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You are reading: 13 Tenant Scams to Avoid For Property Managers

May 20, 2024

13 Tenant Scams to Avoid For Property Managers

Daniel Berlind
CEO

Being a property manager is a tough job. Your days are spent locating and screening quality tenants to fill vacant units, fielding questions and complaints from existing tenants, and fixing any other problems as they arise. On top of all that, there are several tenant scams out there that can take advantage of you if you aren’t careful.

It’s vital to exercise caution when screening potential tenants to avoid rental scams. Scammers prey on inattentive managers, and falling for their schemes can inflict severe financial losses on both the property owner and the manager. Not to mention, such scams can damage the trust between the two parties and lead to costly legal proceedings and property repair expenses in preparation for future lessees.

We know how challenging it is to watch out for all of these scams. In this article, we’ll go over common tenant scams and how you can avoid them.

Inability to Pay Their Rent

There are some tenants who will move in with no intention of paying rent. They are counting on the fact that you are busy with other problems and tenants. Their goal is to live rent free as long as they can until you catch on and pursue legal action.

To prevent this type of fraud from happening, you need to develop a thorough tenant screening process that includes the following:

  • Every prospective tenant must complete an application. This will help you collect information, such as current and prior landlords, employment history, and references.
  • Run a background and/or criminal check. This can help you avoid putting your property or your neighborhood at risk.
  • Request a credit history report. A high credit score is a good indication that they are making payments on time.
  • Contact personal and employment references to ensure that the information on the application is correct.
  • Contact their previous landlords to see if there have been any issues in the past.
  • Request financial documents, such as pay stubs, to confirm employment and that their income aligns with what is being reported.

Read our article on how to screen potential tenants for more tips on this process.

Money Wiring Scams

Property managers can lose millions of dollars each year dealing with wire transfers. Once the rental application has been accepted, victims of this scam are sent a fake check that is for more than the initial rent and fees. The renter then requests that the extra funds be wired back to them. Since it takes time for the fraudulent check to bounce, the unknowing property manager doesn’t receive the funds that were wired back to the potential tenant and any funds used from the check.

We don’t recommend accepting wire transfers, but if you do, remember that funds from a check deposited into an account should not be used until the check officially clears, which can take weeks. Alternatively, you might consider requiring your renters to pay rent online through an online portal to eliminate the chance of receiving fraudulent checks.

Falsifying Pay Stubs

Pay stubs provide valuable information about prospective renters and how much they earn, but sadly, fake pay stubs are all too common these days. Companies are popping up all over the internet that can help tenants create phony pay stubs in minutes!

To avoid being fooled, check all the basic information closely on the pay stub. Look for any discrepancies in the numbers, formatting, and overall quality, and always make sure to ask for employment references. An applicant’s employer cannot give you a person’s salary information unless they have been given permission, but at the very least, you can verify that the applicant works for that employer.

Illegal Sublets to Third Parties

Tenants are often tempted to sublet their unit if they’re going on a long vacation, studying abroad, or just feel like making a little extra cash while they’re not home. Tenants find it easy to sublet their apartment, require six months’ rent up front from the new tenant, and then take off. When you stop receiving your rent payments, you find that someone other than the original tenant is now living in the apartment. At that point, both you and the person subletting are out of substantial funds.

Sometimes scammers do it to earn money on your back by subletting 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
  • 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:
  • Add clauses dictating the process of subletting with instructions on how your tenants can add new residents

Writing a Check Larger Than the Move-In Amount

Similar to a money wiring scam, a new tenant might write a check for more than their rent amount and then ask you to return the over payment. Later, you will find out that the check is counterfeit, and you are out the rent payment and the extra funds you returned.

This can be a tricky one to prevent. If it happens, ask the tenant to rewrite the check for the correct amount or tell them you will apply the additional funds to next month’s rent.

Resetting the Eviction Process

This common tenant scam can happen during the eviction process. Eviction processes must follow strict rules and if you stray from the outlined steps, you will have to start from the beginning.

If you have already filed for an eviction and then accept a partial or late payment, you may be forced to start the entire eviction process all over again. Furthermore, if a tenant who is being evicted asks to stay in the apartment for a few more hours or an extra day and you allow it, this can also reset the eviction process, and you will be forced to start the process over.

Make sure you understand the eviction laws for your state, so you can avoid these mistakes.

Identity Fraud

Identity fraud is another potential scam you need to be aware of as a property manager. According to the 2019 Identity Fraud Study from Javelin Strategy and Research, there were 14.4 million victims of identity fraud in 2018. Yikes!

Using a false name and identity, a potential candidate can rent an apartment from you. When you call or visit the property to follow up on missed rent payments, someone other than the original tenant answers. How is that possible? Well, you soon find out that the person you rented the property to is actually a professional scammer and has rented the property to an unsuspecting tenant and took the first six months’ rent in advance.

The best way to combat this type of scam is be requiring ID verification. You’ll also want to follow up on references from previous landlords and employers.

Providing a Fake Credit Report

Some prospective tenants will offer you a copy of their credit report to save you the time it takes to do it yourself. However, a potential tenant can simply go online and use a template to make their own credit report. By signing a lease agreement and handing over the keys without doing your own research, you open yourself up to a number of problems. At that point, your only alternative may be to go through a legal eviction process that can take months and cost thousands of dollars.

Verifying a printed report supplied by the applicant is very difficult and not worth the risk. Best practice is to request a credit report yourself and avoid loss of income or other potential issues with the tenant.

Stealing Your Listing

Identity theft isn’t the only thing you should be worried about. Someone can easily copy your property listing, download your photos, and post them to another site at a discounted rent. The scammer then proceeds to rent the property to another person, asks for the rent up front, and tells the renter to pick up the keys at the property.

Always protect your listing by adding a watermark to your photos with your website or company name to prevent others from using them. If you find a fraudulent listing, make sure you report it to the website. The Federal Trade Commission or your state’s attorney general can also help get the post removed if you run into trouble.

Using Fraudulent Documents

Providing fraudulent documents is one of the most common scams. There are countless websites that either teach applicants how to change documents or they’ll do the service for them for a small fee. Some scammers will even provide fake references, too!

Property managers need to be extremely vigilant in verifying the documents submitted by applicants. One way to eliminate this frustration is by making a few calls to verify employment details and rental history with their former landlords. However, this can take too much of your time, especially when you have dozens of applications to review.

A better solution is to use Snappt. Our data-driven fraud detection software is designed to catch even the smallest instances of fraud in bank statements and pay stubs. We catch over 99.8% of fake documents, reducing potential future bad debt & evictions by 51%! To learn more, request a demo or visit our website.

Unauthorized Tenants

Having a roommate is a great way for potential renters to reduce their financial obligations, but some tenants may conceal who they have living with them if it’s someone with a criminal record or credit problems that could hurt their chances of renting a property.

To combat this, confirm with the applicant that all necessary roommates have applied. Make sure they understand that any breach of contract can be grounds for immediate lease termination.

False Employment

Similar to providing fake references, potential tenants may also provide fraudulent information for their employer and hire a professional or a friend to act as a reference to verify their employment.

Independently contact the company that the applicant provided by searching the company online. If the company does not exist or the reference does not exist, you will immediately know that the potential tenant has provided fraudulent information.

Property Damage

A tenant may deliberately damage something in the rental property and then report to the Licensing and Inspections Department that the property manager has not made the repairs. Once the Licensing and Inspections Department issues a violation or citation, the tenant can then refuse to pay the rent.

When you are doing the initial tenant screening, call the previous landlords to see if has been a problem in the past. We also recommend conducting a move in/move out report and regular inspections of the property. Documenting any notable damage is important during these inspections.

To Sum Up…

Tenant scams are a serious issue that can have disastrous consequences for landlords, property managers, and tenants alike. With the rise of rental scams, it’s more crucial than ever to stay informed and take proactive steps to protect yourself and your property.

Remember to conduct thorough tenant screenings, verify employment and income, and stay up-to-date on the latest rental market regulations. And don’t forget to trust your gut – if something seems too good to be true, it probably is! With these tips and tricks in mind, you’ll be on your way to avoiding tenant scams and keeping your property—and your wallet—safe.

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