Lettings fraud: How to prevent it

Most tenancies run without any major problems and most tenants are decent, but we do occasionally come across tenants that are trying to commit property fraud.

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 is one of those risks.

Although they’re rare, here are three fraudulent scams that criminal tenants will attempt, together with our advice on what you can do to prevent them:

Faking their way through the referencing process

Criminal tenants will often begin by committing referencing fraud to secure a tenancy in your property.

They might produce fake documentation or pretend to be someone else altogether, usually to hide either their financial status or a criminal past.

They might be planning to use the property for illegal activity, e.g. by turning it into a cannabis farm, or they may just plan to move in and not pay any rent.

Whatever their intention, it’s essential you have a robust referencing process in place to make sure that:

1. The applicant is who they say they are
2. They are able and likely to pay the rent on time and in full
3. They’re not hiding a bad history, e.g. being evicted previously or criminal activity

For more on how to carry out a comprehensive pre-tenancy check, see our recent article.

Here are some ‘red flags’ to look out for at the referencing stage:

• 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 you’re letting the property yourself, we recommend you use the services of a professional tenant referencing company.

At Your Move, we have our own proven systems, administered by experienced lettings professionals who know how to spot suspicious activity. If you’d like to discuss our landlord services,  just get in touch with your local branch.

Sub-letting illegally

Fraudsters may pose as ‘ordinary’ tenants to get the property as cheaply as possible and then sub-let without telling you. For example, they might:

• Let the whole property to someone else who is willing to pay a high rent for somewhere they can use for as a base for criminal activity
• Divide up the property into individual bedsits and illegally overcrowd it with multiple tenants

Most Assured Shorthold Tenancies (ASTs) state that sub-letting is forbidden or requires the landlord’s permission, so just make sure that your own agreement has such a clause – and we’d suggest that you don’t allow it, for two very good reasons:

1. Right to rent checks have to be carried out on every occupant, so you need to know exactly who’s living in the property and have proof that this check has been carried out properly. If anyone is found to be living there illegally – even if you weren’t aware of it – you can be fined up to £10,000 per occupant for a first offence and up to £20,000 for subsequent breaches.
    
2. Illegal subletting will almost certainly be in breach of your mortgage terms and conditions and will probably invalidate your landlord insurance as well.

If we are not letting the property on your behalf, here are three steps you can take to help protect yourself:

1. Carry out thorough pre-tenancy referencing and right to rent checks
2. Make sure there is a clear ‘no sub-letting’ clause in the tenancy agreement
3. 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

What about ‘rent to rent’

This is 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’.

Although it’s a legitimate type of let, it’s only legal if it’s done with the landlord’s knowledge and approval.

This kind of arrangement should have specific contract terms and always be done either through or with the advice of a lettings legal specialist.

Stealing your identity

Although this is one of the rarest scams, some tenants set out to steal their landlord’s identity and pretend to be the property owner.

They can then try to remortgage or sell the property without the true owner’s knowledge, which could be financially devastating for a landlord.

Here are 4 steps you can take to prevent this happening to you:

1. Reference prospective tenants thoroughly.
2. Sign 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.
3. 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.
4. Make sure that any post that has your name on it is redirected.
5. If we are not letting the property for you, carry out your first property inspection within the first two months of the tenant moving in and again within six months.

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, get in touch with your local branch here.

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