Landlords Beware: Tenant Fraud on the Rise

by Chris on December 3, 2018

A landmark study recently conducted on behalf of credit reporting giant TransUnion revealed a disturbing statistic: more than 80% of property managers surveyed have been victims of tenant fraud. Many experienced fraud multiple times over the past two years.

Equally disturbing, the study showed that most cases of fraud were not discovered until after a tenant skipped a rent payment. While half of scammers were exposed within six months, 7% remained for a year or more before the fraud was discovered.

This is a serious problem for all landlords, especially for those in provinces with slow or tenant-friendly eviction systems where an eviction may drag on for several months. Catching a fraudster before the person moves in may be the only way to avoid income loss.

According to the TransUnion study, online rental applications are a major factor in the uptick of tenant fraud. Online leasing provides a level of anonymity to tenants that landlords simply cannot allow. Landlords should take heed and deliver the rental application online only after meeting the applicant in person. Landlords should use their own rental applications and should not accept online rental applications provided by third-parties, such as advertising platforms.

The TransUnion study exposed three common tenant scams. The first is making up a fictional identity online. If the person is successful in securing a rental, he or she then will use the rental address to obtain credit and run up credit card charges before defaulting on rent and disappearing.

Another common scam is doctoring ID, credit cards and other identifying information to support a fraudulent rental application.

TransUnion also found it common for fraudsters to commit identity theft by taking pieces of information from other people and passing it off as their own.

Canada’s vacancy rate decreased this year. A tight rental market will only increase the likelihood a landlord will run into a scammer as desperation to find housing emboldens problem tenants to commit fraud.

To avoid these scammers, landlords must remain vigilant and stick to their tried-and-true tenant screening policies:

Prequalify tenants over the phone and take notes to see if the story remains the same;
Require a photo ID before showing a property;
Require tenants to sign and verify a rental application under penalty of perjury (fraud);
Verify the information in the rental application, including speaking to previous landlords; and
Run a tenant credit check to confirm the person’s identity and credit-worthiness.

In addition to following routine tenant screening policies, landlords can avoid tenant fraud by watching for these red flags:

Supporting documentation must match the rental application

Is the applicant driving the same car that is listed on the rental application? Can the applicant produce a vehicle registration with the same name and address that’s on the rental application? If not, the discrepancy must be explained.

Another test is to ask  the tenant to provide a utility or cell phone bill that matches the name and address provided on the rental application. If utilities are in someone else’s name, that flags potential bad credit or identity theft.

Stick to qualifications

Don’t drift off task when screening tenants. Problem tenants are good at changing the subject or talking themselves out of a jam. Pay attention to whether the applicant appears to be dodging questions.

Always speak with previous landlords when screening tenants. If the applicant asks that the landlord not be contacted, that’s a red flag.

Verify the information in the rental application before running a tenant credit check. If all looks good, go ahead and run the credit report no matter how convincing the applicant appears. These reports cannot be manipulated by applicants and provide a firewall for landlords who are being scammed.

Visit the Landlord Credit Bureau database when running credit checks. Report bad tenants so other landlords will have the tools to stop scammers in their tracks.

For more tips, see the TVS affiliate website, LandlordFraud.com.

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.

{ 1 comment… read it below or add one }

Winston heron December 4, 2018 at 12:11 pm

Hi, thank you for keeping landlords update, with current tips on how better to protect our hard earned investments.

Thanks again
Winston Heron

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