From unexpected charges to refusing to return a deposit, private landlords often have a bad reputation. Increasingly, though, they are falling victim to scammers themselves.
The COVID-19 pandemic has put pressure on renters and landlords alike, with many rental deals being agreed upon without face-to-face contact. And as a result, it's become easier for fraudsters to game the process.
A common technique is to try and exploit the fact that applicants generally have to lodge a deposit.
"Our applicants place a deposit on our website with their applications which typically would become their security deposit or be returned if the application is declined/canceled," says one poster on Reddit, who has experienced this attempted scam twice.
"The two fake applicants are actually real people who we have located online (social media, etc.,) but cannot get ahold of via the phone numbers and email addresses provided (both seem fake.)"
The scammers appear to have been hoping that the landlord would reject their application and write them a cheque before their initial deposit had been banked – a deposit that would then have bounced.
In this particular case, the timing didn't work out for the fraudsters. However, the scam is frequently successful.
How fake check scams work
The most common lure for what's known as a fake check scam is to offer a job – often mystery shopping or as a personal assistant – along with car wrap decals, competition prizes, or 'mistaken' overpayments for sold items. Victims are asked to make a payment of some sort after believing that they've received a valid check.
"By law, banks have to make deposited funds available quickly, usually within two days. When the funds are made available in your account, the bank may say the check has 'cleared', but that doesn’t mean it’s a good check," explains the US Federal Trade Commission (FTC.)
"Fake checks can take weeks to be discovered and untangled. By that time, the scammer has any money you sent, and you’re stuck paying the money back to the bank."
On top of this, banks often charge a fee for depositing a bad check, and in particularly serious cases, the victim's bank account may be suspended or closed.
In a variation of the scam, the property manager approves a rental application from overseas. When the check arrives, it's for more than the correct amount, with the 'tenant' then asking for a refund via wire transfer. Sometimes the check is explained as coming from an employer or family member – but whatever the explanation, it bounces.
The US government has advice for prospective landlords: don’t accept overpayment for rental properties, and if you receive a check that’s for more than the specified amount, return it rather than depositing it.
Don’t rent or sell to a would-be tenant or buyer sight unseen, don’t accept a cashier’s check from your potential tenant if he or she is out of the country, and don’t fall for an unexplained urgency to rent the property.
Tenancy fraud on the rise
But there are other types of tenancy fraud – and overall, the UK property reference agency Homeppl says it saw fraud double between the third and fourth quarters of 2021.
One of the most common is the increasing tendency for fraudsters to use fake documents to rent a property that they then illegally sublet. According to Homeppl, one in 50 rental applications in the UK is now fraudulent, rising to one in 20 in London.
"The consequences for landlords of inadvertently approving a fraudulent application are dire - up to £30,000 in lost income and legal costs and fines of up to £3,000 for renting to a tenant with no legal right to rent in the UK - but for the tenant, there is little risk," says chief executive Alexander Siedes.
"In a worst-case scenario, scammers will lose their holding deposit, but there is little to de-incentivise them from making further fraudulent applications."
It has even been known for tenants to take on a rental and then apply for a mortgage.
"Rental fraud is a new stark reality," says Siedes. "It will only become more sophisticated and therefore we need to invest more money, resources, and creativity in ensuring that we have the necessary tools to identify fraudsters before they slip through the net."
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