Everything You Need to Know on Property Scams and How to Avoid Them
That property might seem like ‘the one’. But is it really?
Today, with scammers exploring different tricks and making use of the loopholes in the law, property scams are taking place much more than they are being reported. The limited information available and the gaps in knowledge have also contributed to this. People are easily vulnerable and unknowingly fall deep into these cleverly schemed frauds. That is why we’ve put together a list of scams you need to be mindful of when purchasing a property.
Scammers have been operating illegal printing presses and producing fake deeds, Title Abstracts (paththiru), letter of permits and selling them between Rs. 20,000 and a few hundred lakhs. Some also use a deceased Notary’s name to submit fake deeds.
Using these fake deeds, they then sell land to a third person without the knowledge of the actual owner. However, though the deeds are transferred, and the plot is sold, the new owner does not become the real owner of the property. Once a legal case is filed by the actual owner attesting his ownership, the third person would not only lose the money invested but also his home.
Changing the owner’s name on the Title Abstract
Adding a letter to the end of the name of the owner or defacing it while checking the documents at the Land Registry is another common trick scammers use. They change deed numbers similarly too. The fraudster then gets the legal copy of the deed which includes the name, address and NIC number of the amended owner, and sells the property without the actual owner’s knowledge.
Changing real owners through a Deed of Declaration
A Deed of Declaration (DoD) is a document submitted by someone who wants to declare ownership of a land to themselves. This is applicable when the land has been acquired through undocumented means such as gifts or claims.
To execute a Deed of Declaration, you need to own a plot for over 10 years. However, scammers register the deed in a new folio as a Deed of Declaration. This changes the original owner of the plot and lets the fraudster sell the land to a buyer. The original owner may not even be recognized as the initial owner after this change.
Forgery through a partition action
Filing a partition action through courts using forged documents is a different kind of scam that fraudsters have got into recently. Here a fake DoD is presented, proving the possession of an unused land plot for over 10 years. The fraudster then introduces someone else to be listed as a co-owner of the plot in the presence of a lawyer. Once this has been documented and registered in the Land Registry, the false owner has the right to sell the plot to a third person. This, as usual, takes place without the knowledge of the original owner. However, if he takes up the issue legally, his ownership will be returned and the buyer will end up losing his money and the property.
How to Prevent These Scams
- Checking documents at the Land Registry regularly.
- Adding a Caveat. A Caveat is a notice registered at the relevant Land Registry, which holds a record of the land. If the Caveat is in place, the Land Registrar is bound to inform those who registered the Caveat when any document or alteration to the registration of the said land is received.
- Verifying that the names match between the deed and Title Abstract and any other relevant documents.
- Making sure that the person selling the land is its true owner by referring to the Title Report and deed. You will also need to make sure that the land is not in a shared/joint ownership (co-owners) and if so, all the owners should have signed the deed. If a property is granted as a gift certificate make sure there are no options to cancel/revoke this and it’s not under any life interest. If there is a possessor for the land, then you should ask the seller to remove them before you buy it.
- Ensure that the land hasn’t been handed through a grant to the owner or sold. For any lands where the owner cannot be identified, anyone can submit a Deed of Declaration which gives them authority to use the land. If no owner comes forward within this period, then the land will belong to the person who lodged the claim.
Besides the above, we also recommend that you check the documents below before purchasing a property.
- The Original deed
- The Title Report (for at least 30 years)
- A copy of the survey plan recently approved by the local authority (within the last 10 years)
- Plan from the local authority to identify any land to be acquired by the government for development projects.
- A certified copy of the duplicate deed (the copy of the deed with the stamp duty affixed, which must be mandatorily lodged at the Land Registry by the Notary)
- Abstracts of the Title (paththiru)
- Ownership non-vesting certificate
- Street/building line certificate
- Power of Attorney
The power of attorney document is where a person gives authority to another to act on his or her behalf regarding financial matters. In a scam, fraudsters use this to their advantage to transfer property of those who have been living abroad for a long time, elderly, etc.
To prevent being exploited from this scam, never sign a power of attorney document unless you are fully aware of the identity of the person and trust him or her. It should also not be released randomly unless it is truly required.
- Fake advertisements and real estate brochures
Fancy pictures are the first things that grab the attention of a buyer to any property. Using this to their advantage, scammers design ads and brochures with attractive images and words like best views, luxury, convenience and affordable prices. These interest buyers and influence them to purchase the property. However, in reality the plot may be in the middle of nowhere, with difficult access to basic amenities, transportation, etc.
To avoid this always make sure you purchase land after thoroughly researching about the area and visiting the place in person.
- Fake NIC
Scammers also engage in scams by creating a fake NIC under a forged name using the NIC details of the actual owner of the property. Here a person matching the age of the actual owner is found and his image is used instead to create the fake NIC. The details in this are then matched with the deed and/or Title Abstract.
To sell the property the fraudster then advertises and passes the details of the property to brokers to find prospective buyers. They rope these unsuspecting buyers and Notaries into the scam without their knowledge as the owner’s details (NIC) match the details on the Title Abstract.
- Selling twice
Unscrupulous sellers also take advantage of the delay by the authorities to register a deed at the Land Registry. They continue to sell an already sold land to another buyer before the 1st transaction’s documents can be registered. Through this, they make twice the amount on the sale and the 2nd buyer loses all of his investment on the property.
- The ‘Mistaken Advance Payment’
This scam involves a person claiming that he or she has paid an additional amount to your bank account by mistake as the advance payment / reservation fee, and they need the refund immediately to pay the lawyer. Since it takes around 3 days for the money to show in your account, those unaware of this will credit money into these scammers’ accounts. It is only later that they realise this person has never transferred any money and end up losing their own money due to this scam.
To avoid this, be aware of situations where the scammers offer to buy the property and hesitate or don’t visit the property in person. Also, wait until any money is received in your account or ask them to send a proof of transfer like a slip with the bank’s stamp on it.
- The holiday rental scam
This is where a person asks for a deposit amount for a short-term rental, only for the tenant to realise that there’s no such property or the property has never been booked under that person’s name.
To be mindful of these situations always try to view the property with the owner / agent, make payments in person and keep permanent and verified contact details of the payment receiver like a landline number, business or home address. It’s better to go with a landlord / company that has positive reviews by others or has been verified by a trusted party, like LankaPropertyWeb’s Verified Agent scheme.
The investment on property is a large sum. Some people might purchase it straight off, but others save up for years to build their dream home. This also makes them even more vulnerable to scams, especially when they are limited by a budget. To prevent this, always seek professional help. Be mindful of even the minute details in the property purchasing and documentation process.
If it is too good to be true, then it probably is…
Know of any other scams that we haven’t covered? Add them in the comments or email us at email@example.com so we can help buyers avoid these scams.
Posted Date: 25th November 2020
The Government should clean up all these loopholes and introduce a standard deed that everyone acknowledges and have an efficient normal standard deed like in Singapore etc.
This would enhance trusted transactions and should the lawyers be negligent then their insurance should compensate the client as in the U.k
Without which we will be looked as a banana republic as is the case