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Tenants whose income, employment and credit files have been decimated by the economic fallout of Covid-19 are increasingly employing underhand tactics in a bid to secure a home, according to referencing firms tasked with checking applications.
The first half of 2021 saw a 72 per cent increase in the number of fraudulent tenancy application attempts picked up by just one referencing firm, compared with the same period last year as the number of tenants struggling to demonstrate their financial credentials soared.
Despite private rents rising by only 1.2 per cent in the last year according to official figures from the Office for National Statistics, tenant due diligence and guarantee firm Homeppl also recorded a 178 per cent increase in the value of fraud being committed over the same period.
The firm cites one individual who was recently caught making fraudulent tenancy applications on three different occasions with different lettings agents.
The first time he was picked up, in March 2021, the application was found to contain doctored bank statements, the business he claimed to be drawing a significant salary from had no revenues, and a series of email addresses, websites and references he provided to support his application were found to be false, or created by him.
A few months later, the same firm received an application via a different agent that was suddenly withdrawn.
Finally, on a third application, he used the same passport and employer details but increased his supposed salary from £72,000 to £115,000, attempted to use a new domain for his employment by switching from .com to .us, where he had created a new website just two days earlier, and attempted to be his own employer reference.
This kind of so-called “amateur fraud” has seen a steep rise in incidents since the start of the pandemic. However, professional rental fraud is also on the increase, when fraudsters apply to rent a property, before subletting it, collecting the rent and failing to pay the landlord.
One London-based lettings agent reports that around one in every 20 applications is now considered fraudulent compared with around one in every 50 before Covid-19.
“This example highlights the lengths that some tenants will go to in order to fraudulently rent a property, which, once they are in, gives them the opportunity to commit further offences (illegally subletting/short letting) or to simply to default on the rent,” says Alexander Siedes, CEO and founder of Homeppl.
“Unfortunately, there is no penalty for a fraudulent application, so they will just keep trying, and given most tenant referencing is nowhere near as reliable as ours, it makes you wonder where else has he tried and been successful?”
““Successful tenancies must be rooted in honesty and trust between a landlord and tenant,” a spokesperson for the National Residential Landlords Association says.
“A prospective tenant who deliberately provides false or misleading information is seeking to obtain a tenancy fraudulently. A tenancy based on fraud is likely to fail, potentially causing harm to themselves and their landlord.
“Landlords must be vigilant and should make use of credit checks and seek references from previous landlords to verify a tenant’s identity and ability to sustain a tenancy. Guarantors may also be considered to help tenants who struggle to access new rental properties.
But with tenant referencing services inconsistent in the methods they employ to confirm the status of an applicant, often relying on credit reports alone, fraudulent applications are regularly missed while those with limited credit reports are often discriminated against, including students, the self-employed, international renters and even some high net worth individuals.
Up to a third of applicants are refused a tenancy agreement because they fall at this hurdle.
Typically, applicants who don’t pass standard due diligence screening are instead required to pay 50 or even 100 per cent of their rent up front to secure a home – a bill that could easily come in at £25,000.
The median full-time salary in the UK in 2020 was £586 per week or £30,472 per year before tax.
Alternatively, an applicant who doesn’t pass referencing tests will be asked to find a UK-based guarantor – someone who is prepared to underwrite the tenant and agree to pay the outstanding rent, and sometimes cover the cost of any damages, if the tenant can’t or won’t.
These individuals must be UK residents and a legal agreement must be drawn up with the guarantor. They must pass their own credit checks to ensure they would be able to pay the rent on top of any of their own costs.
Some agencies require guarantors to not only be UK homeowners, but command earnings of at least £84,000 a year.
“Ultimately, tenants struggling to afford a home should be able to rely on a benefits system that provides proper support where needed,” the NRLA spokesperson added.
“The government should therefore reverse its decision to freeze housing benefit rates in cash terms.”
Meanwhile, Homelessness charity Shelter and Citizens Advice provide further information and support on renting, guarantors and credit scores.
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