Using data from their referencing agency, LetRef, Benham and Reeves found an average of six fraudulent applications a month in 2018, using either fake bank statements and fake or cloned employers in order to pass the referencing stage of the tenancy process. So far this year, this has already hit an average of 13 per month - a 117% increase each month.
This increase is largely due to criminality with those looking to fraudulently rent doing so to: -
- Sub-let/rent in the short-term to holidaymakers and others at a hugely inflated rent, often paying no rent themselves and vanishing once bailiffs attend, taking everything in the property with them.
- Using the property as a brothel which often ends in the property being trashed as well.
- For other immoral motives such as drug dens which again, can cause considerable damage to the property
Given the high rent being asked, particularly in London, the proceeds can be substantial and with such a poor housing court system to evict tenants, landlords run huge risks.
With the recent introduction of the Tenant Fee Act 2019 meaning letting agents can no longer charge tenants for references, it’s expected that the level of fraudulent applications will continue to increase as these applicants know it won’t cost them a penny should they fail, all while landlords foot the bill. In June, the number of fraudulent cases has already increased to 16, above average despite the short time the ban has been implemented.
But the problem goes beyond fake bank statements and more worryingly, Benham and Reeves has seen a notable increase in the number of fake passports being used by fraudsters. In 2018, there were a total of five cases using fake passports, in the first five months of this year alone, there have been 11 cases of fake passports being used. This is due to a number of expert forgers who know the code formatting required to pass an AML check.
Below are three real-life case studies of attempts to secure rental properties using fraudulent documents. As you will see, some of the applicants are extremely convincing but fraud can be detected from the smallest slip-up.
EXAMPLE 1
A fraudulent application from a male applicant which it transpired, was actually part of a serious criminal case. The applicant appeared on the electoral roll and was linked to previous addresses, so this was very well planned, and they had clearly been renting properties fraudulently through other companies for years, something that was later confirmed by the police.
He stated he worked for a company which does exist, but a cloned website was set up with a similar domain name.
He was discovered due to thorough checks on all the domain names and referees involved and tracking down the real employment referee through internet searches, who confirmed that all reference info received was fake.
The bank statements received were also very good fakes and the passport received was fake but passed an AML check. However, there were a few discrepancies and it was confirmed as a forgery and one created specifically for renting illegally.
The landlord reference received was also fake and the name was recognised from another fraudulent case.
Marc von Grundherr, Director of Benham and Reeves, commented: “This surge in fake applications is a very worrying statistic for a rental market that is already straining under the current requirements of a ‘Generation Rent’ and this increase demonstrates the importance of using a bonafide referencing company, where staff have been given specialist training from the National Crime Agency on recognising fraudulent documents.
Unfortunately, the majority of referencing companies do not even collect ID and proof of address and conduct referencing as a sideline, in order to up-sell other services and earn commission.
Letting agents using one of these companies or making checks themselves are highly likely to end up with these fraudulent chancers flying in under the radar and into a rental property.
We are one of only a small number of agents who aren’t passing the cost of a thorough referencing service onto landlords despite the changes to legislation, and we will continue to ensure that the appropriate checks are being made. It’s the professional duty of all letting agents to properly validate the tenants they are providing to their landlords and failing to do so with the utmost vigour simply isn’t acceptable.”
