Michael Portman Blog
Friday 3rd August 2012
As demand for rental property continues to rise, so too is the incidence of fraudulent tenants, who are costing landlords thousands in lost rental income and legal fees. Fraud is a growing and serious problem for agents and landlords alike.
Identity fraud has been on a steady increase over the last few years, in part due to the economic conditions, which has made it harder for people to gain access to credit in their own name.
Some fraudulent applicants are persistent offenders and move from property to property, giving false referees or bogus previous addresses, with no intention of keeping up with the rent. It is not unknown for this to happen within the same small town.
These ‘professional’ fraudsters know how to circumvent bad credit data and ensure that references provided on their behalf appear genuine in their authenticity.
These fraudulent tenants often give false information on where they have been living previously to throw referencing companies and letting agents off the trail. They are sometimes difficult to evict as they often know their way round the legal system.
Indeed, recent research reveals that some towns and cities in the UK are much more at risk from identity fraud than others.
A recent report shows that Slough has overtaken London to become the identity fraud centre of the UK. The Berkshire town recorded 25 identity fraud attempts for every 10,000 households, with residents targeted at around four times the UK national average (seven households in every 10,000).
Residents of London, Gravesend, Birmingham, Luton, Manchester and Leicester were also targeted at twice the national average rate.
Angela Omahony, lettings director at Campsie which has four offices, including one in Slough, admits that they are particularly diligent in checking that passports, bank statements, visas and other proof of identification match the applicant to avoid fraud.
One recent fraud case that recently hit a letting agent near Manchester started with a call from police to say they had found a set of keys belonging to the agent during a raid on another property, about ten miles away. During that raid, police apparently discovered a large number of high-value items, including iPads and iPhones, apparently all bought with stolen credit and debit cards and awaiting export where they would be sold abroad.
The keys were returned by the police to the agent, who identified them as belonging to the flat he had let. The tenant in question asked the agent for another set of keys, claiming to have lost the first. But when told by the agents that the police wished to speak to him, he fled in a taxi and has apparently not been seen since. The police investigation is ongoing.
Within the block of flats concerned, the fraudulent tenant had managed to steal the identities of three of the six occupants, much to their distress. The police believe this incident was part of a huge and widespread fraud where the tenant generally stays only for one or two nights, leaving after accomplishing their true purpose.
Landlords can protect themselves from identity fraud by carrying out thorough tenant reference checks. They can also pick up a lot of information about the applicant when showing them the property. What kind of car does the prospective tenant drive? Does the story they relay to match the story told to the agent?
Landlords should also take the time to compare addresses shown on the application with those shown on the ID documents. Ask for previous utility and telephone (including mobile phone) bills and statements, and check if the name and address and other information matches up with the information on the application form.
The more information collected on the tenancy application the better, because should the tenant subsequently abscond or leave owing money, this can be used to give vital tracing information. In addition, should the applicant make false statements, this document provides evidence for eviction.
Applicants who are reluctant to produce their identity documents represent a higher risk to the agent’s obligations for customer due diligence under the Money Laundering Regulations.
As well as providing references from previous landlords and current employers, applicants should be asked to provide additional proof, for example copies of payslips or sight of bank statements. It is important not to take everything at face value. Don’t believe anything that you are told and/or what is on the application.
My own firm provides a referencing service that includes a Potential for Fraud Indicator and, if there are any doubts, agents can talk through applications with account management staff.
However good the referencing agency is, teamwork is important with the agent in checking the paperwork with the applicant face to face. In one case the agent did not spot that the tenant’s proof of residence was based on a utility bill for industrial premises rather than a residential address.
As a final point, don’t cut corners on the due diligence or get distracted by applicants pushing for a speedy move-in date, no matter how big the deal value is. By applying pressure to both landlords and their referencing companies, they are hoping that corners will be cut and potential fraud indicators missed.
* Michael Portman is managing director of LetRisks
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