House-title rules make fraud easier says lawyer

Home-owners could register properties in their dog's name, according to an Auckland lawyer who is unsurprised about mortgage scams that he blames partly on changes to land registration.

"I just knew this would happen," said solicitor Stewart Germann, who is worried about the three lawyers hit by a scheme that cheated three banks out of $540,000.

Late last year a woman in Auckland stole $180,000 from three banks through three lawyers. She told them she wanted to draw on equity from her debt-free house.

Lawyer Don Thomas, of Thomas & Co, was unwittingly involved in the ASB Bank case but since he spoke out he has had calls from two other lawyers who were tricked by the same woman.

Mr Germann says the frauds were just waiting to happen under a lax land title system.

Previously, properties had two certificates of title, one held by the Land Transfer Office and the other by the home-owner, he said. But the Government changed the system in 2002 and now properties were only registered on its database, Land Information NZ (Linz).

Mr Germann said the system was open to abuse and the changes had allowed the frauds.

"I predicted there would be a number of fraudulent transactions made by not having to produce a second certificate of title which would always be held physically by the registered proprietor of the property or the solicitor or the bank if there was a registered mortgage," he said.

"Technically the system allows a fraudster to transfer anyone's certificate of title to themselves or some third party or even a dog named John Brown."

If the woman who duped the banks had been required to produce the second certificate of title to the lawyer so he could register the bank's mortgage against both certificates, the fraud would have been almost impossible, said Mr Germann.

But Robert Andrell, acting register-general of Linz, said hard copies of certificates of titles had not been issued since 2002 and banks and solicitors searched the register electronically to find who owned properties.

Anyone could find out who owned a property but it was up to banks and lawyers to verify whether a loan applicant was the registered owner or had a contract to buy the house.

Mr Thomas also disagreed with Mr Germann about the land registration system, saying that if a person could forge a passport they could also forge a certificate of title.

Mortgage fraud is rife overseas. In the United States, the FBI had 436 cases in 2003 and 642 last year.

Property "flippers" who buy and sell houses quickly at inflated prices have been credited with creating a property bubble in the US.

An Auckland police spokeswoman said a senior fraud squad investigator had been assigned to examine the issue here.