We know that most tenants are decent, and most tenancies run without any major problems.
However, as a landlord, it’s important to be aware of the potential risks to your business so you can take steps to prevent them, and fraud – although relatively rare - is one of those risks.
Here are three fraudulent scams that criminal tenants will attempt, and some advice on what you can do to avoid them succeeding.
- Committing referencing fraud
Criminal tenants will often begin by trying to fake their way through the referencing process to secure a tenancy in your property.
Whether they’re planning to use it for illegal activity, such as turning it into a cannabis farm, or simply intend to move in and not pay any rent, it’s essential you have a robust referencing process to make sure that the applicant is who they say they are and they’re not able to hide a chequered past.
For more on how to carry out a comprehensive pre-tenancy check, see our recent article.
If you are letting the property yourself, we recommend you use the services of a professional tenant referencing company.
And if you use our own services to let the property, be assured we have our own proven systems, which are administered by experienced lettings professionals who know how to spot suspicious activity.
Here are some ‘red flags’ that can indicate a prospective tenant’s intent to commit fraud and other crimes:
- Wanting to rent in a business name. It’s important to check the business with Companies House to see when it was established, its officers’ names and its account filing history, to make sure it’s legitimate.
- Refusing or saying they’re unable to provide certain pieces of information. A genuine tenant should be able to give you all the documentation required for referencing checks.
- Putting you under pressure to let them move in quickly, without completing referencing checks. They may encourage you to skip the checks by offering to pay several months’ rent or even the whole first year, in advance.
If someone does move into the property and you later discover that their application was fraudulent, you may have to consider the eviction process.
- Illegally sub-letting
‘Rent to rent’ is a type of sub-letting, where you have a contract with your tenant, who then sub-lets the property in a way that brings them more rental income than they are paying you.
They are the ‘direct landlord’ to the end tenant, while you are the ‘superior landlord’.
However, it is only legal and possible if it’s done with the landlord’s knowledge and approval and you have checked your mortgage and insurance companies will allow this to happen.
This kind of arrangement should have specific contract terms and always be done either through or with the advice of a lettings legal specialist.
Fraudsters may pose as ‘ordinary’ tenants to get the property as cheaply as possible and then sub-let without telling you.
They might let the whole property to someone else who is willing to pay a good amount for somewhere they can use for as a base for criminal activity, or they might divide up the property into individual bedsits and illegally overcrowd it with multiple tenants.
This is often done where the landlord lives abroad and is therefore less likely to check on what's happening.
At the other end of the spectrum, a tenant might simply sub-let a room in the property to make some extra cash.
However, this still requires your permission and it’s important to note that right to rent checks must be carried out on every occupant, to make sure they have the legal right to be in the UK.
If anyone is found to be living illegally in your property – even if you weren’t aware they were there – you can be fined up to £10,000 per occupant for a first offence and up to £20,000 for subsequent breaches.
Illegal subletting will also almost certainly be in breach of the terms of your mortgage and probably invalidate your landlord insurance.
One way to protect yourself is to work with our qualified experts who carry out these checks on a daily basis. However, if you are letting yourself, here are three steps to take:
- Carry out thorough pre-tenancy referencing and right to rent checks
- Make sure there is a clear ‘no sub-letting’ clause in the tenancy agreement and the wording has been approved by a lettings legal expert
- On periodical inspection visits, check for any evidence that someone other than the tenant(s) named on the tenancy agreement might be living at the property, such as looking at any mail that’s lying around and extra bedding that suggests another person is sleeping there.
If we let the property for you, we do all of these checks as part of our landlord services.
- Identity theft
On rare occasions, tenants have been known to steal their landlord’s identity so they can fraudulently pass themselves off as the owner of the property.
They then try to remortgage or sell the property without the true owner’s knowledge, which could be financially devastating if they’re successful.
In addition to referencing prospective tenants thoroughly, it’s well worth signing up, for free, via the Land Registry’s website to get alerts if anyone applies to change the register of your property, e.g. by using it to make a mortgage application.
You can also put a restriction on your property title to prevent a sale or mortgage being registered on your property without a conveyancer or solicitor certifying that the application was made by you.
To minimise the chance of your identity being stolen, make sure that any post that has your name on it is redirected, and carry out your first property inspection within the first two months of the tenant moving in, so you can assess how they’re living there, or if we are manging the let, we can do this for you.
For more information on protecting your property and land from fraud, free of charge, visit the government website.
If you have any questions or concerns, or you’d like us to let your property and reference tenants on your behalf, simply contact your local branch and one of the team will be very happy to help.
The Reeds Rains Content Marketing Team
