A Parliamentary Bill currently being proposed suggests solicitors could be faced with a two year prison sentence if they are implicated in mortgage fraud or money laundering.
The Land Registration (Scotland) Bill will make it an offence to knowingly or recklessly register land under false pretences, reported the Daily Record.
MSPs warned that solicitors could be imprisoned for up to two years for “genuine mistakes” under the proposals. However, Conservative MSP Murdo Fraser, Law Society member and Chair of Holyrood’s Economy Committee, told the Scottish Parliament yesterday that the Bill contains no detail on how a solicitor can avoid being prosecuted for “recklessness”.
Mortgage fraud is estimated to cost the UK economy £1 billion a year but ministers believe that it is difficult to prosecute fraudsters and their accomplices in the legal profession under current laws.
The types of crime can be extremely varied, but some fraudsters take out a mortgage for land or properties under false pretences at an inflated value, sometimes with the help of a corrupt solicitor, and then skip the payments and allow the property to deteriorate.
Others use the illegally-purchased properties for other criminal or fraudulent activities, such as drug production.
Another example is where some fraudsters buy and sell the same property back to themselves under assumed names several times, at ever inflating prices, until the bank finally forecloses and finds the land or property has been ruined.
In order to crack down on crimes like the ones highlighted above, the Scottish Government wants to create a statutory land register accompanied by a new offence of false registration.
Murdo Fraser said: “The committee heard this was a serious additional measure to tackling serious organised crime, particularly related to mortgage fraud, but we heard a lot of evidence that the scope of the offence was too wide, and that it could cover genuine mistakes made by solicitors.
“It does not mention fraud, even though it is intended to deal with fraudulent behaviour, and did not provide any detail on what solicitors need to do to make sure that they are not prosecuted for recklessness.”
Fellow Tory MSP Annabel Goldie said fraudulent purchasers, landowners, heritable creditors, surveyors, solicitors or other advisors “can be prosecuted under existing laws”.
She stated: “I think the proposed new law is unnecessary and grossly disproportionate, and I would urge the minister to remove this section or heavily amend it.”
Enterprise Minister Fergus Ewing announced: “The aim of the offence provision is to disrupt serious organised crime and to criminalise those individuals who knowingly use the land register to facilitate criminal behaviour.
“It is not the government’s intention to criminalise honest solicitors who make genuine errors in applications for registration.”
Mr Ewing pledged to work with the Law Society to provide the necessary clarity to avoid wrongful prosecution and said the Government “will carefully consider” whether the Bill itself needs to be clarified.
Currently, around 55 per cent of title holdings in Scotland are registered in the existing land register, but this only equates to around 21 per cent of the land mass.
The Land Registration (Scotland) Bill was introduced to Scottish Parliament on 1st December 2011 and seeks to reform and restate the law on registration in the land register. The Bill is currently in the ‘Stage One debate’, with ‘Stage Two’ expected to begin by early May 2012.