Property Fraud: Protect Your Transaction from Cybercrime

Property transactions involve substantial sums of money, making them an attractive target for fraud. As technology advances, fraudsters exploit electronic communications and digital platforms to intercept property transactions. For buyers, sellers and property practitioners, understanding how property fraud occurs and careful verification is essential.

When verification protocols fail, the consequences of property fraud go far beyond the administrative hassle. Buyers may lose funds intended for the property purchase, sellers may become victims of identity theft, and transactions may be delayed or even fall through. For all parties involved there may be significant financial, legal and reputational consequences.  

Common types of property fraud

1. Email interception and business email compromise: where fraudsters impersonate a legitimate party and attempt to redirect payment;

2. Identity impersonation and title deed fraud: where fraudsters use forged or stolen documents and attempt to sell or transfer ownership without the owner’s knowledge.

Who is responsible when property fraud occurs?

In the case of Edward Nathan Sonnenbergs Inc v Hawarden, a landmark ruling by the Supreme Court of Appeal has completely reshaped the answer.  

A client lost R5.5 million after fraudsters intercepted emails between the client and ENS Africa whereafter the funds had been paid into a fraudulent account.  

Originally the High Court held the firm liable as they owed a general duty of care towards the purchaser and failed to communicate its banking details safely and securely.

However, The Supreme Court of Appeal ruled that clients cannot automatically hold law firms legally or financially responsible for independent third-party cybercrime, especially when the client had the means to protect themselves.

The court held that the client could have verified the firm’s bank account details by inquiring with the attorneys and the client had been faced with the option of furnishing a guarantee versus an electronic transfer to the firm. Whereafter she had elected to forego a bank guarantee for a cash transfer.

While this shifts a lot of responsibility to the client, it underscores the need for law firms to provide clear warnings and secure communication channels. As a result, firms are to ensure proactive communication by clearly advising clients that the firm's banking details will never change via email, and any communication suggesting otherwise must be treated as fraudulent; ensure mandatory telephonic verification and implement explicit disclaimers regarding cybercrime

How can you protect yourself?

Buyers: Stop, read, think, verify.

• Always telephonically verify banking details prior to transferring funds.

• Attend to a test payment. Once confirmed by the law firm, attend to payment of the balance due.

• Be cautious and verify any changes.

Agents: Establish secure communication from the beginning

• Use appropriate, secure communication channels when handling sensitive information.

• Inform the client on day one on how communication will be attended to, and that banking details will never be changed via email.

• Warn buyers and sellers about email interception and fraudulent banking details.

Sellers: Protect your identity and sale proceeds

• Share identity documents only through appropriate, secure channels.

• Confirm banking details directly with the agency or conveyancing firm.

• Question unexpected requests to change the account into which the proceeds of the sale will be paid.

Preventing property fraud requires vigilance from everyone involved in a transaction. By verifying payment instructions independently, protecting personal information and investigating unusual requests before acting, the parties can reduce the risk of significant financial loss and legal complications.

Written by: Micaela Hermans
Moderated and approved by: Rohula Kgabu

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