Property Manager

Applying for a rental unit is a lot different these days than in the past decade. Instead of meeting in person, potential renters simply fill up an online application without ever meeting the landlord face-to-face. True, online applications can be convenient and will provide landlords with a larger pool of applicants. However, it does come with a few hitches—particularly, fraud.

Fraud in the form of identity theft or fake identities has been on the rise in the rental housing arena, and the current digital landscape isn’t helping things a bit. In fact, technology may have escalated housing scams to a point where the industry is having difficulty keeping up.

TransUnion conducted a couple of studies to assess the biggest challenges landlords face when it comes to fraud in the rental housing industry. It was revealed that 97% of property management companies dealt with some form of fraud, with 80% of respondents saying they had to deal with the issue up to 20 times between 2016 and 2018. What is most shocking, however, is that 41% of the respondents discovered the fraud only after tenant move-in.

The Covid-19 pandemic that followed only made things worse. There was a significant 15% increase in fraud cases compared to just 10.3% over the same period pre-pandemic.

Common Types of Fraud in the Residential Rental Industry

Fraud seems to be the price the industry has to pay as a result of increased digitization. Data breaches are on the rise—fraudsters are becoming smarter with identity theft, and property management companies finding difficulty keeping ahead of their precocious tactics.

Here are some of the most common types of fraud that landlords and property managers need to be aware of:

• Rental application fraud: Potential renters lie about their details in the rental application, whether it be providing altered photos or false income statements.
• Synthetic fraud: Potential renters create a fake identity using a mix of both real and false information. For instance, the applicant may use a fake Social Security number and provide a real address to gain access to a rental property. This is presently the fastest-growing form of fraud.
• First-party fraud: The applicant uses his own identity but provides fake or altered information on the source of income and rental history.
• Third-party fraud: The applicant takes on another person’s identity or information to qualify for a rental property. In most cases, they use someone else’s Social Security number, name, and date of birth.

Can a landlord simply change locks on a tenant with a fake identity?

Changing locks on a tenant with a fake identity would generally be considered illegal and unethical behavior by a landlord. Landlords must follow specific legal procedures and adhere to tenant rights, regardless of a tenant’s identity or background.

Here are a few reasons why this would be problematic:

1. Due Process: Evicting a tenant or denying them access to their rented property typically requires following the legal eviction process in your jurisdiction. This process usually involves giving proper notice and obtaining a court order to regain possession of the property. Changing locks without going through this process is typically unlawful.
2. Tenant Rights: Tenants have legal rights, regardless of their identity. Landlords must respect these rights, including the right to peaceful enjoyment of the property and protection from unlawful eviction.
3. Discrimination: Treating a tenant differently based on their perceived or actual identity, such as using a fake identity, can be considered discrimination, which is illegal in many places.
4. Contracts: Rental agreements and leases are legally binding contracts. Changing locks without cause could violate the terms of the lease agreement, potentially leading to legal consequences for the landlord.

If a landlord has concerns about a tenant’s identity or believes they are engaging in fraudulent activities, they should consult with legal counsel and follow the proper legal procedures. It’s important to note that landlords must work within the bounds of the law and respect tenants’ rights, even in challenging situations.

What must landlords do if they suspect or verify rental fraud?

The first thing to keep in mind is that you are a landlord, not a law enforcement officer. You cannot take it upon yourself to lock out a tenant the moment you discover some form of fraud, whether they used a true or a false identity.

If a landlord suspects that a tenant has provided false or fraudulent information—including a fake identity—they should proceed cautiously and follow legal procedures. The specific steps a landlord should take may vary depending on local laws and regulations, but here are some general guidelines:

1. Gather evidence: Document any information or evidence that leads you to believe the tenant has provided false information. This may include inconsistencies in the application, identification, or rental history.
2. Consult legal counsel: It’s advisable to consult with an attorney who specializes in landlord-tenant law to understand your rights and responsibilities in your jurisdiction.
3. Contact the tenant: You can contact the tenant to discuss your concerns and ask for clarification. Give them an opportunity to provide additional information or correct any discrepancies.
4. Verify information: If you still have doubts about the tenant’s identity or information, you can attempt to verify their identity through legal means, such as checking government-issued IDs or running background checks through reputable agencies.
5. Follow legal procedures: If you have strong evidence that the tenant has provided false information or is engaging in fraudulent activities, consult your attorney to determine the appropriate legal steps to take. In many cases, this may involve initiating eviction proceedings based on the grounds of fraud or material misrepresentation.
6. Comply with local laws: Ensure that you follow all applicable local, state, and federal laws regarding eviction and tenant rights. Eviction procedures can vary significantly by jurisdiction.
7. Maintain documentation: Keep detailed records of all interactions with the tenant, including correspondence, evidence of false information, and any legal actions taken.
8. Avoid self-help measures: Landlords should avoid taking matters into their own hands, such as changing locks or forcibly removing a tenant, as these actions can lead to legal trouble and may be considered unlawful eviction.
9. Report fraud: If you believe the tenant’s actions involve criminal fraud, you can report the matter to local law enforcement or the appropriate authorities.

Remember that landlords must always adhere to the law and respect tenants’ rights throughout the process. If you are unsure about how to proceed or have concerns about a tenant’s identity, it’s essential to consult with an attorney who can provide guidance specific to your situation and local laws.

Afterword

It is difficult to determine the exact prevalence of individuals renting homes using fake identities in the United States, as such activities are illegal and typically not reported or documented systematically. The vast majority of renters in the U.S. provide accurate and legitimate information when entering into rental agreements. However, instances of individuals attempting to use fake identities can occur. In fact, they have been on the rise lately due to digital transformation.

Landlords typically have processes in place to verify the identity and background of potential tenants, which may include background checks, credit checks, and verification of employment and rental history. These checks are designed to minimize the risk of renting to individuals with fraudulent intentions. Thankfully, additional security measures such as facial recognition have stepped up the verification process to curtail fraudulent activities.

Attempting to rent a property with a fake identity is illegal and can have serious legal consequences, including eviction and potential criminal charges. Landlords and property managers are generally vigilant in their screening processes to identify and prevent such fraudulent activities. Additionally, law enforcement agencies take identity theft and fraud seriously and investigate cases when they come to their attention.

It’s important for both landlords and tenants to act ethically and within the bounds of the law in all rental transactions to maintain trust and integrity in the housing market.