By Daniel Berlind on Mar 4, 2020

Being a property manager is a tough job. You have to locate quality tenants who will fill vacant units, vet them to ensure they will be good long-term tenants, field questions and complaints from existing tenants, and fix problems as they arise. It is a never-ending job.

Therefore, the last thing you need is a devious tenant who runs a scam on your property. It is expensive, time consuming, and disruptive. With that in mind, here are 14 common scams, how they work, and how to avoid them.

14 Tenant Scams to avoid

 

  1. Inability to Pay Their Rent

While most renters are not out to scam you, there are some who will move in with no intention of paying rent. They are counting on the fact that you are busy, and their goal is to live rent free as long as they can until you catch on and end up evicting them.

To prevent this type of fraud from happening, you need to develop a thorough tenant screening process that includes the following:

  • Start by having every prospective tenant complete an application. This will help you collect information, such as current and prior landlords, employment history, and references.
  • Run a background and/or criminal check. This can help you avoid putting your property or your neighborhood at risk.
  • Request a payment or credit history. A high credit score is a good indication that they are making payments on time.
  • Contact personal and employment references to ensure that the information on the application is correct.
  • Contact their previous landlords to see if there have been any issues in the past.
  • Request financial documents, such as pay stubs, to confirm employment and that their income aligns with what is being reported.

 

  1. Money Wiring Scams

Property managers can lose millions of dollars each year dealing with wire transfers. Once the rental application has been accepted, victims of this scam are sent a fake check that is for more than the initial rent and fees. The renter then requests that the extra funds be wired back to him/her. As it takes time for the fraudulent check to bounce, the unknowing property manager is now out the funds that were wired back to the potential tenant and any funds used from the check.

If you do accept wire transfers, remember that funds from a check deposited into an account should not be used until the check officially clears, which can take weeks. You might also consider requiring your renters to pay rent online through an online portal to eliminate the chance of receiving fraudulent checks.

 

  1. Falsifying Pay Stubs

Pay stubs provide valuable information about prospective renters and how much they earn, but sadly, fake pay stubs are all too common. Many sites online can help you create phony pay stubs in minutes so that you can apply for rentals without indicating your actual employment status or income.

To avoid being fooled, check all the basic information closely on the pay stub. Look for any discrepancies in the numbers, formatting, and overall quality, and always make sure to ask for employment references. An applicant’s employer cannot give you a person’s salary information unless they have been given permission, but at least you can verify that the applicant indeed works for that employer.

 

  1. Illegal Sublets to Third Parties

Subletting an apartment is an excellent alternative for people looking for a situation that is a little more flexible. However, an illegal or unapproved sublet is more common than you might think. Renters find it easy to sublet their apartment, require six months’ rent up front, and then take off. When you stop receiving your rent payments, you find that someone other than the original renter is now living in the apartment. At that point, both you and the person subletting are out of substantial funds.

Make sure you have no-sublet clause in your lease agreement, or require that renters get your approval for any subtenants. Any time the renter does not have permission to sublet the apartment, it is an illegal sublet.

 

  1. Writing a Check Larger Than the Move-In Amount

Similar to a money wiring scam, a new tenant will write a check for more than their rent and sometimes send twice as much by accident and then ask you to return the over payment. Later, you will find out that the check is counterfeit, and you are out the rent payment and the extra funds you returned.

If this happens, ask the tenant to rewrite the check for the correct amount, or tell them you will apply the additional funds to next month’s rent.

 

  1. Resetting the Eviction Process

A common tenant scam can happen during the eviction process. If you have already filed for an eviction and then accept a partial or late payment, you may be forced to start the entire eviction process all over again. Furthermore, if a tenant who is being evicted asks to stay in the apartment for a few more hours or an extra day and you allow it, this can also reset the eviction process, and you will be forced to start the process over.

Make sure you understand the eviction laws for your state, so you do not make these types of mistakes during the process.

 

  1. The Tenant–Landlord

According to the 2019 Identity Fraud Study from Javelin Strategy and Research, there were 14.4 million victims of identity fraud in 2018. Identity fraud is another potential scam you need to be aware of as a property manager. Using a false name and identity, a potential candidate can rent an apartment from you, but when you call or visit the property to follow up on the rental payments, someone other than the original tenant answers. You soon find out that the person you rented the property to is a professional scammer and has rented the property to an unsuspecting tenant and took the first six months’ rent in advance.

Make sure you are screening tenants carefully, but if you are only doing a background check, you could be checking on the wrong person. Make sure you get proof of identification to prevent someone from using a stolen identity, and follow up on references from previous landlords and employers. If there is any question, take a photo of your applicant, and text it to past landlords to ensure you have the right person.

 

  1. Providing a Fake Credit Report

Some prospective tenants will offer you a copy of their credit report to save you the time it takes to do it yourself. However, a potential tenant can simply go on the Internet and use a template to make his/her own credit report, and these sites are easy to find. By signing a lease agreement and handing over the keys without doing your own research, you open yourself up to a number of problems. At that point, your only alternative may be to go through a legal eviction process that can take months and cost thousands of dollars.

Verifying a printed report supplied by the applicant is very difficult, so the best practice is to request a credit report yourself and not risk income loss.

 

  1. Stealing Your Listing

The Internet has made it easier than ever for someone to steal your information, and rental scams are becoming more and more common. Someone could easily copy your property listing, download your photos, and post them to another site at a discounted rent. The scammer then proceeds to rent the property to another person, asks for the rent up front, and tells the renter to pick up the keys at the property.

Always protect your listing by adding a watermark to your photos with your website or company name to prevent others from using them. If you find a fraudulent listing, make sure you report it to the website. The Federal Trade Commission or your state’s attorney general can also help get the post removed if you run into trouble.

 

  1. Using Fraudulent Documents

Providing fraudulent documents is one of the most common scams. A number of websites that can teach anyone to create counterfeit documents have surfaced. Some scammers will even provide fake references. For as little as $5, your applicant can have two trained professionals waiting for your call.

Property managers need to be extremely vigilant in verifying and, in some cases, re-verifying the documents submitted by applicants. You can eliminate much frustration and additional costs simply by making a few calls to verify employment details and previous rental activity with former landlords and by confirming whether the name of the person giving the reference matches the property ownership or business registration. By not taking a few extra steps during the application process, you take the risk of losing a few months’ income when you need to have the tenant evicted.

 

  1. Lying about Co-Tenants

Having a co-tenant or roommate is a great way for potential renters to reduce their financial obligations, but some tenants may conceal who they have living with them if it is someone with criminal or credit problems that could hurt their chances of renting a property.

Make sure your tenant includes the correct number of co-tenants in the lease agreement and that they understand any breach can be grounds for immediately terminating the lease.

 

  1. Phony Employment

Similar to providing fake references, potential tenants may also provide fraudulent information for their employer and hire a professional or a friend to act as a human resource (HR) contact or reference to verify their employment.

Independently contact the company that the applicant provided using the company website listing. If the company does not exist or the HR person or reference does not exist, you will immediately know that the potential tenant has provided fraudulent information.

 

  1. No Intention of Paying Additional Rent

Unfortunately, some tenants move into a place with no intention of paying rent beyond the first payment. They know they can live rent free for as long as the eviction process takes, which can be three months or more, giving them plenty of time to line up their next place to stay.

Be extra careful during the background and employment check. Call at least two recent landlords to ensure that the applicant has the financial capacity and intention to pay his/her rent.

 

  1. Property Damage

A tenant may deliberately damage something in the rental property and then report to the Licensing and Inspections Department that the property manager has not made the repairs. Once the Licensing and Inspections Department issues a violation or citation, the tenant can then refuse to pay the rent.

Property managers need to call previous landlords in order to see if this has been a problem in the past. Conducting regular inspections of the property and documenting any damage or issues are also important.

 

In Conclusion

 

In light of all these potential scams, tenant scanning must a priority. While going through each step may take additional time, energy, and effort, it will be worth it in the end. Do not assume the documents are correct, and do not take shortcuts. Create a structured approach to each document to ensure you take the necessary steps to prevent any potential scams.