Tenant Scams: How Landlords Can Spot and Avoid Them

There is always the risk that a tenant damages property or stops paying rent to landlords. Yet, there are more deceptive risks you should be aware of, too. A recent survey shows that scammers target 85% of property managers.

Tenant scams cost time and money, and put your business at risk. Below, you’ll learn about common tenant scams and how to protect your property.

Fake checks

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Tenants may use a counterfeit check to pay rent or a security deposit. If the renter signs the lease, the landlord must start an eviction process to get the tenant to move out. This is true even if the funds are invalid.

Watermarks, security threads, and color-changing ink are high-security features that counterfeiters can’t replicate. You can also ensure that the top right check number matches the bottom after the account number.

Ensure checks have cleared before granting a tenant access to the property. Especially if the checks weren’t mailed from a recognized bank.

Identity fraud

Identity fraud is when an applicant attempts to rent from you under a fake identity. This makes accountability for any illegal activity they conduct very difficult.

Screen applicants. Check their government-issued documentation and references from prior landlords and jobs.

Money-wiring/check scams

This scam is when an applicant sends money via wire transfer or writes a check for more than the rent amount. The applicant then requests a refund for the difference. Since most bank deposits clear within two days, many landlords assume the check is legit. They won’t know the check or wire transfer was fraudulent until the refund goes through.

Never accept payments greater than the requested amount. Instead, immediately return these payments to the tenant.

False employment records and pay stubs

To confirm an applicant’s employment status and salary, landlords look at their most recent pay stubs or W-2s. This scam occurs when an applicant forges these documents.

If you have doubts, collect more than one form of employment verification. Do a background check that includes employment history. Then, compare the results with the renter’s application.

Faking credit report

Some tenants may submit a fake credit report to hide a less desirable credit history.

Conduct your own credit check, but don’t base your decision on a credit report alone. Check applicants’ rental history and references to ensure they pay rent on time.

Subleasing your property without your knowledge

If your lease allows it, subletting is legal. But what happens if a tenant sublets without your approval? They can collect rent in advance without the new tenant knowing and disappear.

Include no-subletting language in your lease agreement or require authorization for any subleasing. You can also avoid this scam by tracking and addressing late rent payments.

Forging rental history documentation

Verifying rental history is a must to ensure a tenant will pay rent on time and follow the lease conditions. Renters with poor or no rental history may provide false information.

Ask for proof of residence through a utility bill. Or, you can verify a previous landlord’s contact information online.

Making partial rent payment to reset the eviction process

When evicting a tenant for nonpayment, a tenant may offer to make a partial payment of the amount owed. If you accept, you will have to start the eviction process from the beginning, even without payment.

Avoid lengthy and costly evictions by knowing local and state eviction laws.

Protect yourself from scams with tenant screening

Landlords must screen applicants to protect themselves from scams. Screening should include:

  • Verifying credit history
  • Performing a background check
  • Checking rental and eviction history
  • Verifying income and employment

Several online tools provide professional applicant screening. If you work with a property management company, they’ll handle your screening process.

Victim of a scam? Here’s what you should do

If you’ve been the victim of a scam, report the incident to the police. If the tenant signed a lease agreement, you might be able to file a lawsuit against them in small claims court.

If you catch a tenant trying to scam you, protect other landlords in your area by reporting the incident to the police.

How to protect your property from a rental scam

Many scammers prey upon landlords and tenants. As landlords, it’s crucial to protect your property from scammers.

Do these three things:

  • Conduct a reverse image search on Google. You can catch fake listings using your property’s photos to scam unsuspecting renters.
  • Create a Google Alert for your property address. A Google Alert will notify you of any web page containing your property’s address.
  • Add watermarks to all property images. Scammers are less likely to create fraudulent listings with watermarked images.

The bottom line

Rental scams are on the rise. Yet, there are ways to protect yourself and your business. Be aware, cautious, and proactive. In the end, you’ll protect your rental business before it happens.

 

UnnamedPhillip is the Director of Operations (Colorado markets) for Evernest, a full-service real estate company. Phillip joined Evernest in 2019 from Four Seasons Hotels and Resorts with over 13 years of experience in the world of hospitality. When not at work, Phillip is exploring the great state of Colorado on his weekly fly fishing adventures or studying chess theories.