Landlords see a massive increase in fraudulent tenancy applications

Landlords see a massive increase in fraudulent tenancy applications

10:36 AM, 21st April 2023, About 11 months ago 12

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There’s never been a tougher time for the private rented sector (PRS) with demand soaring and stock dwindling tenants are struggling with finding a place to live.

This leaves tenants battling it out for properties but some face extreme vetting procedures to access homes to rent.

However, with tenancy fraud applications on the rise, there is cause for concern for landlords over whether tenants can be trusted to pay the rent.

This Property118 investigation highlights how tenancy fraud applications have seen a huge spike in recent months and how this could affect landlords.

153% increase in fraudulent tenancy applications

Tenant referencing is a review of prospective tenants and any guarantors.

Referencing can bring peace of mind to landlords knowing they can let out to a suitable tenant who can pay rent.

According to the NRLA, reference checks can vary depending on the provider, but may include:

  • Suitable identification such as a passport or driving licence
  • Either a utility bill or a bank statement
  • Credit check; clear of County Court Judgements, and bankruptcies & indicating confirmation of residency
  • Confirmation of employment
  • References from former landlords

A tenant could fail the reference checks for a variety of reasons. Tenants in receipt of benefits including Universal Credit may find it difficult to meet the criteria needed to pass a check because they do not have sufficient income to pay the rent.

Some of the common techniques used by fraudsters for tenant applications include fake IDs, such as passports and driving licences, and doctored documentation such as payslips and bank statements.

Companies offer checks to landlords and letting agents to check the validity of tenant applications.

According to one tenant reference provider they have seen a 153% increase in fraudulent tenancy applications from February to March this year.

In March 2023 alone Homeppl caught more than £3.3 million worth of fraud.

Homeppl revealed in their March fraud monthly round-up that they have seen a huge spike in fraudulent submissions from applicants who hold overseas passports.

Fake tenancy applications can cause financial hardship to landlords when an apparently suitable tenant is unable to pay the rent.

In one particular case, the provider uncovered an application that included a fake visa.

A routine anti-money laundering check found the applicant has outstanding theft charges to her name and a history of disappearance.

If the application was approved undetected, she may have cost Homeppl’s client almost £90,000 in contract value, legal and eviction costs.

Alexander Siedes, CEO and founder of, Homeppl told Property118: “We have assessed hundreds of thousands of consumers and close to a million financial documents.

“Our data shows that in certain key clients that fit the common target for tenancy fraudsters, we can find that up to 10% of their applicants can be deemed to have committed fraud. As you’ll see in our 2023 trends report, 91% of all tenancy fraud we catch comes from the falsification of financial documents.”

He added: “Our document analysis tool, Fraud Finder, finds those modifications and document edits instantly. With the most recent data showing a 153% increase from February to March 2023, the threat continues to grow at an alarming rate”.

150 cases of tenancy fraud every day

According to the 2020 Fraud and Corruption Tracker by the Chartered Institute of Public Finance and Accountancy (CIPFA), false tenancy applications are the fastest-growing area of housing fraud, costing an estimated £60.1m in the UK.

Another reference provider said they are currently identifying 150 cases of tenancy fraud every day.

The letting agent supplier Homelet said the increase is up from 110 a day in 2021 ­– representing a 36% increase.

Homelet says they are taking action against advanced fraud and protecting landlords and letting agents using artificial intelligence (AI) technology in their tenant checking process.

The company checks applications against more than 500 million data points, including the Credit Industry Fraud Avoidance System (CIFAS) database and its own database, and completes various checks, including financial sanctions.

The artificial intelligence system will add an extra layer of protection from tenancy fraud by checking every document Homelet receives.

Head of customer operations, Rebecca Baker, said: “It’s great to add another line of defence to our growing armoury of advanced fraud detection.

“Just last week, we stopped a case in Mayfair from getting through where the monthly rent was over £5,000. The fraudster had edited their documents to make it look like they were earning income from a legitimate source, but the source and transaction had been forged.”

Is it any wonder landlords are now taking extra precautions when it comes to tenant referencing?

‘Landlords make an informed decision’

In a recent article in the Guardian, it was claimed that some landlords are asking to see photos, CVs and character references to choose between prospective tenants.

Dan Wilson Craw, acting director of campaign group Generation Rent, told the Guardian that requesting photos is a ‘recipe for discrimination’.

He said: “Landlords might pick tenants who appear more conventionally attractive.

“If you don’t have regular work or if you don’t have a long-term contract at work it puts you at a disadvantage compared with other renters. It just adds another opportunity for discrimination.”

Paul Shamplina, from Landlord Action, defended landlords who ask tenants to provide extra information such as their CVs.

In a programme on GB News, he told presenters Isabel Webster and Eammon Holmes that “landlords want to make the best-informed decision” when it comes to a tenant wanting to rent their property.

He added: “Landlords make an informed decision that can tenants pay the rent and can they afford it. Affordability now has gone up to the worst it’s ever been which is 39% of someone’s wages now going towards rent.

“If a tenant is putting their best foot forward. A landlord wants to make sure that is that tenant working at the workplace they say they’re going to be working at.”

He added that it’s not common practice for landlords or letting agents to ask a tenant for their CV.

Mr Shamplina said: “Let’s be very clear it’s not a common practice and I think it’s probably more a London-centric thing rather than the rest of the country.”

Fraudulent applications will only make things worse

Mr Shamplina warned that abolishing Section 21 will mean landlords are going to be much more stringent when it comes to referencing.

He said: “The biggest losers in all of this will be vulnerable tenants, particularly those on housing benefits. If you’ve got private tenants vying for a property with a housing benefit tenant and a private tenant can pay four or five hundred pounds a month more.”

In what is already a financially difficult time for landlords, the increase in fraudulent applications will undoubtedly only make things worse.


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Comments

Judith Wordsworth

11:40 AM, 21st April 2023, About 11 months ago

Even the Right to Rent checks are a minefield of fraudulent documentation, with the landlord carrying the buck and likelihood of fines.

If the Police cannot confirm, as one Policeman has actually told me, when shown such documents, how is the "humble" landlord supposed to know whether they are legitimate documents of fake ones?

Reluctant Landlord

11:55 AM, 21st April 2023, About 11 months ago

Reply to the comment left by Judith Wordsworth at 21/04/2023 - 11:40agree a bloody minefield. The Ukranian passports/visas were new to me. Tenant came via the council so even though I did the checks, they must have been shown the same docs to the authority before me (for access to public benefits) so that was a bit of confidence, but when they come to you direct....its really impossible to be 100% sure.

moneymanager

12:37 PM, 21st April 2023, About 11 months ago

"In a recent article in the Guardian, it was claimed that some landlords are asking to see photos, CVs and character references to choose between prospective tenants.

Dan Wilson Craw, acting director of campaign group Generation Rent, told the Guardian that requesting photos is a ‘recipe for discrimination’."

Protesting against photo ID is a bit ironic coming from the Guardianista.

moneymanager

12:39 PM, 21st April 2023, About 11 months ago

There are no "extreme vetting procedures", there are only appropriate underwriting conditions in extreme circumstances to prevent applicants overcommiting themselves, words matter.

geester24

14:59 PM, 21st April 2023, About 11 months ago

Indeed. Discrimination lol.
So often people these days have 3 or 4 interviews for a new job.Mmmm why is this ? To get the best person for the job of course. Same for vetting a tenant nowadays. You want to have a good relationship so that they pay on time, treat the place well and are suited to the property while you adhere to your responsibilities as a landlord. With the imminent end of S21 etc and severe court delays of course you would. I weed mine out and talk to them for 30 minutes or so. You soon get a feel rather than just box ticking.

Cathie

16:05 PM, 21st April 2023, About 11 months ago

Is any action taken against these fraudsters? I thought fraud was a criminal offence.

Reluctant Landlord

17:45 PM, 21st April 2023, About 11 months ago

Reply to the comment left by moneymanager at 21/04/2023 - 12:37
There are no "extreme vetting procedures", there are only appropriate underwriting conditions in extreme circumstances to prevent applicants over commiting themselves, words matter.

Love it - stolen!

Reluctant Landlord

17:46 PM, 21st April 2023, About 11 months ago

Reply to the comment left by moneymanager at 21/04/2023 - 12:39
other simple checks...social media!

Blodwyn

10:10 AM, 22nd April 2023, About 10 months ago

Reply to the comment left by Cathie at 21/04/2023 - 16:05I've not (yet!) had this problem but suspect the Police will say, if they cannot cope with house-burglars, how do you expect them to cope with fraudsters?
Correct me if I am wrong, but was it Mrs May as Home Sec who sacked 20,000 coppers and her successors who are trumpeting about recruiting 20,000 but forgetting they are simply trying to undo the harm they did before?

Pramila

11:36 AM, 22nd April 2023, About 10 months ago

I would suggest that for the proof of income, get the consent from the prospective tenant to contact HMRC that's the only way. Since there have been fraud payslips, fraud employment references because they have connections with others who write the fraud employment references etc. Especially be aware for anyone with any connection with struck off lawyers, unlicensed solicitors law companies etc.

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