Dear Claire – Winter 2019
09 / 01 / 2019
Perplexed by property law? Relax, Professional Support Lawyer Claire Haynes is here to answer your most pressing questions…
Q I am in the process of buying a property in London. The seller of the property is a company. I thought this was unusual so I did some digging on the internet and I discovered that the majority shareholder is currently suspected of corruption. Should I continue to exchange contracts to purchase the property?
A From the information you have given me this has the characteristics of a ‘high risk’ transaction. In these circumstances it would be usual for the seller’s solicitor to carry out enhanced due diligence and anti-money laundering checks on their seller client. As a buyer, I would expect your solicitor to request additional comfort from the seller’s solicitor in relation to these checks and to establish a nexus between the parties and the property. Solicitors are under a duty to report to the enforcing authorities if they know or suspect, or have reasonable grounds for knowing or suspecting, that another person is engaged in money laundering or terrorist financing.
If there is concern with regard to the legitimacy of the money used by the seller when it purchased the property, enforcement authorities could be investigating the seller. New legislation brought in during 2018 enables the enforcement authorities to apply for an ‘unexplained wealth order’ issued by the court. Orders of this nature can be granted if the authorities have reasonable grounds for suspicion that an individual who is either involved in serious crime or a politically exposed person has insufficient legitimate income for the purpose of acquisition of a specific property with a value of over £50,000.
An unexplained wealth order is usually accompanied by an interim freezing order over the property pending investigation. These orders are not commonplace but they can be granted without notice. If you exchange contracts without a simultaneous completion and such an order is granted prior to completion the best case scenario is that it would delay completion of your purchase. In cases involving corruption, fraud, terrorism or money laundering, the enforcing authorities have a number of powers at their disposal pursuant to the Proceeds of Crime Act 2002. A freezing order over the property could mean that the authorities seek to recover the proceeds of crime by realising the value in the property through a civil recovery action.
Given the high risk circumstances and the money that you potentially stand to lose, if you are not already you should take immediate legal advice to enable you to make a fully informed decision.