regarding this article please contact:
|Peter Beekink||Anita Barnes|
|(08) 9288 6751||(08) 9288 6802|