Fraud by prospective tenants trying to secure residential units is on the rise in SA and reflects global trends. Approximately 60% of rental applications submitted through Johannesburg property developer and rental management company, Renprop have included false information in the past six months. [Sheree I added in a timeline is this accurate? If not how many months?]
The group reports that fraud is becoming more sophisticated, often making it difficult for an average property owner to pick up the tell-tale signs. This is also happening elsewhere around the world. CNBC, quoting the credit reporting agency TransUnion, reports the global rental industry is now at higher risk as digitisation has increased the prevalence of fraud. It reports that since the pandemic began, the frequency of actual fraud incidents has jumped by nearly 50%, according to TransUnion1.
Renprop MD, Chris Renecle says property owners looking for tenants need to be aware of this dire trend. There are however checks and balances designed to detect fraudulent activity. To illustrate how prevalent the problem is, the group currently manages more than 2,000 sectional title rental units, and says half of the rental applications are accompanied by some form of fraudulent documentation.
Vigorous screening systems
Renecle says fraud can be “disguised in many ways” and can involve inflating salaries, supplying fake payslips, and tampering with bank statements to imply the prospective tenant earns more money than they do. When it comes to ticking the employer’s box, applicants list companies that do not exist, along with contact numbers for a fictitious HR department.
“The plague of fraudulent transactions is a sign of the times. Understandably, everyone needs a roof over their heads and a place to call home. Unfortunately with economic pressures comes desperation,” says Renecle.
Five helpful tips for home owners seeking tenants
- Check each and every piece of documentation for authenticity. Even if this means a delay, make those phone calls to the potential applicant’s employer, references, and confirm all other personal information.
- Never overlook the credit check. Yes, times are tough but a credit check from a reputable provider can give you all the information you need to make an informed decision. An applicant’s bad credit rating should never be ignored.
- Another common ploy is an offer of several months’ rent up front, this is generally from an applicant who knows they will not be your first choice of tenant. They may go to great lengths to become more appealing to you. While many homeowners may find a lump sum attractive, this is definitely a warning sign.
- When in doubt – don’t! With SA’s property legislation it makes it difficult to evict tenants so don’t ignore warning signs otherwise it will be a struggle to get rid of an unwelcome tenant who stops paying the rent.
- Finally, consider the services of companies with top property management expertise as they are well positioned to identify fraud and find you the right tenant.
“Owners are under the increasing pressure of trying to attract and retain tenants in the residential rental market. While many owners will only see the pitfalls of not having a tenant occupy their property – this is a better option than overlooking an applicant with warning bells. Our advice to property owners is to weed out the perpetrators even if this means the property remains vacant slightly longer than usual,” says Renecle.
“On a positive note,” adds Renecle, “securing the right tenant can be a match made in heaven. And with the market picking up, and demand for rentals is increasing, the right tenant is out there!