Rental Application Scams in the UK are as prevalent as ever with statistics revealing tens of thousands of property owners are becoming unwitting victims of rental fraud. A study conducted by CIPFA found that 71% of fraud reported in the UK was property-related!
Paula Higgins CEO of HomeOwners Alliance stated:
Unfortunately, the value of successful frauds of property sales have more than tripled – from £7m in 2013 to £25m in 2017. Email and IT systems (especially those of conveyancers) are being attacked continuously. Scammers are becoming more sophisticated – fake emails can now be very hard to spot, and people may find themselves caught out, especially when under the stress of buying a home.
In the rental sector, it is now believed that 5% of all rental properties in the UK are being rented to tenant fraudsters.
With these extremely worrying figures, it is more important than ever to be well informed about the simple yet effective rental fraud scams that many fall victim to. Most would be shocked to find just how basic some of these scams are to carry out... but they seem to always work. Other frauds, backed by advancing technology, can be incredibly deceptive and almost always costly.
A renter's scam can be as simple as a fraudster just relisting your property on another site, charging more than the rent price to make money off of your asset.
Document modification to cloak true financial affordability is another. Homeppl is on a mission to spotlight rental application fraud as it is a growing threat to letting agents and landlords around the world, not least in the UK.
This article will inform you about the top most common scams that so many property owners fall victim to.
1) Defaulting on rent... on purpose
One of the most common tenancy frauds we see is when tenants attempt to move into a property with the intention to live rent-free for as long as possible. These type of fraudsters will typically go for expensive and lavish urban apartments, knowing that the state of tenant referencing in big cities is so poor they can escape detection. It is ultimately a waiting game until the landlord eventually evicts them, but essentially they never had the intention of paying the rent of the property.
The most effective way to significantly reduce the chances of entering into a tenancy agreement with a potentially fraudulent tenant like this is to run a Homeppl tenant reference check. With us, tenants undergo 150+ fraud detection tests per check. We catch 100% of fraud.
Although we would advise against it, if you were to run your own reference checks as a landlord, these are the basics you'd need to cover:
Ensure you look for employment history, income status, and previous and current landlord details. A background check should also be completed which is really important to make sure the tenant is not a threat to the local neighbourhood or the property itself.
Running a credit check and verifying financial documents is absolutely essential in revealing whether the tenant is likely to pay the rent in full and on time. A super important step is to get in touch with previous landlords and employers to verify the employment of the tenant to make sure they are honest about their status. But as we said, there is an incredible depth to referencing and this should be completed by experts like us. To see more, read our ultimate guide on tenant referencing.
2) Money Wiring
A wire transfer is the moving of funds electronically from one bank account to another which is commonly used to defraud landlords or property managers. The fraudster sends a cheque for more than initially asked for, then asks for the money to be sent back before the cheque bounces, leaving the landlord without the initial payment and losing out on the extra money they sent back.
To avoid this it is vital to wait for the money to clear before taking action on it.
3) Fake Financial Information on Submitted Documents
A lot of people would love to be earning a whole lot more money than they are, some even go to the extent of faking it before they make it!
A common rental fraud scam occurs when prospective tenants modify or even create employment/financial documents attempting to fool landlords into thinking they can comfortably afford the rental property in question. With fraudsters becoming clever and using advanced tech to their advantage it is harder and harder to detect a fraudulent document. That's why Homeppl tech is so advanced, we're able to detect 100% of fraud in any document we receive by analysing the font, the images, layers and meta data.
4) Subletting Illegally
Another increasingly common tenancy fraud scam is when prospective tenants aim to sublet the rental property illegally to a third party. They'll demand an extortionate upfront payment and then leave. The landlords who fall victim to this tend to then find someone completely different living in the property when they chase for rent arrears. Both parties are now left at a huge financial loss with the original tenant having left with the money and no longer paying the rent.
To avoid this, it is crucial that there is a clause in the tenancy agreement explicitly stating there is to be no subletting, to legally protect the landlord.
Subletters will usually target luxury city build-to-rent developments with a 0 deposit scheme and easy access to the property. This is the exact type of client Homeppl has excelled in protecting.
5) Manipulating the Eviction process
With eviction laws being slightly more complicated, fraudulent tenants have used the complexities in the law to manipulate the eviction process in order to overstay their welcome. Many will plead with landlords for extra time in the home, however, this can restart the whole eviction process if they breach the time allocated to them to leave set out by councils or courts.
6) Legal Name Fraud: Identity
Identity fraud is at an all-time high with advancing tech making it so much easier for fraudsters to create fake documents under other unsuspecting victims' names. They may also just use someone else's documents whom they may know to pass the tenant reference checks but when the landlord arrives at the property they find someone completely different living there.
Running thorough tenancy checks and validating the information is a great way to catch out these fraudsters. It is absolutely essential that the landlord meets prospective tenants before entering into a tenancy agreement.
7) Fake Credit Reports
Fake credit reports are rife in tenancy applications with many prospective tenants lying about their credit scores. There are morally dubious websites available where people can pay for a fake credit file to be created in a template of a common provider such as Experien.
A tenant's credit score has been a longstanding indicator of whether he/she is able to make payments on time, or whether they have any active CCJs (County Court Judgements) against their credit which is usually deemed crucial for a smooth and hassle-free tenancy agreement.
When running the tenancy checks, Homeppl’s advanced tech detects 100% of fraud in modified or falsified documents guaranteeing the landlord peace of mind when selecting the right tenant who can afford and will pay rent on time.
8) Property Listing Scams
Thanks to the internet it has become super easy for anyone to download the images of your property from property websites and use the information provided to scam potential tenants.
Rental scam artists will upload the photos and information on another website and receive enquiries. Usually something completely unregulated like GumTree. They will then ask for an upfront payment and will tell the tenant to collect the keys at the property and leave with the money, leaving the unsuspecting tenant a victim of a financial crime with your property at the centre.
9) Co-tenant Fraud
Although having fellow tenants is traditionally an efficient way to ease financial pressure on tenants, some may lie about their co-tenants who may have a criminal history or a bad credit score.
To avoid this, the landlord needs to make sure that co-tenants are all verified and named on the tenancy agreement, and any breach of this would result in the termination of the tenancy agreement.
10) Damaged Property Scam
A tenant may also deliberately damage the property in order to raise a complaint against the landlord which, if the landlord is found in violation, may give them a reason to avoid paying rent.
Although this is very hard to predict, to decrease the chances of selecting a tenant that may commit this scam the landlord should always talk to the tenants previous landlords to see if anything similar had happened.
Rental fraud scams are so prevalent within the UK that 5% of rental properties are rented to fraudsters and 71% of all UK fraud is property-related! The tactics these fraudsters use are so simple yet very effective to slip up and catch out vulnerable or uninformed landlords. With the right technology, they're east to protect against.
So what can you do?
Make sure you run comprehensive Homeppl tenant reference checks on all prospective tenants running identity verification, confirming their employment, residential, and financial history.
Run all documents provided through a screening process to check to ensure they are not fake or modified in any way. Contact the tenants' previous landlords to ensure their affordability and whether they pay rent on time or commonly default.
Always meet the tenant before signing any tenancy agreement to get a much better understanding of who they are and their lifestyle. Include in the contract specific conditions around any co-tenants.