You may have read recent reports in the media about growing numbers of prospective tenants using fake documents when applying for a tenancy. In particular, news items have focused on tenants who forge payslips to give the impression they earn more than they do to pass the affordability check.
It’s not difficult to see why this is happening. Household budgets are squeezed by the cost-of-living crisis. High inflation is eating away at purchasing power, not to mention reducing landlords’ real-terms profits. Hikes in interest rates are making buy-to-let mortgage payments more expensive, leading many landlords to increase rents. Then there is the growing number of landlords who are selling up, with many of their properties leaving the rental market altogether.
The net result is that there are fewer properties, higher rents, and reduced affordability for many tenants. Little wonder some people are submitting fraudulent tenancy applications, simply to get a roof over their heads.
Problems for landlords
While it’s not hard to feel sympathy for struggling tenants, fraudulent applicants can cause landlords a whole host of problems. If a tenant over-represents their income, they are much more likely to face problems paying the rent. That can lead to loss of income and the expense of eviction for the landlord.
It’s not just income that can cause problems. It’s relatively common for a tenant to get a friend to supply an employers’ reference. It’s also not unknown for some people to forge a reference that supposedly comes from a previous landlord. If you don’t spot these, you might find yourself with troublesome tenants.
It’s advisable to take a two-pronged approach. Firstly, it’s always best to use a professional tenant referencing service to run robust checks on prospective tenants. While most applications are honest, tenant referencing should pick up on anomalies, such as forged payslips or bogus references. This helps landlords weed out hard-to-spot fraudulent applications and avoid the problems they can cause. A full referencing service normally includes:
- Employment history check
- Residency history and previous landlord referencing
- Personal data confirmation (bank account details, ID, etc)
- Credit check and affordability calculation
- Full written report
In addition to tenant referencing, rent guarantee insurance provides protection if a tenant stops paying rent, as well as legal cover for the process of evicting the tenant. Rent guarantee insurance from Alan Boswell Group provides:
- Up to £2,500 missed rental income per month, for up to 15 months
- Up to three months’ rental cover after eviction at 75% of monthly rent
- Legal expenses, including eviction costs, of up to £100,000
- 24/7 legal expenses helpline
Rent guarantee insurance is contingent on proper tenant referencing, but if your referencing provider fails to pick up on a fraudulent document and your tenant then goes on to stop paying rent, your cover won’t be invalidated as long as there isn’t any blatant evidence that the tenant’s documents were fake.
Rent guarantee is designed to pay you rent and support you through the eviction process. For a claim to be payable you will have needed to assess affordability, checked for CCJ/bankruptcies/IVA’s, obtained ID, set up a legal tenancy agreement, as well as supply the tenant with the documents required by law (e.g. rent guide, EPC, gas cert). There is no cover for any disputes within the first 60 days of taking out a policy (unless comparable cover was held for six months immediately prior) and the tenant must be in arrears of at least two full rental payments. Find out more about rent protection insurance here.
As our director of Personal Lines, Heath Alexander-Bew, explains:
While we always recommend that tenants are professionally referenced before you let your property to them, rent guarantee insurance can provide financial security if your tenant stops paying rent and you find that the documents used to prove affordability were fraudulent.
While a professional tenant referencing service is more likely to spot problems, there are steps you can take to check a tenant’s documents are genuine.
Our top tips include:
- Pay attention to where documents come from. Have the documents come from an official email address, such as that of a letting agency? Be wary of documents that come from generic email addresses. Also, look up email domain names using services such as Nominet. If a supposed employer’s domain name has been registered in recent months, it could well be a sign that it’s not genuine.
- Check phone numbers. Put phone numbers into Google to see whether they link to a particular person or business.
- Call any number you’re supplied with. If you’re calling a previous landlord, ask them in detail about the tenancy and the tenants. Genuine landlords will know details such as how much rent a tenant paid, how much their deposit was and the repairs and maintenance they did during the tenancy. If the person on the end of the phone is hesitant or doesn’t seem to know the answers to your questions, this is a red flag.
- Check identity documents carefully. Pay particular attention to the photos on passports and driving licences to make sure they’re of the tenant.
- Ask to see original documents. It’s much easier for people to doctor scanned documents using software like Photoshop, than it is for them to forge convincing originals.
- Pay close attention to payslips. Check the employer is registered with Companies House and was trading during the period the payslips were issued. Check that PAYE deductions reflect the salary paid.
- Think laterally. For example, check that the BACS payment date on a bank statement is actually a date when banks process payments (not a bank holiday, for example).
While most tenancy applications are honest, it’s a sign of the tougher times we live in that growing numbers of fraudulent documents are being used to prove affordability. If you do your own tenant checks, be more vigilant than ever. However, for maximum peace of mind, we suggest you protect your investment and income with professional tenant referencing and rent guarantee insurance. To find out more, contact us on 01603 216399.