How to avoid falling victim to rental fraud
Category Advice
For the uninitiated, renting out a property for the first time can be daunting. Even seasoned landlords can fall victim to rental fraud, if the right checks and balances aren't in place.
The one tangible fraud that a landlord may experience is when a potential tenant deliberately misrepresents themselves financially with the view of moving into a property and then not paying rental.
Tenants offering to pay a few months' rental upfront and then the balance monthly is also a potential opportunity for fraud. It is important to be able to 'read between the lines' when assessing a rental application, and there is value in using a reputable estate agency that has experience and expertise in assessing tenants beyond what you see on paper.
Estate agencies use credit bureaus and the Tenant Profile Network (TPN) to evaluate potential tenants, with the permission of the tenant as required by POPIA. Most agencies are listed on the TPN, where tenant-specific profiles linked to rental payments are created so that agents can access data to see if they have been flagged for non- or erratic payment.
It also links to their payment profile on other loans, such as clothing accounts, credit cards, car repayments, etc. This then gives us a good holistic view of the person's financial character and a credit score is allocated to them based on their previous payment history. The vetting process should not stop there, it is vital to directly appraise employer and salary records and speak to reference provided to fully ascertain the calibre of tenant, a good paying tenant that does not look after your asset can also cost you dearly.
A good credit report, sufficient affordability and good references are absolutely non-negotiable. Using a reputable agency will minimise the risk of falling victim to fraudsters, loss of rental and the unpleasant experience and costs associated with trying to evict a defaulting tenant.
There are also documented incidents of fraudsters sending through falsified bank statements, payslips, IDs, as well as proof of payments. As an additional precaution, we get a bank code on potential tenant's account that verifies that the bank account belongs to the applicant in question so we know we are looking at the correct bank statements.
The increase in scams perpetrated by the electronic interception of communication between attorneys, estate agents and their clients has been so significant that the Attorneys Indemnity Insurance Fund no longer coverers attorneys who fall victim to cybercrime.
The following advice is to protect all parties against fraudulent real estate scams:
- It's important for agents and attorneys to verify and know their clients and always personally verify any change in the payment instruction.
- Be especially vigilant if bank details are changed and independently verify the bank account details directly with the bank. Most banks have systems to enable conveyancers to do this.
- Never, ever pay money into an account that does not belong to a bona fide party to the transaction.
- Confirm that your estate agent is legitimate. You can also do so via the Estate Agency Affairs Board website where all agents who are marketing properties must be registered.
- Never, ever just click reply to an email when you are sending important information. Rather create a new email and input the email address directly from your address book. This will ensure that you never send information to a fake email address that looks similar.
- Always ask for verification of the bank account into which any funds are being paid.
- All correspondence requesting a change of banking details should be viewed with suspicion.
- Only use banking details provided in an email if you have confirmed authenticity.
- Nowadays, face-to-face meetings are not always possible however, important documents should always be signed in person and verification of bank details always completed.
- Be on the lookout for the following red flags: spelling errors in emails or other messaging systems, the presentation of sudden changes or decisions as having strict deadlines, hasty changes to terms and conditions of the contract, refusal to speak on a phone call.
- Property professionals should be adequately insured.
If landlords choose to rent their properties out privately, as an added safeguard, I would advise that a tenant only be allowed to move into the property once the deposit and the first month's rental reflect in their bank account. Do not rely on a proof of payment being sent through as it is very easy for fraudsters to produce false proof of payments.
Author: Property 24 - Extracts
