How Landlords Can Avoid Common Forms of Rental Fraud

Landlords face many challenges when it comes to managing their rental properties, but one of the most overlooked of these is dealing with rental fraud. Not only can deceptive practices threaten your financial stability and damage the trust you place in future tenants, but they can also lead to potential legal battles and costly repairs.  

Recognizing the dangers posed by rental scams is the first step in protecting your investment. Scammers often target unsuspecting landlords and exploit any oversight to their advantage. As such, it’s essential to adopt a cautious approach when screening prospective tenants.

Please note that this is for informational purposes only and is not intended as legal advice. Laws may vary depending on your location. 

13 Common Tenant Scams and How to Avoid Them

Although fraudulent folks are always creating new schemes, here are some of the most common scams you’re likely to encounter as a landlord and tips on how to avoid them.

1. Inability to Pay Rent

Some tenants have no intention of paying rent from the start and bank on the idea that you may be too busy to notice; they hope to live rent-free for as long as possible until you take legal action. Fortunately, this scam can easily be prevented by adopting a thorough tenant screening process. Here are the steps you should consider taking for every prospective tenant:

  • -Have the tenant complete a rental application that includes information such as previous and current landlords, employment history, and references.
  • -Conduct a background and /or criminal record check. 
  • -Run a credit report.
  • -Verify the accuracy of application details by reaching out to personal and professional references or requesting a tenant verification report. 
  • -Ask former landlords whether there were any prior tenant-related issues.
  • -Ask for financial records like pay stubs to verify employment status and income consistency. 

2. Wire Transfer Scams

Each year, landlords lose thousands of dollars to wire transfer fraud. This generally happens after approving a rental application; the tenant will provide an overvalued check for the first month’s rent and deposit, then ask for the excess amount to be wired back. By the time you’ve discovered the check is fraudulent, you’ve lost any wired money along with the supposed rent. 

For this reason, it’s best to be cautious with wire transfers. If you choose to accept them, make sure the check fully clears before using any of the funds. Alternatively, you may want to consider encouraging online rent payments through secure portals, which can significantly reduce the risk of this type of fraud.

3. Fake Pay Stub Schemes

Fake pay stubs have become increasingly common; there are even online services that help create them. To counter this scheme, pay close attention to the details on the pay stub, keeping an eye out for discrepancies in the formatting, numbers, and overall quality. 

You should also verify employment details with the tenant’s employer. Although they can’t give you salary information without permission, they can at least let you know whether the tenant works for them. 

4. Unauthorized Subletting

Some tenants may try to sublet your rental property without permission, especially if they plan to take a long vacation or travel abroad. A common subletting scam involves the tenant demanding rent upfront from the subletter, only to disappear. This leaves you and the subletter in a financially vulnerable position. Others may simply try to sublet a room to someone on Craigslist or AirBnB.

To prevent issues with subletting, make sure your policies are clearly stated in the lease or rental agreement. If you allow subletting, specify the exact conditions a subletter is allowed and that deviating from those conditions is considered a breach of contract. You may also want to consider adding clauses that include specific instructions on the steps your tenant should take to add new residents. 

5. Check Overpayment

With this scam, a tenant will issue a check that exceeds the required rental amount and request the difference back, only for you to later find out that the check is counterfeit. Although this can be difficult to prevent entirely, you can safeguard against this type of scam by requesting that all checks be written for the exact amount or suggesting that you apply overpayments to future rent. 

6. Eviction Process Manipulation

There are strict rules that need to be followed during the eviction process; if any of these rules are broken, the entire process will have to start from the beginning. Unfortunately, some tenants are aware of this and will purposely delay eviction by exploiting loopholes, such as making partial rent payments after eviction proceedings have begun or requesting to stay at the property for an extra day. 

The best way to prevent any sort of eviction manipulation from your tenants is to make sure you understand and strictly adhere to your state’s eviction laws. 

7. Identity Theft

Identity theft is on the rise, so it’s important to be aware that some tenants may use false identities to secure a lease. If you don’t do your due diligence, it can severely complicate any attempts to collect unpaid rent or address issues with the lease. Make sure to implement strict ID verification and follow up on all provided references to ensure the tenant’s identity is verified with official records. 

8. Offering Fake Credit Reports

To expedite the leasing process, some tenants may offer to provide credit reports—which, like pay stubs, could be fabricated. Avoid accepting these at face value; conducting your credit checks is safer and ensures you receive accurate and unbiased financial information.

9. Listing Theft

Similar to identity theft, listing theft involves a scammer copying your property listing and defrauding others by collecting rent for it. To protect your listings from this kind of scam, make sure to always include watermarks on your photos. If you discover a fraudulent listing for your property, report it on the website. If you need further assistance to get the listing removed, you contact the Federal Trade Commission or your state’s attorney general. 

10. Providing Fraudulent Documents

Unfortunately, there are many resources on the internet that help people falsify a wide range of documents, from bank statements to references—which makes it difficult to verify their authenticity. Tenant verification services, as well as fraud detection software like Snappt, can help you quickly and accurately identify fraudulent documents and significantly reduce the risk of financial losses. 

11. Unauthorized Residents

Roommates can be a great way for tenants to reduce their rent payments, but they may not want to disclose who’s living with them, especially if it’s someone with a criminal record or financial issues that could affect their ability to pay rent on time. To combat problems with unauthorized residents, ensure everyone living at your property is vetted and listed in the lease, with clear clauses that state unauthorized occupancy will lead to lease termination.

12. False Employment Information

In addition to providing fake references, some tenants may also provide false employment information. For example, they may say they work for a particular employer, then ask a friend or hire someone to act as a reference to verify their employment. 

Fortunately, this can easily be avoided by contacting the employer directly, rather than relying on the information the tenant provided. If the company doesn’t exist or they’ve never heard of the applicant, you’ll know the tenant provided false information. 

13. Property Damage Claims

With this scam, tenants intentionally damage the property and then report the damage to the Licensing and Inspections Department—with the claim that the landlord failed to address the issue. If a violation is issued, the tenant can use it as an excuse to not pay their rent. 

During tenant screening, make sure to talk to previous landlords about whether this has been a problem in the past. It’s also highly recommended to conduct regular inspections and to provide a comprehensive move-in/move-out report. This will help you document the property’s condition and counter any unfounded damage claims. 

Protect Your Properties and Streamline Your Tenant Screening Process with TSCI

While there’s no sure way to avoid potential tenant scams and fraudulent behavior entirely, comprehensive screening is your best bet for mitigating risks and protecting your properties. At Tenant Screening Center, we offer comprehensive tenant screening reports that streamline the tenant screening process, safeguard your assets, and help you find responsible and honest tenants. 

With a variety of options to choose from, we make it easy for landlords around the country to find the perfect level of screening for their properties. Even better, the cost of many of our reports can be deferred to the applicant, making our tenant screening as affordable as it is convenient. Order your reports today and enjoy the peace of mind that comes with knowing you’ve taken a crucial step towards securing your investment and fostering a trustworthy tenant base. 

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