The Latin phrase caveat emptor, or buyer beware, is a fundamental principle of commercial property transactions. Lawyers may be reaching for the Latin dictionary again, for a translation of “lender beware”, due to a commercial property fraud case currently in the courts.
Six solicitors are pleading not guilty to helping criminals obtain almost £50m of mortgages on six commercial investments, based on grossly inflated valuations and forged leases. These were subsequently defaulted on, leaving lenders out of commercial property pocket.
Laurence Ferrigan, one of the accused, allegedly transferred £11.9m in a single transaction to Pakistan, where the fraud organisers were based. He blames a lack of skills for him ‘unwittingly’ assisting with the deception. Ferrigan said his firm needed to ‘boost income’, resulting in Ferrigan branching out to conveyancing, where he admitted making ‘a lot of mistakes’.
Ferrigan used the surveyor Ian McGarry, who was arrested and has admitted creating exaggerated valuation reports in each of the commercial property transactions. Once Ferrigan knew of McGarry’s arrest, he said he informed authorities of his own involvement.
Commercial property investors need to be aware that cases such as these may not be isolated; according to one lawyer, other firms may ‘have expanded their practice areas in order to maintain income’, which could lead to issues across the board. However, the usual outcome is that a solicitor lacking experience in an area should really point their client in the direction of someone who has the knowledge to do the best job possible.
Police referred the case to the Serious Fraud Office (SFO) in 2006 after one of the lending banks made a complaint to them regarding the commercial property mortgages taken out by the defendants. The SFO uncovered evidence which, the prosecution allege, shows defendants acting as buyers and sellers in commercial property transactions and exchanging contracts at inflated prices using loans obtained from banks and building societies.
Only individuals have currently been implicated in the trial, which continues; their companies seem to have avoided the spotlight this time.
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