Manjit Kataora, Foxtons Director - Legal and Compliance, shares insight on how landlords can protect themselves from fraudulent tenant applications.
For years, the issue of mortgage fraud has been well-publicised: using fake credentials a borrower secures a greater mortgage advance than to which they would otherwise be entitled. More recently, in the rental market, the number of tenancy applications based on fraudulent documents has exploded. An analysis of over 600,000 tenancy applications found that fraudulent applications rose by 140% last year alone. (Source: Goodlord)
The widespread use of technology means it’s easy for landlords and agents to find themselves staring at a doctored bank statement or proof of income in the course of an ordinary tenancy application. But how do you know if you’re looking at a fake?
Technology
Granted, some mistakes are easy to spot. But widely available online editing software means it’s easier than ever for documents to be manipulated to show higher balances and/or incomes than are actually the case. Document resolution continues to improve and in such cases we see increasingly higher quality forms of passport images, driving licenses, utility bills and bank statements ‘doctored’ to portray a more favourable background in the hope of slipping through reference checks.
Fake companies
Neither are corporate applications immune: signs to look out for here include only recently incorporated companies and those with websites whose deeper content pages bear no correlation to the main page or stated objects of the company. We have come across examples of the latter whose pages read as if they have been scraped from other websites and when we perform our own checks we have found that more than likely to be the case. Directors’ details should be checked to see they are actually listed on Companies House records.
Trusted, independent referencing
Foxtons uses an independent third-party reference company. We also have our own in-house compliance team who check other discrepancies day-in day-out. Through experience, we have built up a valuable knowledge base on what to check and look out for. We adopt a combined approach using technology and the human eye to check those cases where we have doubts. Technology will help to identify missing data normally embedded in genuine documents missing from those superficially tampered with and human checks will examine documents against their correct format. All this helps our customers ensure they do not fall victim to fraudsters.
The money laundering threat
Doctored or fake applications are used by criminals looking to dispose of or ‘launder’ their proceeds of crime; alternatively to commit some other crime once they have secured a property to rent. For these reasons, even where a fake application is weeded out and has been rejected, that is not necessarily the end of the matter; the details may still be reported to higher authority under the Proceeds of Crime Act.
Full service
Unlike some online-only platforms, Foxtons is a full-service estate and letting agent that deals in high value lettings (those where rent levels exceed the sterling equivalent of €10,000 per calendar month) and is thereby subject to anti-money laundering regulations that are strictly enforced and audited by HMRC.
In high-value lettings tenancies not only is the tenant comprehensively referenced using an independent third-party referencing company, but the applicant also passes through another layer of checks that specifically comply with the anti-money laundering regulations.
Landlords can therefore be confident that in these cases their tenancy applicant has been thoroughly checked against a number of different databases. Any recommendations or information about the applicant can then be thoroughly reviewed before they decide whether to grant the tenancy.
Summary
The ease with which forgeries can be concocted online, and the tools that allow this to be done mean that landlords thinking about letting someone live in the biggest asset they own need to be especially careful today. Teaming up with a letting agent that complies with these tough standards avoids the risks that arise from ‘going it alone’ or online platforms whose service, on the face of it appears cheaper, but actually introduces more risk.
Even with all these checks in place, it’s always possible that something may go wrong. Performing these checks is a critical step towards ensuring total peace of mind but it’s always worth considering purchasing rent and legal protection guarantee cover so that if your tenant stops paying rent you know you have cover in place that will protect your income stream (subject to terms and conditions).
Landlord Essentials is a series of articles where our experts delve into the big questions for London landlords. If you have a question on letting your property in London, ask a Foxtons expert. If you want help making your property a success, get in touch with Foxtons lettings team.
