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  • FIRST POST
    • mamz001
    • By mamz001 14th Jun 17, 12:28 PM
    • 16Posts
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    mamz001
    Fraud by developer against a new build
    • #1
    • 14th Jun 17, 12:28 PM
    Fraud by developer against a new build 14th Jun 17 at 12:28 PM
    Hello All,


    Hoping someone can give me some advice the context is a bit long so please bear with me.

    I put down a deposit for a new build flat near the end of last year; it was a 40% deposit upon exchange which was done Dec 2016. The works were meant to start Feb 2017 but never did due to some existing issue. However in May 2017, my solicitor told me the developer has stopped responding and no works has started the developer's solicitor told my solicitor that the developer has stopped responding to them too. My solicitor advised that I am a victim of money laundering at the beginning of June.

    I found out about all this early June, since then I have come across 10 other victims who have all paid a 60% deposit amount. All funds were transferred to the developer's solicitor by our solicitor, the developer's solicitor released all the funds to his client, my solicitor has reported the developer's solicitor to the SRA, as that is against the accounting law, they should have never released all the funds to the developer especially when no works has commenced.
    The developer is nowhere to be found and may have fled the country with the money, since I found out about this fraud, myself and the 10 other victims have appointed a litigation solicitor (Harry). Harry managed to track down that the developer's bank is with Barclays and asked Barclays for a statement for all the transaction made in that account. Barclays confirmed the account is closed but they can help answer Harry's question if he gives all our names to the bank, Harry did this yesterday.

    My question is, is there a chance Barclays can compensate us since the fraudulent money was all transferred to one of their accounts? Harry has asked them the question too if Barclays can compensate, but I thought let me try to investigate a bit myself. Any help greatly appreciated at this difficult time and happy to answer any questions.
Page 1
    • AdrianC
    • By AdrianC 14th Jun 17, 12:41 PM
    • 14,785 Posts
    • 13,139 Thanks
    AdrianC
    • #2
    • 14th Jun 17, 12:41 PM
    • #2
    • 14th Jun 17, 12:41 PM
    I put down a deposit for a new build flat near the end of last year; it was a 40% deposit upon exchange which was done Dec 2016. The works were meant to start Feb 2017 but never did due to some existing issue. However in May 2017, my solicitor told me the developer has stopped responding and no works has started the developer's solicitor told my solicitor that the developer has stopped responding to them too.
    Originally posted by mamz001
    I presume you know the name of the limited company you paid your deposit to? You need to find out exactly what the legal situation is. If administrators have been appointed, then you are a creditor alongside other creditors, and you need to work with them.

    My solicitor advised that I am a victim of money laundering at the beginning of June.
    I doubt that's what he really said. Chinese whispers don't help.

    I found out about all this early June, since then I have come across 10 other victims who have all paid a 60% deposit amount.
    You said 40% a minute ago.

    The developer is nowhere to be found and may have fled the country with the money
    Did you pay your deposit to the developer as an individual, or to a limited company?

    My question is, is there a chance Barclays can compensate us since the fraudulent money was all transferred to one of their accounts?
    Very unlikely. You voluntarily paid a substantial %age deposit for a property that was still no more than a drawing and planning permission. That is a very risky and unwise thing to do, and absolutely not something in the normal run of property purchasing. A holding deposit, yes. A 10% deposit at exchange, close to completion, yes. A substantial %age off-plan? No...

    If the developer personally has defrauded you, then that's a criminal matter.
    If the developer company have simply failed, with no criminal intent to defraud, then that's part of the risk you took in paying such a large deposit so early.
    • davidmcn
    • By davidmcn 14th Jun 17, 12:44 PM
    • 5,604 Posts
    • 5,381 Thanks
    davidmcn
    • #3
    • 14th Jun 17, 12:44 PM
    • #3
    • 14th Jun 17, 12:44 PM
    On what basis do you think Barclays would be liable? It seems they've just done what they've been told to, it's none of their business what your contracts say.
    • mamz001
    • By mamz001 14th Jun 17, 1:07 PM
    • 16 Posts
    • 1 Thanks
    mamz001
    • #4
    • 14th Jun 17, 1:07 PM
    • #4
    • 14th Jun 17, 1:07 PM
    I presume you know the name of the limited company you paid your deposit to? You need to find out exactly what the legal situation is. If administrators have been appointed, then you are a creditor alongside other creditors, and you need to work with them.



    I doubt that's what he really said. Chinese whispers don't help.



    You said 40% a minute ago.



    Did you pay your deposit to the developer as an individual, or to a limited company?



    Very unlikely. You voluntarily paid a substantial %age deposit for a property that was still no more than a drawing and planning permission. That is a very risky and unwise thing to do, and absolutely not something in the normal run of property purchasing. A holding deposit, yes. A 10% deposit at exchange, close to completion, yes. A substantial %age off-plan? No...

    If the developer personally has defrauded you, then that's a criminal matter.
    If the developer company have simply failed, with no criminal intent to defraud, then that's part of the risk you took in paying such a large deposit so early.
    Originally posted by AdrianC
    Thanks for the quick reply.

    I have done everything by the books, paid an initial 10% deposit after asking my solicitor if this is the norm, he said yes. Then paid the remaining 30% upon exchange, again my solicitor did all the checks etc that a conveyancing solicitor would, however it has come to light that the developer never owned the building, which he was going to redevelop into new flats. Looks like my solicitor may have not done all the relevant checks.

    I got a letter from the money laundering officer from my solicitors saying that I am a victim of fraud. The developer's solicitor told them this too, I have it in writing so not Chinese whispers.

    The director of the company has just disappeared and it has come to light the company has no assets, so going into administration won't make a difference. Initially there was a letter claiming they have assets, which was done by the developer's solicitor but it has come to light they have no assets, it was all a lie.

    Yes I paid 40% deposit as I negotiated it, but most of the other victims have paid 60%.

    I paid all my deposit to my solicitor, just like how you pay it when purchasing a house. All the other victims did it the same way too. My solicitor then sent the payment to the developer's solicitor who then sent the money all across to the developer. It looks like the developer's solicitor may have been involved with all this too.

    The only reason I asked if Barclays will compensate is because they responded to my current litigation solicitor saying “We can process the scam as expeditiously as possible?”, hence I was wondering if that means compensation or if anyone has been through something similar like this.
    • AdrianC
    • By AdrianC 14th Jun 17, 1:09 PM
    • 14,785 Posts
    • 13,139 Thanks
    AdrianC
    • #5
    • 14th Jun 17, 1:09 PM
    • #5
    • 14th Jun 17, 1:09 PM
    The director of the company has just disappeared and it has come to light the company has no assets, so going into administration won't make a difference. Initially there was a letter claiming they have assets, which was done by the developer's solicitor but it has come to light they have no assets, it was all a lie.
    Originally posted by mamz001
    So you are owed money by the legal entity your contract was with - the limited company.
    Think of that limited company as a person on his death bed with no money... When the company is wound up, it ceases to exist. It dies.

    There may be a criminal case against the director of the company. If you can find him.
    • Guest101
    • By Guest101 14th Jun 17, 1:12 PM
    • 14,625 Posts
    • 14,349 Thanks
    Guest101
    • #6
    • 14th Jun 17, 1:12 PM
    • #6
    • 14th Jun 17, 1:12 PM
    So you are owed money by the legal entity your contract was with - the limited company.
    Think of that limited company as a person on his death bed with no money... When the company is wound up, it ceases to exist. It dies.

    There may be a criminal case against the director of the company. If you can find him.
    Originally posted by AdrianC


    Possibly owed money by his solicitor too.
    • G_M
    • By G_M 14th Jun 17, 1:14 PM
    • 40,543 Posts
    • 46,375 Thanks
    G_M
    • #7
    • 14th Jun 17, 1:14 PM
    • #7
    • 14th Jun 17, 1:14 PM
    This does not sound like money laundering. Where was the 'dirty' money, and how was is cleaned?

    Fraud - perhaps.
    Breach of Contract - almost certainly.

    Frankly I think your best chance of success is action taken against the developer's solicitor. This has the advantge that you know who/where he is, and presumably he has funds and/or professional indemnity insurance with which to compensate.

    But it depends towhat extent he is responsible for the client money he held (or rather, released).
    • mamz001
    • By mamz001 14th Jun 17, 1:16 PM
    • 16 Posts
    • 1 Thanks
    mamz001
    • #8
    • 14th Jun 17, 1:16 PM
    • #8
    • 14th Jun 17, 1:16 PM
    There may be a criminal case against the director of the company. If you can find him.[/QUOTE]

    Yes I have a detective on the case for that, but I am pretty sure he has fled the country.
    • mamz001
    • By mamz001 14th Jun 17, 1:17 PM
    • 16 Posts
    • 1 Thanks
    mamz001
    • #9
    • 14th Jun 17, 1:17 PM
    • #9
    • 14th Jun 17, 1:17 PM
    Possibly owed money by his solicitor too.
    Originally posted by Guest101

    Yes both my solicitors and the developer's solicitors have professional indemnity insurance and are registered against the SRA, Harry has advised we may have to take the route of claiming via the indemnity insurance.
    • AdrianC
    • By AdrianC 14th Jun 17, 1:20 PM
    • 14,785 Posts
    • 13,139 Thanks
    AdrianC
    There may be a criminal case against the director of the company. If you can find him.
    Yes I have a detective on the case for that, but I am pretty sure he has fled the country.
    Originally posted by mamz001
    This is the 21st century. People can be found beyond these shores.
    • mamz001
    • By mamz001 14th Jun 17, 1:24 PM
    • 16 Posts
    • 1 Thanks
    mamz001
    It was all our hard earned money, but I am not sure where it is now. By the sounds of it, it looks like the developer transferred all the funds from his Barclays account to maybe some abroad account etc, Harry is currently looking into tracking down this information.
    • mamz001
    • By mamz001 14th Jun 17, 1:27 PM
    • 16 Posts
    • 1 Thanks
    mamz001
    This is the 21st century. People can be found beyond these shores.
    Originally posted by AdrianC
    I hope so, at first I felt like an idiot because usually I am very careful with all this but having met the other victims, some are doctors and some hold senior posts in financial institutions, so it was very cleverly planned out.
    • DumbMuscle
    • By DumbMuscle 14th Jun 17, 1:33 PM
    • 196 Posts
    • 290 Thanks
    DumbMuscle
    The "money laundering" is a red herring - basically, the person at the solicitors' office who deals with compliance checks (including money laundering, hence the job title) got passed the buck for this (not unreasonably, as it will be closer to their work than to the work conveyancers normally do), and so was the one to contact you.

    It sounds like there are an awful lot of questions which your lawyer should be asking all the solicitors involved. Most notably, why was any money exchanged at any point in this before they had confirmed that the seller owned the land (or why did those confirmations fail)?

    Going full paranoia for a moment (probably not an issue, but worth checking) - did you find your own solicitor or were they recommended as part of the buying process? Similarly, where did the information about Harry come from? Check that both are registered with the appropriate regulators, and ensure that the contact details you have match the ones publicly available via those regulators if possible. Do as much verification as you can on any other party involved here, especially ones that you might end up owing or paying money to. It's quite possible that you will now end up on a "suckers list" and be targeted for further fraud.

    Has a police report been filed?

    Good luck, I suspect you will need it!
    • eddddy
    • By eddddy 14th Jun 17, 1:39 PM
    • 4,936 Posts
    • 4,586 Thanks
    eddddy
    Are you sure this isn't just a dodgy 'off plan investment scheme'?

    It sounds very much like one, but that doesn't seem to correlate with what your solicitor is telling you. Did the contracts you signed talk about an 'Investment'?


    The way some of these (very dodgy) schemes work is...
    • A developer identifies a site (and perhaps gets an option to buy it)
    • 'Investors' each pay a chunk of money to the developer (i.e. your 40%/60% deposit)
    • The developer uses the money to buy the site, and start building
    • 'Investors' might be required to pay more chunks of money along the way to fund the building.
    • Each 'Investor' gets an apartment at the end (hopefully!)

    Even if no fraud is involved, these unregulated investment schemes can fail catastrophically.

    Sometimes the 'developer' running the scheme is a bloke who was selling used-cars the day before, with no assets, no experience of property development and no business acumen (and no morals).


    Edit to add...

    Having just read DumbMuscle's post - I would agree - check that your solicitor and Harry really are legitimate. They seem to be telling you rather strange things.
    Last edited by eddddy; 14-06-2017 at 1:56 PM.
    • aneary
    • By aneary 14th Jun 17, 1:57 PM
    • 423 Posts
    • 292 Thanks
    aneary
    I would look at your solicitor it looks like they have failed in a number of areas and as they are about with insurance you have a better chance of getting some money back.
    • jbainbridge
    • By jbainbridge 14th Jun 17, 2:11 PM
    • 1,703 Posts
    • 1,095 Thanks
    jbainbridge
    Could someone clarify at what point money should be released to the vendor? My understanding was it happens at completion ... I guess I'm wrong?
    • mamz001
    • By mamz001 14th Jun 17, 2:41 PM
    • 16 Posts
    • 1 Thanks
    mamz001
    The "money laundering" is a red herring - basically, the person at the solicitors' office who deals with compliance checks (including money laundering, hence the job title) got passed the buck for this (not unreasonably, as it will be closer to their work than to the work conveyancers normally do), and so was the one to contact you.

    It sounds like there are an awful lot of questions which your lawyer should be asking all the solicitors involved. Most notably, why was any money exchanged at any point in this before they had confirmed that the seller owned the land (or why did those confirmations fail)?

    Going full paranoia for a moment (probably not an issue, but worth checking) - did you find your own solicitor or were they recommended as part of the buying process? Similarly, where did the information about Harry come from? Check that both are registered with the appropriate regulators, and ensure that the contact details you have match the ones publicly available via those regulators if possible. Do as much verification as you can on any other party involved here, especially ones that you might end up owing or paying money to. It's quite possible that you will now end up on a "suckers list" and be targeted for further fraud.

    Has a police report been filed?

    Good luck, I suspect you will need it!
    Originally posted by DumbMuscle
    You're right the letter says a victim of fraud. You're spot on Harry my litigation solicitor told me, the land registry should have been checked by my conveyancing solicitor before any money exchanged, so they clearly didn't do all the relevant checks. The conveyancing solicitor was actually recommended by the managing agent, all 10 of us victims had the same solicitor, we only found out about this after we were all victims.

    I spoke to the police and they got me to file a report with Action fraud which I have. One of the victim's friend recommended Harry, I was the same as you and paranoid so checked him out on the SRA website, linkedinn google etc. He seems legit so we went with him. I also visited Harry at his office in person to ensure he was a real person with a real office.

    Harry has been on the case and updating us daily with the communication he has been doing with my conveyancing solicitors and also the developer's solicitors.

    Finally thank you for the luck.
    • eddddy
    • By eddddy 14th Jun 17, 2:41 PM
    • 4,936 Posts
    • 4,586 Thanks
    eddddy
    Could someone clarify at what point money should be released to the vendor? My understanding was it happens at completion ... I guess I'm wrong?
    Originally posted by jbainbridge
    The contract that about 99.9% of home buyers in this country use says that the money is transferred to the vendor on completion.

    But a contract can anything you like... it could say the money is transferred 6 months in advance of completion or 10 years after completion. As long as both parties agree.
    • mamz001
    • By mamz001 14th Jun 17, 2:43 PM
    • 16 Posts
    • 1 Thanks
    mamz001
    Are you sure this isn't just a dodgy 'off plan investment scheme'?

    It sounds very much like one, but that doesn't seem to correlate with what your solicitor is telling you. Did the contracts you signed talk about an 'Investment'?


    The way some of these (very dodgy) schemes work is...
    • A developer identifies a site (and perhaps gets an option to buy it)
    • 'Investors' each pay a chunk of money to the developer (i.e. your 40%/60% deposit)
    • The developer uses the money to buy the site, and start building
    • 'Investors' might be required to pay more chunks of money along the way to fund the building.
    • Each 'Investor' gets an apartment at the end (hopefully!)

    Even if no fraud is involved, these unregulated investment schemes can fail catastrophically.

    Sometimes the 'developer' running the scheme is a bloke who was selling used-cars the day before, with no assets, no experience of property development and no business acumen (and no morals).


    Edit to add...

    Having just read DumbMuscle's post - I would agree - check that your solicitor and Harry really are legitimate. They seem to be telling you rather strange things.
    Originally posted by eddddy
    The developer never ended up buying the site at all, the managing agent said it has been brought but the system hadn't been updated yet, I have all this in an email. Plan was for me to move in there, but I suspect the developer had the plan from the very beginning to make some money and leg it.
    • mamz001
    • By mamz001 14th Jun 17, 2:45 PM
    • 16 Posts
    • 1 Thanks
    mamz001
    That's what my litigation solicitor has proposed but he wants to mitigate losses first by freezing the developer's bank accounts etc, it seems like the right thing to do but quite costly.
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