Tenant scams take advantage of unassuming landlords who fail to implement the right procedures for screening renters, writing contracts, and collecting payments. These scams (e.g., submitting false employment records, faking credit reports, forging checks and pay stubs, attempting to reset the eviction process, stealing your listing, and hiding property damages) come in different forms, costing landlords valuable time and risking their incomes and businesses.
To avoid these, we’ve exposed 15 tenant scams that should raise a red flag to landlords, along with tips on how to prevent them effectively.
1. Giving Fake Checks for Rent & Security
Tenants who provide written checks aren’t usually questioned about the validity of their payments, e.g., if a check was written from what looks like a reputable financial services company like Western Union or a nationally known bank like Wells Fargo, Chase, or Bank of America.
Tenants using fake checks scams will provide these checks for rent, security, and possibly a deposit to get access to the unit without the intention of ever paying. By the time the landlord cashes the check, they realize these funds are invalid and now have to deal with getting paid, evicting the current tenant, or realizing immediate damage was made to their property (like stolen appliances).
How to Avoid It
The Federal Deposit Insurance Corporation (FDIC) is responsible for insuring bank deposits and overseeing financial institutions for safety and consumer protection. The FDIC and Better Business Bureau (BBB) have listed multiple ways to spot fake checks, so landlords can see any inconsistencies or suspicious elements:
- Look for items like watermarks, security threads, or color-changing ink. These high-security features are usually items that cannot be duplicated on false checks.
- Take into account where the check was mailed from if not presented in person by prospective tenants. If checks were not directly mailed from a valid bank, make sure the checks clear before allowing access to the property.
- Landlords should also be aware of the differences between cashier’s checks and money orders. Money orders are extremely hard-to-trace funds, whereas cashier’s checks allow law enforcement to trace criminals much easier.
- Make sure the check doesn’t feel like it’s been printed on flimsy or suspicious material.
- The check number listed on the upper right of the check should match the check number following the account number at the bottom of the check.
2. Writing a Check Larger Than the Move-in Amount
Even though the American Bankers Association has not released its most recent 2022 report, check fraud attempts have been increasing since 2016, equaling $16 billion in potential loss. Also, according to NICE Actimize, attempted fraud increased 41% year over year in 2021. Knowing these statistics should raise a red flag for landlords for tenants who write checks, especially in a larger amount than necessary.
When a tenant wants to give you more money upfront than you asked for, we’re wired to think it’s a good sign. However, some things can be too good to be true. Rental scams targeting landlords, like rent overpayment, should be a huge red flag. These tenant fraudsters will write you a check for more than the amount you need for rent, security, deposit, etc., then ask you to refund the balance.
The Federal Trade Commission says banks are required by law to make deposited funds available within two days. Many landlords may see the available funds and assume the checks have cleared. However, checks can still bounce before you can figure out you’ve already sent funds back to the tenant and are stuck with the money owed to the bank.
How to Avoid It
When landlords receive a check for more than the needed amount, do not deposit the check into your bank account and immediately return it to the tenant. Landlords can also create policies on the lease that combat rent overpayment. Any additional funds can be applied to the remaining months of the lease, or any overpayment will only be returned at the end of the lease. Another way to provide yourself insurance on checks is to cash them before providing tenants with possession of the property.
3. False Employment Records
Providing false employer information on a rental application is another tenant scam that can trip up landlords. In a recent study by Snappt, 66% of property managers said they had received fraudulent applications. Tenants will provide fraudulent employment history and ask friends or family to act as the employer contact to falsely verify employment on their behalf. Tenants may do this because they don’t have steady income streams, which may bring concerns to the landlord regarding a tenant’s ability to make rent payments.
How to Avoid It
Don’t rely solely on the information given to you by a tenant to make a decision on application acceptance. Call the employer yourself to verify. Keep in mind that based on employer policies, they may only be able to provide selected information about the prospective tenant over the phone.
Make sure to ask for other information on the rental application like pay stubs, a letter of employment, and bank statements to help you decide whether they will be a good tenant for your properties. Compare all this documentation to check for consistent employer names, logos, and salaries. In addition, a quick Google search can also provide some insight into the validation of employment history through websites like LinkedIn.
It’s a difficult process to verify employment for any tenant, especially for a tenant who may be self-employed or a freelancer. Software like MyRental helps screen all tenants and types of employment to help landlords mitigate their risks. It provides a free rental application that allows landlords to pull credit history, criminal history, eviction reports, and even previous address history. These screening tools help landlords make informed decisions about who will be the best fit to live in their properties.
4. Providing a Fake Credit Report
Fair Isaac Corporation (FICO) lists the average credit score in 2021 as 716, which is considered to be in a good range based on a scale of 300 to 850. Although credit scores can indicate financial responsibility, landlords should take a deep dive into payment history to understand a tenant’s track record in making on-time payments to their liabilities.
Renter scams can also occur from tenants providing their own fake credit reports. Tenants who have been denied from multiple units will come prepared with their own report in an attempt to help you save a few bucks on running the report.
However, the information listed on the credit report may be changed to show a more favorable report. An oversight made by landlords screening tenants for their properties happens when they trust the credit report provided to them quickly and base their decision on application approval solely on credit score alone.
How to Avoid It
Landlords should always conduct their own credit and background checks. While they can run credit manually on their own, they can also do so easily with property management platforms like Avail. The platform gives landlords access to free rental applications, which will allow them to pull credit, background, and eviction reports to get a better idea of their prospective tenants. Additionally, Avail allows tenants to report their on-time rent payments and payment history to credit bureaus to help improve their credit scores.
5. Renting on Behalf of the Owner
Subleasing a property to a new third party is not illegal, as long as it’s allowed within the terms of your lease. The rental scam exists when a tenant subleases their property to a third party without notifying the landlord. The tenant will collect months of payment upfront from the third party and never transfer those funds to the landlord. By the time a landlord attempts to collect the payments, there is a new tenant in the property who’s already paid their rent to the leaseholder.
How to Avoid It
Make it extremely clear with your tenants at lease signing that subleasing is not allowed and legal action may take place if they breach the agreement. Landlords can also add a “no subletting” clause within the lease that prohibits subletting without the landlord’s consent.
In addition, landlords have the right to inspect their properties. Schedule regular visits or provide short notice of your visit to inspect if there are non-primary residents living on the property. The tenant’s response or lack of response may indicate whether they are illegally subletting your property. Check in the lease for the amount of notice required before doing a stop-by.
All late rent payments should be addressed immediately to not allow too much time to pass before discovery of the renter scam. Landlords can monitor late rental payments by collecting rent through online rent payment services. Some solutions can provide notifications on the rent deposits, but they will also report rent payments to the credit bureau to ensure anyone with late or missed payments will have it reflected on the credit report for other landlords.
Take a look through our 6 Best Online Rent Payment Services to find the best option for you.
6. Fake Pay Stubs
Providing pay stubs during the application process is a way for landlords to verify proof of income and indicate if a tenant is able to afford the asking rent. Tenants scamming landlords with fake pay stubs usually don’t meet standard rental income requirements. These prospective tenants are most likely less financially stable than they appear, which is why they try to provide a fake pay stub in order to get their leasing application approved. Tenants can easily access resources to create fake pay stubs online, which are extremely affordable with little to no turnaround time.
How to Avoid It
Landlords should examine all pay stubs for any discrepancies in numbers, formatting, and quality. Telltale signs of a fake pay stub include income rounded to a whole number and lack of professional details. Professional details include the employer’s name, address, and company logo.
Landlords can call the applicant’s employer to verify employment. Keep in mind that some employers are not allowed to provide salary information, but will verify if the applicant is a current employee. If you are uncertain if a pay stub is valid, you can always ask for bank statements to match the check deposits or a W2 for additional proof of income.
7. Tenants Doing Things to Reset the Eviction Process
Over 1 million evictions have occurred since March 2020 in Connecticut, Delaware, Indiana, Minnesota, Missouri, and New Mexico. A frequent tenant eviction scam that occurs during the eviction process is resetting the eviction timeline. Tenants can make a late or partial payment of a significantly smaller amount than what is owed, and if the landlord accepts it, it can reset the eviction clock.
Landlords will also need to restart the eviction process if the tenant requests additional time in the unit and you accept the request. Additional time can be a few days or even as little as a few hours.
Landlords are able to give tenants an eviction notice with or without cause. Usually, an eviction notice without cause would be for unit renovations and improvements to increase rent, but landlords would need to provide adequate notice to the tenant. Eviction notices with cause are usually due to lack of rent payment or misbehavior. Evictions, on average, can take a few weeks to a few years, depending on the case.
How to Avoid It
Landlords should take all precautions to avoid a long eviction process and the cost of eviction. Sometimes landlords may even decide to procure a cash for keys agreement with the tenant to avoid the eviction process altogether. However, if you must evict a tenant, you should first understand the eviction laws in your state to prevent a minor mistake that can cause you more loss in rental income.
To learn more about the eviction process, read our article How to Evict a Tenant in 5 Steps + a Free Eviction Checklist.
8. Stealing Your Listing
Unfortunately, with the increase in online lead generation and advertising efforts for vacant properties being marketed digitally, there has been an increase in stolen listings by tenant fraudsters. These fraudsters will copy your property photos, and listing information, and advertise it on a site for a significantly lower monthly rent to attract unsuspecting renters.
They then proceed to rent your property out without proper leasing processes and ask for money upfront from the prospective renter. Once the money is received, the fraudulent landlord will tell the prospective tenant that keys are available to be picked up at the property with no intention of ever handing over keys.
How to Avoid It
Property owners must protect their investments at all costs. They can create a Google Alert for their property addresses, so any web pages containing that address will prompt a notification to the owner. Another easy way to prevent theft of property photos is to include watermarks on all photos that can contain your name, contact information, or business. This will drive prospective tenants to contact you, which may alert you of the false listing or make it difficult for the scammer to crop out the watermark to look like a legitimate listing.
9. False Rental History Verifications
Requesting rental history on an apartment application is a common request from most landlords. Landlords seek to verify if tenants paid their rent in a timely manner and abided by the property rules. Moreover, they use history verifications to come up with an overall character judgment. And the best person to validate this information would be a past landlord.
Tenants who do not have any rental history, poor rental history, or simply do not remember their landlord’s contact information will provide false landlord information on their rental application to scam a new landlord. The fake landlord reference will validate false rental history and/or provide a positive review for prospective tenants to help them with their rental application.
How to Avoid It
In addition to asking for a former landlord’s contact information and property address, landlords may ask for utility bills to cross-reference addresses for proof of residence. Furthermore, with the rise of third-party listing sites, you can find contact information for property addresses to try to get in contact directly with the landlord.
If the tenant was residing in a large multi-unit building, those properties typically have large property management companies that you could reach out to directly to verify history. Pay close attention to the responses of the former landlord. If the responses are short and vague, that might be an indicator that it’s a fake landlord contact.
10. Using Residential Property for Commercial Usage
There are approximately 38 million businesses based from home in the United States, which account for 50% of U.S. businesses. Running a business out of a home is not necessarily illegal, as some businesses will not create any nuisance to the property or surrounding neighbors. The businesses that you should be concerned about are those that are of illegal activity or have the ability to damage the property. Tenants who are involved in such activity will not voluntarily disclose this information to you during the application process.
Tenants who want to avoid obtaining commercial space for their business might also think they can save money by using their residential property. Some residential properties are not property zoned for commercial activity, so landlords may also be penalized and forced to pay fines depending on tenant activity.
How to Avoid It
Since some states allow you to evict tenants who violate the terms of a lease, landlords can avoid troublesome tenants by adding a clause to the lease agreement, prohibiting some or all businesses or commercial activity to be operated out of the property. That way, you’re not entirely banning it, but want to have insight and the ability to forbid it if it’s an issue.
11. No Intention of Paying the Rent
Eighty-four percent of landlords cite payment problems as their number one concern about tenants. Some scammers have no intention of paying rent beyond what is needed to get them access to the property. In this type of scam, tenants will provide valid funds like the first month’s rent and security to move into the property, but then never make any subsequent payments. This forces a landlord to start the eviction process, which will buy the scammer an extra month of free rent before moving out.
How to Avoid It
Property owners must learn how to thoroughly screen tenants and have a process in place that includes rent history, background checks, eviction history, employment history, and income verification. While landlords can manually verify documents themselves, there is software available that can do it for them more efficiently.
One example is RentPrep, which provides tenant screening products to help landlords quickly fill their vacant properties. RentPrep is geared toward smaller landlords who do not have the same resources as large management companies to be able to perform the same tenant screenings at an affordable rate. The platform provides an easy way to verify the income of self-employed applicants and performs credit checks to understand a tenant’s ability and intention to pay rent.
12. Hiding Property Damage When Moving Out
Average tenant turnover costs for landlords can be about $2,500, which includes getting the property ready to re-rent, marketing, and leasing it to new tenants. If tenants do damage to the property, the cost to turn over the property will be even more expensive and will delay move-in for future tenants.
This scam is an attempt by tenants to deceive the landlord just enough to get their security deposit back after moving out. Some examples of hidden damages that occur include temporarily fixing plumbing issues, hiding cracks and scuff with plaster and paint, and sometimes hiding signs of infestations that may affect future tenants.
How to Avoid It
To avoid this scam, landlords need to be aware of the difference between normal wear and tear and damage to their property. As part of the lease, tenants are mandated to leave the premises with only normal wear and tear. For example, a small scuff on the wall is considered normal wear and tear. In contrast, if there is a hole in the drywall, that would be damage.
For more information, read our article Normal Wear and Tear for Rental Properties: A Landlord’s Guide.
In addition, use an apartment turnover checklist help ensure no rock is left unturned. Landlords should ensure they allow adequate time for a turnover inspection and that they’re doing so in the presence of the tenant, so they are aware of any damages. Do not refund a tenant’s security deposit prior to inspection, so if repairs are needed, it can be taken from the deposit.
Property owners can also outsource property management to turnkey rental companies like Roofstock. They remove the hassle from day-to-day property management, and their vast network of vendors allows you to own rental property anywhere in the U.S. The property managers will handle all repairs and unit management, which includes communicating with tenants and performing apartment inspections and turnovers.
13. Unexplained Urgency to Rent
The United States government issues a warning to landlords to not fall for tenants who have an unexplained urgency to rent. The unexplained urgency may be a key sign of tenants who have a history of scamming landlords, and the sense of urgency is to deter landlords from processing tenant applications with due process.
If prospective tenants push you to counter-sign the lease in a short period of time, there may be an error on the lease documents in their favor. These tenants may also need to secure housing on short notice due to a current eviction before it goes on their record.
How to Avoid It
Although landlords would like to avoid any vacancy in their buildings, sometimes putting tenants in too quickly can cost you more money in the long term. Given that over 40% of U.S. renters were facing eviction as of 2020, landlords must have strong processes in place to screen tenants before handing over the keys.
One tip to help when there is such urgency to rent is to avoid unseen rentals. Make sure you meet the prospective tenants to help you make a better assessment in person. Also, take your time screening tenants, regardless of how quickly they push you to review their documents and make a decision.
14. Lying About Co-tenants
One of the more common scams from tenants is lying about co-tenants who may be living on the property unofficially. Although this may seem quite innocent at first, the need to conceal unauthorized tenants may be due to criminal background or credit history issues.
The non-disclosure of such information can be a liability for property owners with the possibility of nonpayment of rent if the primary tenant moves out, property damage with no leaseholder accountable, and negligence of lease terms since the occupant did not sign the lease agreement. In addition, if there are any unforeseen catastrophes like a fire and the unknown tenant is injured, there could be consequences for the landlord.
How to Avoid It
Although eviction is always an option due to a violation of the lease agreement, evicting an unauthorized tenant is one of the more challenging eviction cases. Landlords can avoid this situation by being clear to tenants on guest rules and how long guests are allowed to stay before needing to be an official tenant on the lease.
Guest rules should be a specific category on the lease agreement and be stated as a clear violation with repercussions. A strong and communicative tenant-landlord relationship can assist with making sure tenants follow your rules, whereas an absent landlord may entice tenants to push the boundaries of house rules. Also, make sure to inspect the property regularly, with notice, so you are knowledgeable about guests coming and going on the premise.
15. Service Animal Discrimination
Many properties have a no-pet policy, and it’s within a landlord’s right to include this clause in the lease agreement. Pets can cause disturbance to other tenants, cause excess wear and tear to the property, and increase property infestations. However, many tenants will try to pass their animal off as an Emotional Support Animal (ESA) or service animal to skirt the pet fees or pet deposit with fake ESA letters. This scam results in a pet that is untrained with no deposit to cover excess damage when the tenant moves out.
How to Avoid It
Understanding the Fair Housing Act and landlord/tenant laws can quickly help you see if your property is exempt from the rules. Owner-occupied buildings with no more than four units, single-family homes sold or rented without a real estate broker, and property owned by religious or private clubs housing their members are all exempt from the housing discrimination laws.
If your property does not fall in the exempt categories, you may request to have an ESA letter sent to you directly from a mental healthcare professional. Call the healthcare professional to confirm the validity of the letter or you can Google to make sure this is a certified professional. While you cannot deny an applicant solely because they have an ESA, you may have other factors that make you choose a more qualified tenant, such as income requirements or credit history.
Online rental applications can be customized through TurboTenant to include questions regarding the possibility of a pet in the property. Their standard application asks questions regarding the pet’s breed, gender, weight, and animal license, but can be customized as needed. The online application is free for landlords and will instantly return tenant screening reports covering credit score, criminal background, and eviction history.
Although you cannot be 100% certain that a tenant is not a scammer, having a thorough tenant screening process can ensure you are putting the best tenants in your units. Understanding these tenant scam tactics can help you identify red flags and protect yourself when a tenant might be taking advantage of you.