Charity property fraud: What should you do if an attorney or deputy commits fraud?

In a series of three articles, Marina Leigh from Foot Anstey's Charity Property Team explores the types of property fraud that your charity may encounter and how you can protect against them.

In this third article in the series, we explore property fraud by an attorney or deputy.

What is a deputy or attorney?

Deputies are appointed by the Court of Protection, and attorneys are appointed under a Lasting Power of Attorney. They play a crucial role in managing the affairs of those who cannot make decisions for themselves due to mental incapacity. Deputies and attorneys' duties typically involve the management of property, finances, and/or personal welfare matters.

This article will focus on the property elements of deputy/attorney fraud, however, improper management of any of the affairs of an individual are equally devastating, both emotionally and financially, for the person affected.

How to spot property fraud by an attorney or deputy?

Typically, misconduct takes place if an attorney or deputy fails to act in the best interests of those they represent. The level of breach of duties will indicate whether legal intervention is necessary.  

Fraud could manifest in a number of different (and often multiple) ways in relation to property held by an individual. For example, by:

• using the individual's assets for the deputy/attorney's own gain,
• mortgaging or selling a property without consultation or apparent justification or without considering an individual's long-term needs or preferences,
• granting or releasing other interests over property not in the best interests of the individual (such as rights of way, other easements, restrictive covenants or rights to acquire).

Why is deputy/attorney fraud so dangerous?

If fraudulently dealt with, the individual's property assets can be significantly, or even totally, diminished, leaving only recourse against the deputy or attorney who may have dissipated the relevant funds.

Overreaching is a mechanism under the Law of Property Act (LPA) 1925, sections 2 and 27, that allows a purchaser of land to take the property free from beneficial interests under a trust. While it protects the marketability of land, it can leave beneficiaries with minimal protection, as their rights are converted from an interest in the physical land into a right to a share of the sale proceeds. This creates a "curtain" that prevents purchasers from having to look behind the legal title, often favouring them over beneficiaries. 

Along with being emotionally distressing for the individual affected, from a practical sense, it can result in the individual having somewhere unsuitable to live and/or their assets diminishing therefore putting the individual in financial difficulty. 

If a charity is the beneficiary of an individual's will, and fraud takes place before the death of the individual, the eventual legacy gift may be diminished or lost entirely.

What can your charity do to protect its future interests?

If your charity suspects that an attorney or deputy is acting improperly or fraudulently, they can be investigated and legal action taken against them. For example, an application can be made to remove the deputy or attorney and any losses incurred by the individual could be claimed from the deputy or attorney. In serious cases, other legal proceedings for fraud, undue influence, or theft can be initiated.

If the fraudulent attorney/deputy is removed, Foot Anstey Trust Corporation could be appointed in their place to manage the property and financial affairs of an individual.

If you or your charity suspects that an individual is at risk of fraud by an attorney or deputy you should obtain legal advice at the earliest opportunity.  It may not be too late if fraud only comes to your attention after death. Although not straight forward, there are steps that can be taken to protect or recover assets.