Preventing Property Frauds
In the wake of the global financial crisis, the rise in unemployment and the drop in consumption in Bulgaria, crime levels are on the rise, property related fraud in particular.
The bad actors range from educated professionals to poorly educated individuals.
The National Police Directorate General has classified different types of crime into the following main sub-types:
- Acts or failures to act by legal entities /investors and contractors for residential building developments/ and public administration officials responsible for the approval of architectural designs, development plans, et al. This exists due to the information gap about local laws and mediators’ malpractices. These types of fraud most often involve violations of the zoning and spatial planning legislation and/or civil law.
- The second group involves individuals who, acting unlawfully, acquire or dispose of properties of third parties, who are bona fide owners. This type of fraud is perpetrated through embezzlement of proceeds from time share, misuse of personal data and its use to “acquire” the property. The fraud relies on misleading foreign buyers, using the fact that buyers are not familiarized with the domestic legislation. Fake brokers are set up and involved in a “negotiation” and document exchange process.
- Buyers often rely on the brokers and fail to investigate the developer of the building. Another sub-type of this fraud involves properties of foreign nationals, who have acquired properties through companies and said properties have been listed on the balance sheet of their company.
- Since the information in the Commercial Register is public, fraudsters have access to the identity documents, UCN/PNF, address and other data, in particular – the signatures of the partners/managers of the company. This data is then used to produce false documents in the name of fictitious persons.
Last Will and Testament or Donation – widely used for acquisition of property of deceased or mentally incapacitated individuals.
Certificate of Death/Certificate of Inheritance – in most cases used to acquire the complete documentation for further transaction with property of deceased persons.
Abuse of mentally incapacitated persons, who are not placed under guardianship and are in a mental institution.
Often the documents have the authentic signature of the owner, who has been mislead/taken advantage of by the fraudsters, who have created a relationship with them.
Two types of real estate fraud that are on the rise in the past 12 months:
Fraudsters impersonate individual homeowners and use stolen IDs to sell or mortgage properties. The mortgage or sale happens quickly and the fraudulent proceeds are dissipated outside the jurisdiction almost immediately.
The CBC recently reported that a handful of organized crime syndicates are behind these real-estate frauds, in which 30+ homes in the GTA have either been sold or mortgaged without the owners’ knowledge.
Fraudsters dupe unsuspecting homeowners into registering one or more mortgages on their properties at “cut rates.”
The unsuspecting homeowners end up with one or more mortgages registered on title to their properties on terms they never agreed to while failing to receive some or all of the mortgage proceeds advanced by the lender.
Minutes of Meetings with decisions to change the manager of a limited liability company, substituting the real manager with a person involved in the fraud.
- Changing Partners in a limited liability company by selling shares and a transaction for disposal with the company property by the “new” partner.
- Court rulings for awarded ownership/claim.
- Court rulings for recovery of ownership rights.
Promissory note /frequently falsified document/, used to initiate enforcement proceedings at private bailiffs and enforcement of injunctions on the property of the debtor.
Failure of the debtor to secure the claim means the property is subject to a public auction, and in some cases the property is acquired by a fictitious person at prices several times lower than the market prices.
The National Automated Information Fund for Bulgarian identity documents connection system has the goal of preventing attempts of fraudulent real property transactions using false identification documents.
Furthermore, Notary Publics have access to the Property Register of the Registry Agency and to the National Database “Population” (for data on legal successors of deceased persons).