As an agent, you want to do all you can to protect your business. But what can you do when the threat comes from those very customers you are trying to serve – your tenants?
Tenancy fraud doesn’t just affect your earnings each time it occurs. It can also do longer-term damage to your reputation and business. And, sadly, it’s on the rise. At HomeLet, we’ve seen tenancy fraud increase from 110 cases a day in 2021 to 150 in 2023. Other figures suggest tenancy fraud has increased by 120% since January 2022, while during the pandemic there was a 263% increase in fraudulent applications in three months alone.
The financial and legal consequences of tenancy fraud on your business can be devastating, so it’s vital to understand how to best manage the risks.
The current rate of tenancy fraud
The increase in tenancy fraud isn’t so surprising when put in the context of the cost-of-living crisis and soaring rents. But that doesn’t mean it’s something your business needs to accept. Identifying where fraud is at risk of impacting your business, and putting measures in place to combat the risk, is essential.
Figures show that 5% of rental properties in the UK are rented to fraudsters, and in some cases up to 10% of rental applications involve a level of fraud. The use of fake documents, such as statements, pay slips, utility bills and identification documentation, is the most likely fraudulent activity to take place.
The consequences of fraudulent tenants
Once a fraudulent tenant is in the property of one of your clients you may find it hard to get them out. And, while legal disputes might be rumbling on, you could end up with a costly bill for both rent arrears and legal costs until eviction takes place.
This is especially important to consider given that fraudulent tenants may be cheating the system to access properties that would normally be out of their financial grasp, which they may then be subletting through short-let sites.
How to manage the risk of fraudulent tenants
With fake documentation being one of the most significant areas to be exploited by fraudulent tenants, it’s wise to improve your agency’s processes in this regard. While technical solutions are available to check documents, it can help to pay closer attention to details – such as thoroughly checking bank statements to check the income and spending of a prospective tenant.
Open banking, meanwhile, allows prospective tenants to securely share their financial details with a reference agency to validate bank statements further.
Improving your tenant referencing processes is also essential. Working with an established business which works by blending technology, data and people, as part of your tenant referencing strategy will help to deliver the best results. Combining all these elements also gives you the most effective blend of tactics to detect suspicious applications and follow up accordingly. At HomeLet, for example, we blend more than 200 tenant referencing team members with the data shared from a customer base of more than 3,700 agents and a million annual references.