Protecting your rental investment is of paramount importance, not simply because it is an investment, but to also ensure that it does not have a long-term negative impact on your own financial security. Unfortunately, the lettings landscape is not immune to scams that target both unsuspecting tenants and landlords alike. Scams are on the rise, exploiting vulnerabilities and causing financial and emotional distress. In this blog article we will explore some common current tenant scams and arm you with the knowledge to avoid falling victim to them. We will do a similar post in due course for tenants.
Tenant scams are cunningly designed schemes that prey on landlords who may not be well versed in identifying red flags, scammers will usually seek out adverts from landlords seeking to rent directly to tenants through Gumtree and similar sites where landlords will place their own direct advertisement for rental homes. From fictitious identities to fraudulent documents, these scams can have devastating effects on landlords financial wellbeing and peace of mind.
Non Payment of Rent – You only have to join many of the available landlord groups on social media to see the commonality of receipt of the first months rent and little to nothing else being received thereafter in the form of rent payments. The court system is slow and costly and experienced non payment scammers know all the tricks to spin out the time it takes for a landlord to regain possession of their property, thus living rent free whilst the landlord lives with the financial implications that may, ultimately, result in repossession of the property by the mortgagee.
Identity Fraud – This goes almost hand in hand with the above. If prospective tenants are prolific scammers they will not want their financial history catching up with them! The best way to ensure that they are able to continue to live rent free is to change their identity. This can happen in a number of ways from forged identity documentation to ‘borrowing’ that of a friend or family member.
Fake Credit Reports/Financial Information – You should be aware that there are websites available where people are able to pay for fake credit profile documentation to be made to look like that coming form a recognised source, just in the same way as there is the ability to obtain fraudulent ID. There are also sites that will offer prospective tenants modified or fictitious employment/financial documentation and/or references.
Misrepresentation of Information – When scam tenants are seeking to rent property they will falsify information to hid past issues. They may claim to be property owners or living with family to avoid having to provide details of their current landlord, thus appearing to avoiding the need for obtaining a landlord reference.
Co-Tenant Fraud – Having additional tenants residing with the lead tenant can be a cost efficient way of the tenant maintaining a standard of living and, where co-tenants have less favourable credit or financial history or a criminal background the lead tenant may choose to omit their presence from their application.
Sub-Letting Illegally – This is where prospective tenants have the intention of obtaining a tenancy for the property in order to subsequently rent out the property themselves to a third party unbeknownst to the landlord. In many cases the initial tenants, who have probably committed some of the abovementioned actions to obtain the initial tenant, will ask for full upfront payment of the rent to them from the sub-tenants and one in receipt of this will disappear, thus leaving the landlord chasing for rent arears and a house full of unknown tenants and the sub-tenants equally out of pocket and facing eviction.
Manipulating the Eviction Process – As eviction laws become more complex and detailed fraudulent tenants have availed themselves of the knowledge to find the relevant loopholes to delay evictions. In some cases, if the tenant can cause significant enough delay via this method the notice may expire. Of course, it is also important to note that, sometimes, as we see in many online landlord groups, landlords can also come unstuck by failing to serve notice correctly given the current complexities of this which can also cause delays and, in extreme circumstances, prevent eviction altogether.
Damaged Property Scams – There have been cases where a tenant may also deliberately cause damage to the property in order to raise a complaint against the landlord for a breach of their legislative responsibilities. If the landlord is found to be in violation of their responsibilities this may delay any pending eviction of the tenant or drive a court to issue an order for a rebate of rent to the tenant.
Mitigating these risks necessitates a proactive approach. It is important to adopt measures that both deter fraudulent activity and also enhance the vetting process for potential tenants. Some indispensable practises that will support you in weeding out the potential fraudsters are as follows;
Tenant Pre-Screening – We recently posted a blog post which covered effective pre-qualification of tenant enquiries, you can find that post here.
Viewing/Face to Face Meeting – Arrange a viewing/face to face meeting with potential tenants. This affords you the opportunity to gauge their authenticity and establish a personal connection. Don’t be afraid to ask questions about their current circumstances and use this as an opportunity to clarify the details of the let. This also provides you with an opportunity to get an overview of their demeanour and attitude to the property and the process of letting a property. If they are expressing an urgency to let or express difficulty with past lets ask open ended questions to fully understand the issues, which will also provide valuable insight.
Tenant Screening & Right to Rent Checks – We recently posted a blog post about Tenant Referencing and Right to Rent Checks which covers this in greater detail, you can find that post here.
Documentation Verification – Scrutinise identity documentation and financial records meticulously and cross-reference these with official sources to ensure their legitimacy.
Secure Online Transactions – Implement a method of payment that is trackable, traceable and secure and ensure that you keep accurate and up to date records of all payments. The use of specific accounting software for this is advisable.
Robust Tenancy Agreements – Comprehensive tenancy agreements that explicitly outline the rights and responsibilities of the contracted parties under legislation are an essential part of letting a property. They clearly and concisely establish the expectations and boundaries associated with the letting of the property and outline the consequences of breaching these terms establishing the basis of the professional relationship between the parties.
Routine Property Visits – Legislation sets out that you have the right to attend the property to compete regular property visits. Regular visits are essential to detect any unauthorised sub-letting or occupancy of the property, ensure that the property is maintained and meets all current legislative requirements including health and safety and that there is no misuse of the property. The results of these visits, or any refusal of these, should be carefully documented.
Engage Professional Services – Of course, you can also seek to utilise the services of experienced award winning letting and property management specialists who invest time and money to ensure they have the most robust systems, processes and procedures in place to correctly and robustly screen tenants and can spot red flags immediately thanks to their skills and experience gained over the years.
Safeguarding your investment from potential scams requires diligence, prudence and takes time. By arming yourself with this knowledge and implementing robust preventative measures you can avoid the pitfalls of these potential scams.