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Mortgage fraud

11 February 2019

Note that the SRA Handbook (version 21) was replaced by the SRA Standards and Regulations on, and with effect from, 25 November 2019.

This practice note will shortly be updated to reflect the introduction of the SRA Standards and Regulations. Until then, you are advised to check any references in the practice note to the current Handbook against the new Standards and Regulations to ensure that you are aware of the up-to-date position on all issues to which the practice note refers.

Criminals will exploit weaknesses in lending and conveyancing systems to gain illegitimate financial advantage from the UK property market.

This can be either:

  • opportunistic action using misrepresentation of income or property value to obtain greater loans than a person is entitled to, or
  • organised crime syndicates overvaluing properties, using false identities and failing to make any mortgage repayments.

A solicitor will be involved in most property transactions undertaken in the UK. You can find yourself criminally liable if your client commits mortgage fraud, because of the extension of the definition of fraud in the Fraud Act 2006 and the anti-money laundering regime in the UK. 

You can be liable even if you were not aware of the fraud or did not actively participate in it.

Courts will assume a high level of knowledge and education on your part. They will often be less willing to accept claims that you were unwittingly involved if you have not applied appropriate due diligence.

This practice note highlights the warning signs of mortgage fraud and outlines how you can protect yourself and your firm from being used to commit mortgage fraud.

Legal status

This practice note is the Law Society's view of good practice in this area. It is not legal advice.

Practice notes are issued by the Law Society for the use and benefit of its members. They represent the Law Society's view of good practice in a particular area. They are not intended to be the only standard of good practice that solicitors can follow. You are not required to follow them, but doing so will make it easier to account to oversight bodies for your actions.

Practice notes are not legal advice, nor do they necessarily provide a defence to complaints of misconduct or of inadequate professional service. While care has been taken to ensure that they are accurate, up to date and useful, the Law Society will not accept any legal liability in relation to them.

For queries or comments on this practice note contact the Law Society's Practice Advice Service.

Professional conduct

The following sections of the SRA Handbook are relevant to mortgage fraud:

  • Principle 1 – Uphold the Rule of Law and the Administration of Justice
  • Chapter 3 – Conflicts of Interest
  • Chapter 4 – Confidentiality and disclosure

SRA Principles

There are ten mandatory principles which apply to all those the SRA regulates and to all aspects of practice. The principles can be found in the SRA Handbook.

The principles apply to solicitors or managers of authorised bodies who are practising from an office outside the UK. They also apply if you are a lawyer-controlled body practising from an office outside the UK.

Terminology

Must - A specific requirement in legislation or of a principle, rule, outcome or other mandatory provision in the SRA Handbook. You must comply, unless there are specific exemptions or defences provided for in relevant legislation or the SRA Handbook.

Should - Outside of a regulatory context, good practice for most situations in the Law Society's view. In the case of the SRA Handbook, an indicative behaviour or other non-mandatory provision (such as may be set out in notes or guidance).

These may not be the only means of complying with legislative or regulatory requirements and there may be situations where the suggested route is not the best possible route to meet the needs of your client. However, if you do not follow the suggested route, you should be able to justify to oversight bodies why the alternative approach you have taken is appropriate, either for your practice, or in the particular retainer.

May - A non-exhaustive list of options for meeting your obligations or running your practice. Which option you choose is determined by the profile of the individual practice, client or retainer. You may be required to justify why this was an appropriate option to oversight bodies.

The Law Society also provides a full glossary of other terms used throughout this practice note

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The Practice Advice Service provides a dedicated support line for Law Society members and employees of law firms. Call us on 020 7320 5675.

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