The 3 Most Common Tenant Scams and How to Avoid Them
Rental scammers will take advantage of property managers caught daydreaming. If you fall victim, you won’t just cause your property owner to lose trust in you - but you’ll also lose money in costly evictions. That’s not to mention the cost of property repairs needed before the next (hopefully better) renters move in. These are the three most common red flags and types of scams you should notice when conducting tenant screening and accepting applicants to avoid being duped.
1) Fraudulent checks
The world has become very digital; the pandemic proved that working from home is possible; and people job-hopping left and right to increase pay during a four decades-high recession. These three factors combined create the perfect storm for this type of sting.
This sophisticated scam will include you getting emails/phone calls from potential tenants claiming they're moving into the area for a new job and/or their employer is helping them relocate (aka relocation package). They’ll say they’re interested in moving into your property, wire money in the form of a big check, much larger than the required deposit, applicant fee, or first month’s rent — and ask for the difference back — claiming that’s what their employer asked them to do.
However, this “employer’s check” is pure fiction. It’s a fraudulent check, and by the time you try to cash it again after it bounced, only to realize what happened (you sent real money out and got fictional money in), your “prospective tenants” are well on their way to stinging the next person.
So, how to avoid it?
First, avoid transactions occurring only over the phone/email.
Second, getting checks-wire transfers/offers with overpayment on what you’re asking should be avoided.
Third, insist on meeting the prospective renter. Sure, it’s plausible they’re indeed moving from out of town and relocating, but a virtual call, like on Zoom, shouldn’t be a problem. If it is, something’s off.
2) Unauthorized tenants
While you might be very careful with who’s signing the lease, it may not even be the person actually moving in because tenants sometimes lie about who they intend to live with inside your property. It can be a roommate with poor credit they’re covering for, even one with past evictions, or a romantic partner with a criminal record.
And, believe it or not—it could be even worse—as sometimes scammers do it to earn money on your back by subletting (renting) a room to a person on Craigslist or Airbnb.
All this is obviously unethical, illegal, and one of the most expensive renter scams to deal with. Here’s how to avoid it.
- If you don’t allow subletting, make it clear to potential renters immediately.
- If you allow sub-leasing, add another clause clarifying what kind — and that deviating from what’s agreed equals breach of contract with grounds for terminating the lease agreement. Also, be creative:
- Consider approval on a case-by-case basis.
- What are the new tenant’s responsibilities and liabilities?
- Maybe the sub-leaser must undergo an additional tenant screening process at their own expense?
- Add clauses dictating the process of subletting with instructions on how your tenants can add new residents should they want to (romantic partner moving in, for example). Make sure this is legally binding in your state and bulletproof in court.
But regardless of your choice, thoroughly screen your applicants upfront and authenticate their credentials.
3) Landlord swap
This is a manifestation of the previous scam - just dialed up a notch.
This scam involves a person acting like they'll be the one paying and living there, while they actually plan on having someone else entirely take up the space. They may even pay themselves and still have someone else living there. Sometimes, it’s not for the money, but because the person staying couldn’t pass background checks, have a bad rental history with previous landlords, or have had an unflattering run-in with law enforcement, and they're covering for them.
But sometimes, they sublet it illegally for monetary gains. It can happen during their contract, hoping you won’t find out, or worse, before leaving—they’ll pretend to own the place, lease it to someone else for 3-6 months in advance—all in cash.
To avoid this, we recommend you insist on collecting two forms of ID and, again, that you authenticate all paperwork submitted by applicants.