Fraud In The Rental Industry On The Rise

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Making a case for professional property management.

Top Johannesburg property developer and rental management company, Renprop says fraud by prospective tenants trying to secure residential units is on the rise in SA in line with global trends, adding that 60% of the applications it deals with include false information.

This means the services of companies with top property management expertise such as Renprop are even more crucial as fraud is becoming more sophisticated, often making it difficult for an average property owner to pick up the tell-tale signs.

Renprop MD, Chris Renecle says the group has a vigorous screening system designed to pick up any fraudulent activity. To give some idea of how prevalent the problem is across the residential market, Renprop’s property management business, which currently manages more than 2,000 sectional title rental units, is now finding that at least 50% of the rental applications are fraudulent or are accompanied by some form of fraudulent documentation.

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 and a rise of fraudulent rental applications,” says Renecle.

The problem for the residential property owner is that SA’s property legislation makes it difficult to evict tenants so they may struggle for months to get rid of an unwelcome tenant who has secured a lease by fraudulent means and then stops paying the rent.

“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,” says Renecle.

What is also behind in the rise in fraud is the move of rental applications in SA to digital platforms. In the wake of the Covid-19 pandemic digital applications has inadvertently made it easier to commit fraud.

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 the increase in digitisation has opened up the prevalence of fraud even more. It says that since the pandemic began, the frequency of actual fraud incidents has jumped by nearly 50%, according to TransUnion.

Renecle says the South African situation is no different and says some of the red flags that property owners should take note of to prevent themselves from falling victim to fraud, is an applicant’s credit record and the supporting documentation. “An applicant’s bad credit rating should never be ignored.”

Another common ploy is for the applicant to offer several months’ rent upfront as a sweetener. “An applicant who knows they will not be your first choice may go to great lengths to become more appealing to you. Offering you six months’ rent upfront is one such way and while many homeowners may find the lump sum attractive, this is definitely a warning sign.”

Renprop is able to identify fraudulent applications based on years of experience in the industry, Renecle explains, “Experience has taught our team to meticulously check key points on an applicant’s supporting documentation and credit checks. Renprop’s internal processes include all legislative requirements as well as a multi-step sign-off process of application for approval. The most important steps we take to weed out the fraudulent applications is identifying that supporting documentation is true and knowing how to verify the information and documentation supplied,” says Renecle.

Renprop is finding that while the lower rentals were most at risk of fraudsters, but since 2020, this is now becoming prevalent in the high-end rental market too.

Due to income restraints since 2020 many people do not qualify for a rental and desperation forces their hand to turn to fraudulent documentation to secure a home. “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, “it is encouraging to see the market is picking up, and demand for rentals is increasing. In these last couple of months, we have seen a record number of enquiries, and our rental division is buzzing.”

For more see: https://www.renprop.co.za/residential/residential-rentals/