The Land Registration (Scotland) Bill will make it an offence to knowingly or recklessly register land under false pretences.
Murdo Fraser, MSP and member of the Law Society, told the Scottish Parliament that the Bill contained no detail on how a solicitor could avoid being prosecuted for “recklessness”.
Fraudsters taking out a mortgage for land or properties under false pretences at an inflated value will typically have the help of a complicit valuator or solicitor.
Fraudsters will then skip payments and allow the property to deteriorate.
Some will repeatedly buy and sell the same property back to themselves under false identities to inflate prices until the bank forecloses to find the land or property ruined.
The Scottish government wants to create a statutory land register accompanied by a new offence of false registration.
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 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 make sure they are not prosecuted for recklessness.”
Fellow MSP Annabel Goldie argued that the proposed law was unnecessary and grossly disproportionate as fraudsters, landowners, heritable creditors, surveyors, solicitors and other advisers could already be prosecuted under existing laws.
Fergust Ewing, enterprise minister, said the aim of the offence provision was to disrupt serious organised crime and to criminalise those individuals who knowingly used the land register to facilitate criminal behaviour.
He said: “It is not the government’s intention to criminalise honest solicitors who make genuine errors in applications for registration.”
Ewing pledged to work with the Law Society to provide the necessary clarity to avoid wrongful prosecution and said the government would carefully consider whether the Bill itself needed to be clarified.
The National Fraud Authority estimated that the cost of mortgage fraud in the UK to be £1bn per annum.
