$8,500 Goes Missing: How Landlords Can Avoid Rent Theft

by | Sep 24, 2018 | Rental Property Management Tips

A property manager in Tallahassee has been charged with theft after allegedly cashing tenants’ money orders, according to a news report.

A supervisor discovered the discrepancy after posting late notices to three tenants who claimed to have paid rent. When the supervisor researched the ledgers, she discovered potentially fraudulent entries. The property manager allegedly cashed the money orders at a bank.

In most cases, a tenant will not be responsible for rent theft and the landlord will suffer the loss. To avoid income loss from theft, landlords may want to take precautions:

Employee Background Checks

Like tenant screening, landlords need to investigate who they are allowing to access the rental property. Employee background checks can flag problems like prior criminal history of theft. Equally important, landlords need to check previous employer and personal references before hiring.

Credit checks on employees are more problematic. A person with bad credit may have more incentive to steal but accessing the employee’s credit may not be an option. Many states prohibit employers from obtaining credit history, so be sure to check local rules. The employee must provide consent to the background check.

In addition to employee background checks, provide adequate supervision of employees. Theft is less likely to occur when employees fear getting caught, and losses are minimized if a theft scheme is exposed early on.

Lose the Drop Box

Drop box theft is common enough that landlords might want to consider nixing the idea altogether. Drop boxes often are tied to late fee provisions — rent has to be in the office by midnight, for example. That encourages tenants to drop rent when the property manager or landlord is not there. Thieves come up with all sorts of ways to fish money out of overnight drop boxes and the task is easier when the office is empty.

A better solution is to accept rent in person and provide consecutively-numbered rent receipts that easily can be traced back to the exact day and time the tenant paid. That makes employee theft more difficult while making it easier to determine whether a tenant is telling the truth.

For landlords who accept payments in the mail, mailbox theft is a risk. Possible solutions are to accept rent in person or use a post office box which is far more secure.

Are Money Orders Really the Best Way to Pay?

Tenants hate money orders. It’s inconvenient to stand in line at the grocery store after work or over a lunch hour once a month. The clunky process can lead to late rent payments. Insisting on money orders for rent payments also increases the chances of rent theft for landlords because stolen money orders generally are easier to cash than personal checks.

So, why do landlords insist on money orders? Probably to quell fears that a personal check will bounce. If that’s the case, then the landlord is not screening tenants properly — a problem that can lead to even greater income loss.

There are other disadvantages to money orders, too. Tenants who lose them have a difficult time getting reimbursed — and that causes rent defaults. And money orders still can be cancelled or dishonored.

Landlords are protected from bounced checks with local statutes that allow collection of damages and civil penalties, and by the lease agreement which can provide a bounced check charge. Personal checks contain updated personal information — like a name change, new phone number, or bank — that is crucial to collecting unpaid rent.

An alternative to personal checks is accepting electronic payments. Automated methods improve cash flow by ensuring on-time payment, reduce the need to extend leasing office hours and can take less time to manage. Additionally, electronic payments create an irrefutable payment record that deters potential thieves.

This post is provided by Tenant Verification Service, Inc., helping landlords reduce the risks of renting with fraud prevention tools that include Tenant Screening, Tenant Background Checks, (U.S. and Canada), as well as Criminal Background Checks, and Eviction Reports (U.S. only).

Click Here to Receive Landlord Credit Reports.

Disclaimer: The information provided in this post is not intended to be construed as legal advice, nor should it be considered a substitute for obtaining individual legal counsel or consulting your local, state, federal or provincial tenancy laws.

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