Every landlord wants to have responsible tenants who pay their rent on time, respect the property, and don’t cause any trouble. Unfortunately, there’s always some risk associated with renting your property; this is why it’s essential to be cautious when reviewing applicants and keep an eye out for any red flags that could indicate a scam.
Many people have access to scanners and photo editing software these days, which makes it easy for someone with basic computer skills to fake important documents like pay stubs, employment records, or other financial information. This type of scam is often difficult to detect – especially if the applicant submits the documents online. Proper tenant screening and verification can protect against scams, as well as prevent the long process of eviction and the need to replace the tenant.
Even the most cautious landlord can fall victim to fraud, so it’s important to be able to recognize the most common types of tenant scams and take the proper precautions.
Lying About a Co-Tenant
This type of scam often involves providing falsified information to present the applicant in a better light, however, it can also include lying about who will be sharing the rental property with them. This could be due to a criminal record or credit problems that might otherwise hurt their chances of renting the property.
If the applicant lists a co-tenant, make sure to run a background check on each of them, even if the co-tenant is a spouse. After the tenants are living at your property, confirm that their identity matches and that the number of people living there is the same number as listed on the lease. Also, make sure you inform applicants and co-applicants that lying can be grounds for immediate lease termination.
Providing a Fraudulent Credit Report
Credit reports offer vital insights into how a person handles their financial responsibilities. So, it’s essential to order the credit report yourself, rather than relying on the applicant to provide one. Today’s technology makes it incredibly easy for people to manipulate documents in their favor.
By ordering the applicant’s credit report yourself, you’ll be able to have peace of mind that the information you’re receiving is accurate and unbiased. However, make sure you’re not just relying on the credit score—pay attention to other factors in the report, like credit limits and account balances to have a better understanding of the applicant’s financial responsibility.
Falsifying Pay Stubs or Lying About Employment
Pay stubs are the best way to verify the applicant is employed, who their employer is, and how much money they make. It may surprise you to learn, however, that there are actually websites where people can order falsified pay stubs.
These fake pay stubs often look legitimate at first glance. For this reason, it’s important to check all the basic information on the stub you’re provided. Here are some things to look for:
- Are the numbers perfectly rounded? Although it’s possible to be paid a flat $1000 during the pay period, it’s unlikely.
- Does it look professional? All the characters and numbers should be legible and lined up evenly.
- Is there a difference between Os and zeros? The letter “O” is much more rounded while 0s are more oblong. A professional accountant would never make this kind of mistake, so it’s a good sign the document is fake if you can’t tell the difference between the two.
- Is the basic information (name, address, social security number, etc.) consistent with the other information the applicant provided?
You’ll also want to make sure to ask for employment references, or even better, order a tenant verification. Keep in mind that an applicant’s employer often can’t give you an employee’s salary information without written permission, so you may want to consider adding a release form or clause to your rental application.
Another employment scam to be aware of is to list a non-existent employer with a fake job description, job length, and salary. With this type of scam, applicants will often ask another person to pose as an employer or Human Resources contact who will “confirm” their employment.
It’s important to verify that any employment references listed on the application actually exist. Asking for pay stubs, a W2 tax return, and bank statements will help expose the scam. If you choose to verify employment yourself, ask to speak to the tenant’s immediate supervisor so you can get a more personal character reference.
Lying About Previous Landlord References
Like the employment scam, some applicants will also provide false contact information for previous landlords. When calling to verify the applicant’s tenancy, there’s a chance you could be speaking with a friend or family member who’s lying about their identity in order to provide a favorable reference for the tenant.
If you choose to perform the verification yourself, some things you’ll want to check include:
- The address provided is the landlord’s rental property
- The property the applicant says they lived at is listed in the credit report
- Ask for utility bills in the tenant’s name; cross-reference the address with other information they’ve provided
- Confirm the reference’s name, number, business, or tax records to see if it matches with what your applicant provided
- Listen to the reference’s responses; do they just agree with you and give short answers, or try to get you off the phone as soon as possible? Or do they sound knowledgeable? Keep in mind that if the rental was a few years back, they may have difficulty remembering.
Overpaying the Rent or Deposit
There are several variations of this type of scam. In the most common version, the applicant wires too much money for the security deposit or writes a check for more than what is owed. If the applicant uses a wire transfer, typically they’ll write a check for more than the amount, then request the extra funds to be wired back to them.
However, the initial check provided is fraudulent—but it will take weeks to bounce. This means the landlord will be out not only the money they refunded but also the correct amount from the check, too.
If you accept wire transfers, keep in mind that any funds from a deposited check shouldn’t be used until the check has officially cleared. In some cases, this could take weeks. You may also want to consider requiring renters to pay rent online through a portal, which will eliminate the chances of receiving a fraudulent check.
Similarly, you may have a tenant who “accidentally” writes a larger rent check then request you refund them. Or, you may receive a call or email from someone who claims they’re relocating to the area because of work, and that their employer will send a check to cover the move-in costs.
To avoid these scams, don’t accept payments that are more than the specified rent or deposit; don’t accept an out-of-state paper or cashier’s check, especially if it’s for more than the amount you’re due. You should also make a point to meet your tenant in person and avoid accepting an applicant who only communicates by phone or email.
The Tenant Landlord Scam
This scam involves a tenant who poses as you while stealing your rent. Typically, what happens is a landlord fails to run a background check and rents the property to someone who is using a fake identity. The person then rents the home out to another person and collects the deposit and rent.
Another scenario is the scammer may charge the unsuspecting tenant more rent than they pay the landlord and keep the difference for themselves. This type of scam can be avoided by confirming the tenant is who they say they are.
Illegal subletting can be another version of this type of scam. The tenant sublets the property and asks for a large amount of rent in advance, only to disappear once they receive it. Adding a no-sublet clause to your lease can help prevent this type of situation. If you choose to allow subletting, make sure to specify that any new tenants must be pre-approved before subletting the unit – and don’t forget to run tenant screening and verification on them, too.
The Tenant Won’t Pay Their Rent
Most tenants sign the lease agreement with every intention to pay their rent, consistently and on time. Sometimes this doesn’t happen; other times, the tenant is a scammer who didn’t have any intention to pay rent.
With this type of scam, the tenant may pay rent for a month or two, then stop entirely. Your only action at this point is to begin the eviction process. However, the scammer realizes they can live rent-free for several months until they’re forced to leave. The best way to prevent this type of scam is to have a comprehensive screening process that will give you insight into the tenant’s previous rental history.
Taking Advantage of the Eviction Process
Many scammers are successful because they know loopholes, including how to outsmart the eviction process. For example, if the landlord accepts partial payment from the tenant, the eviction process may need to be restarted, which buys the tenant extra time to stay in the home.
If you allow the tenant to stay in your home for even a few more hours or an extra day may also end the current eviction order—which means you’ll have to start the process over again. Make sure you read up on your local laws prior to filing to ensure the eviction process goes smoothly.
Additional Steps You Can Take to Avoid Being Scammed
Since the pandemic, rental scams have been on the rise; the percentage of “fraud triggers” detected by TransUnion in 2020 increased by nearly 30% from March to August. This has been in part due to more wide-spread economic issues, but particularly the rental housing industry’s increased reliance on digital and contactless methods for interacting with tenants and applicants.
In addition to some of the tips we’ve already mentioned, here are some additional steps you can take to avoid being a victim of a scam:
- Always ask applicants for two types of identification (including a photo ID)
- Run a comprehensive background check
- Never allow a tenant to occupy your property without paying a security deposit and at least one month’s rent
- When possible, visit your properties to make sure that the person you rented to is actually the person who’s living there
While there’s no 100% foolproof way to avoid being scammed, having the right process in place to screen prospective tenants (and to collect rent payments) will greatly reduce the chances that you’ll be taken advantage of.