Serious Organised Crime Agency v Pelekanos [2009] EWHC 2307 (QB)
Just a quick note to observe that this case – well off our usual patch – makes clear that a significant misrepresentation on a mortgage application that would be likely to induce the lender to enter into the contact (and this can be inferred by the court and does not need evidence from the lender) means that the property, or other property into which it can be traced, is liable for confiscation via a civil recovery order under Part 5 of the Proceeds of Crime Act 2002. This is because it constitutes the proceeds of an unlawful act, to wit fraudulent misrepresentation. Just to be clear though, it is the proportion of the property (and any gains made on it) that was acquired by the unlawful act that is subject to the recovery order, so not the 5% deposit…
This must include all those exaggerations of earnings from the days of self-certification. As the Defendant in this case discovered, ‘that was what everybody did’ isn’t a viable defence:
Mr Pelakanos acknowledged in evidence that the filling out of the application forms was “quite creative”, and claimed that that was how things were at the time. He also acknowledged that he did not do anything “too wrong” in the forms. It may well be that practices were lax at this time and that mortgage applicants such as Mr Pelakanos thought that they could get away and did get away with false and exaggerated statements being made. However, a false statement is a false statement regardless of the prevalence of the practice of making such statements. If a person knows a statement he has made to be untrue then it is a fraudulent statement regardless of how many other applicants may be doing likewise. In the present case all the false statements of income made were substantially false and I am satisfied that in each case Mr Pelakanos knew this.
Now call me an old cynic, but this has got to potentially impact on a lot of people, both residental buyers and buy-to-let ‘speculators’ who got a bit optimstically creative with the income section of the mortgage applications back in the days to the boom.
Thanks to Nikki for the pointer.