When you purchase a property and register mortgage bond in favour of a bank simultaneously, then the documents are based on an agreement also called a deed of sale. This document stipulates the purchase price and the method of payment thereof. Where the purchaser is purchasing with money lent from the bank the document will state that the purchase is subject to the purchaser being successful in being granted a loan for a specific amount. The bank bases its decision on the contents of this document.
A problem arises where the bank grants an 80% loan and requires the purchaser to pay a 20% deposit. The purchaser then has to pay the 20% deposit into the account of the Conveyancing Attorney. The actual effect is that the contract has lapsed and become null and void. Due to the fact that parties wish to proceed with the contract they make all attempts to obtain the required deposit. Most purchasers do not have the deposit and the estate agent then renegotiates the deal.
When renegotiating the deal some agents will go as far as to increase the purchase price with anther 25% which is then described as a deposit. The relevant agent will then explain to the parties that the deposit is not actually payable and that it is only done to convince the bank to give the other 75% as a loan, incidentally the same as the original purchase price. This is then described n the addendum to the agreement as a fictitious deposit.
Should the parties sign such an agreement they are committing fraud. Fraud is defined as misrepresentation made by one party to another to move the latter party to accept it as the truth and then to do something that might prejudice or potentially prejudice the latter party. The misrepresentation must be done with intent to defraud.
Where a contract which contains a misrepresentation is submitted to the bank as if it were true then the bank is being misled. The bank has then already been defrauded.
What happens next is the worst. The instruction is handed to a conveyancing attorney to attend to the transfer. When corresponding with the bank’s attorney who has to register the bond, the Conveyancing attorney has to certify in writing that he has received the deposit and that the purchase price is true and correct. When submitting this certificate the Conveyancing Attorney also commits fraud.
Even though the agent and the parties to the agreement were the actual fraudsters they caused the attorney to commit fraud as well because he is dependent on instructions to survive. It is almost a necessity for the attorney to receive instructions to enable him or her to keep the doors open.
The bad thing of it all is that only the attorney will be charged with fraud and struck off the roll as an attorney. The estate agent walks away to commit fraud again another day.
Everybody is complaining about our President getting away with fraud and then they commit fraud themselves.
Think twice. If you are not part of the solution you are part of the problem. If we come across matters like this we refer it to the banks and the estate agency board. Attorneys who commit to these practices will be reported to the Law Society.