The pandemic has changed quite a few things in the PRS (private rental sector) one of these is the increase in fraud, which we now see as a growing problem.
Since we opened our doors in 2005 we have set up nearly 6,000 tenancies, so you could say that we have seen it all. This does make it easier for us to sort out a straightforward application for a property one from a ‘professional tenant’. Even so, fraudsters are clever, so we remain vigilant! A ‘professional tenant’ could cost quite a bit in both time and money to deal with. Recent research by several PropTech firms concluded that the average cost to remove a rogue tenant is around £30,000 when lost rent and legal fees are considered. Ouch!
The most obvious spot is a fake bank account and payslips. When we reference a prospective tenant, we look to view both to prove income. If the dates and amounts do not match, questions are asked and the referencing goes deeper. We scrutinise bank statements to check the applicant’s income and expenditure. The statements should reflect a real person living their life. Any irregular ‘special’ arrangements should set alarm bells ringing.
Why is tenant fraud on the increase?
Initially we saw this happen on higher end properties (above £2,000 per month), but now we are starting to see applications that don’t add up on properties of £900 per month – the average rental for a 3-bed semi in our area. We think this is happening for several reasons:
- Many people are simply not making the money they need now, and so are not honest in their tenancy applications.
- Scammers are aware that landlords currently have less power to evict fraudulent tenants. Accordingly, many are renting properties with the intention of illegally subletting them to make easy money, or not paying rent.
- In a worst-case scenario, scammers will lose their holding deposit, but there’s little to de-incentivise them from making further fraudulent application.
- The Tenant Fee Act means that a prospective tenant has no costs when applying for a property – therefore they have nothing to lose.
- There are fewer properties on the market and therefore people think that they can falsify documentation to be chosen. And believe me, the falsifying of documents is becoming more sophisticated.
How to avoid rent fraud?
The obvious answer is finding the right tenant. And let’s be honest, most tenants are honest and truthful – but there are some bad apples out there and if you are taken in, it could cost you dearly.
Initial screening is so important. If you miss this part because your prospective tenant is a friend of the family say – you will put yourself at risk. We have a two-part assessment. The first on the telephone, the second when we meet the applicant (prospective tenant) for the first time. We have a list of questions that we ask at both meetings. They are the same questions and we usually get the same answers.
Those that are trying to fool the system usually get caught out at this point. We had a classic example last year, where we were told in the initial telephone conversation that the person applying for the property had lived in the same home for the last 5 years. When it came to meeting in person, we found out that they had had several addresses. This obviously did not feel right, so we did not proceed with their application.
Heart rendering stories
Sorry to sound cynical but sometimes you may be faced with people in awful circumstances. The professional tenant will play on this. So, you need to have your business head on if you are faced with this sort of situation.
We have mentioned above that fake documents are out there. We have a 7-point process when we look an individual’s references. You need to make sure that your due diligence covers every aspect to make sure that the information you receive is legitimate. Vigilance is the word here.
Dealing with directors of companies / self-employed
Companies House gives you a wealth of information for free. Such as when the company was incorporated and what accounts have been filed. We recently had an application from a director of a cleaning company, but the payslips provided didn’t match the Company.
Use of social media
I am always surprised that even the cleverest of criminals (let’s be honest, that’s what they are) forget that they leave a trail on social media. You can find out a lot about your prospective tenant by spending 10 minutes on general searches. Whatever technology you use make sure that you are looking out for the scammer. They are the minority, but if you end up with one in your property, it can be very expensive.
However one tool which is essential in the war against these is Legal Expenses and Rent Protection Insurance. Provided you can show you have been diligent, they will handle things if it gets nasty and, if you use a policy like ours, cover your rent.
Make sure you have suitable Legal Expenses and Rent Protection Insurance
To find out more about the policy we offer, click here.
If you want to know more about how we make sure that we help you find the right tenant, just give us a call on 01480 494939