There are a number of things that are different about the landlord-tenant relationship. One is that usually this is a one-off transaction, apart from renewing a lease, any tenant is unlikely to ever do business again, unlike say an ecommerce site or a financial transaction where a history of previous transactions are easily available to be fed into the risk assessment of future transactions.
Showing a rental property is also a face to face transaction, here factors that come into play that may not otherwise, you may not want to seem rude by questioning a person’s integrity right in front of them or their partner/family, but that is what you need to do.
A good tactic is to apologise for doing the checks but blame on someone else (even a fictional someone), the Finance Director, Your Partner, insists that you do these checks even though you don’t think it’s necessary as you can see the potential tenant is a stand-up guy, it’s not your choice you have to do the checks, and then carry out the checks! --> Some basic rules still apply you need to look at the risk of the transaction, apart from the odd chipped cup, the risk on a rental agreement is quite high and hard to replace lost funds.
Ask yourself this if you lose a month’s rent then how long does it take you to earn this back, three, six or twelve months? That will define the risk. A car dealer can sell other cars to make up for one fraudulent sale, as a landlord unless you have many properties the months rents is gone and needs to be made up from the same property, one bad transaction can probably ruin your year. Once you assess the risk, look at steps you can take. Here is one example of a high powered car dealer who defrauded friends. A client who spent £225,000 on two cars could not be bothered to do a £5 text message to PPI check them, which would have revealed in minutes that the cars had outstanding finance on them and therefore could not be sold to him.
People, even very successful people can be susceptible to fraud. As we see in the latest Ponzi fraud where Levene, who was not in court, has admitted defrauding a series of business people including Sir Brian Souter and his sister Ann Gloag, the founders of the Stagecoach bus and rail group, and Richard Caring, owner of The Ivy and Le Caprice restaurants in London's West End.
Even the richest with the best legal protection can be taken in by fraudsters. So please don’t think that you are in some way immune, remember the fraudster’s whole job is to be believable, and often they are good at it.
That’s why the clichéd advice of “If it sounds too good to be true then it probably is” is such poor advice, the worst fraudsters will look like your best customers, not someone trying to sell you the Eiffel tower (and no, they are not looking for your property expertise to rent out the first floor due to the Euro financial crisis!). So fraud is out there, before you enter a transaction, spend five minutes looking at what preventative measures you can do before you get in front of anyone, and then secondly and most importantly, do all the checks, no matter how ideal or fantastic the potential tenant looks like or how much of a rush they are in. Fraudsters know the checks won’t work, so they will use time pressure and distraction techniques to ensure you don’t do the checks. On the other side of the coin, fraud is big problem for tenants also. The National Fraud Authority
In October 2010, the housing and homelessness charity Shelter carried out an online survey looking at the number of people who have been a victim of a scam involving a private tenancy or landlord. The YouGov research estimated that 946,000 people have been the victim of rental scams in the last three years, equating to around 315,000 victims per annum.
The NFA has calculated an annual fraud loss estimate using the prevalence rate identified in the Shelter survey multiplied by an average fraud loss of £1550 per victim identified via Action Fraud in relation to rental fraud.
Again these are probably devastating losses for these people. Landlords should keep this in mind and do what they can to reassure tenants that they are genuine, don’t be offended if they are asked to prove their identity and property ownership and also report any bad activity that they are aware of. No checks are 100% and themselves can be fraudulently produced. If you have any niggling feeling then one of the best things to do is get a second pair of eyes on the deal to review it. Finally always be prepared to walk away from any deal you are not happy with.