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Watch out there’s (more) rental fraud about

bogus-landlords-truth-lie-decisionFake landlords are rapidly becoming the new scourge of the property market, with con artists fleecing hopeful tenants out of huge sums in a range of rental scams. Unfortunately, this type of fraud is continuing to increase at a rapid rate and letting agents are not immune.

Rental fraud is not a new phenomenon, but has increased significantly since the introduction of the internet and has risen by 92 per cent just in the last two years. The latest figures from the National Fraud Authority estimate that rental fraud resulted in £755 million losses to individuals in 2012.

Many frauds involve direct adverts, usually on internet sites, placed by criminals posing as the landlord of a property they do not own. Some victims may be asked to transfer money to secure the property before viewing, or even have been shown around the property by scammers who have illegally gained access and then disappear, once the tenant has handed over a substantial deposit.

ARE YOU AT RISK?

With home ownership in England falling to its lowest percentage in nearly a quarter of a century, the huge increase in private tenants is providing fraudsters with a multitude of opportunities to cheat tenants. The problem is particularly bad in London and the South East, where there is a growing shortage of rental properties. These fake landlords are scamming tenants directly through newspaper and online ads, but have also started targeting them indirectly, through high street letting agents.

Letting agents can also be vulnerable to this type of fraud if they do not remain vigilant. A recent case reviewed by The Property Ombudsman was brought by a tenant who found her new home through a letting agent and subsequently signed a tenancy agreement. It later transpired that the landlord was not the legal owner and did not have permission to rent out the property, so the tenant sustained a loss of over £5500. The Ombudsman found that the supposed landlord had provided the agent with a Land Registry document as proof of ownership at the point of instruction. However, it was dated 11 months into the future.

This should have alerted the agent to the potential for fraud and he should have conducted his own independent research to verify who the true property owners were. The Ombudsman ruled that the agent had breached Paragraphs 1d, 4a and 14a of the TPO Code by treating the tenant unfairly and as such, instructed the agent to repay the money she lost to the bogus landlord plus £500 in compensation.

Although the agent was also subject to fraud in this case, had he conducted the necessary checks on the landlord and the property, he would have uncovered the deception and would not have provided a platform for the fraud by advertising the property.

Agents need to be careful and scrutinise information provided by landlords, as closely as they would documents provided by tenants. They need to pay particular attention to land registry documentation and must carefully check all ID information.

Here are some really useful tips for letting agents if they are at all suspicious of a new landlord:

  • Check the title to the property via the land registry website – If you are suspicious of a landlord, you can find out who the registered owner of the property is for only £3 at www.landregistry.gov.uk/public/property- ownership
  • Ask for photographic ID, such as a passport or driving licence, and proof of address to match the landlord to the named owner listed on the land registry records. This is normal practice by solicitors before acting in property transactions
  • Ask to see the Energy Performance Certifi cate for the property. As a legal requirement for self-contained rentals, a legitimate landlord should be able to present this
  • A ‘Consent to Let’ document will confi rm the landlord has permission from their mortgage provider to lease the property
  • The process of ‘knowing your customer’ will establish whether the landlord has mortgage commitments and allow you to discuss the importance of arranging insurance against loss of rent and legal expenses insurances to evict non-paying tenants.
Michael Portman - LetRisks

Michael Portman – LetRisks

Michael Portman is Managing Director of LetRisks. www.letrisks.com

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