Why fraud becomes a major problem in rentals during a UK recession

What exactly does fraud in the rental market look like?

Well, some prospective tenants doctor and falsify referencing documents (such as bank statements, residency documents and prior references) in order to secure rental properties on false pretences.

We’re not just talking about amending a PDF. Advanced fraudsters are using software and tools to cloak their real financial and residential history.

Whether it’s our unique font detection technology or our in-depth background checks that catches them, we've built up an extensive database of the tricks fraudsters use to deceive estate agents and landlords up and down the UK.

Why does fraud become more prevalent during a recession?

Simply put, people tend to be more financially vulnerable during a recession. With rising inflation, astronomical energy & gas prices and the price of food and rent increasing, people around the UK are tightening their belts.

There is more reason for people to falsify their financial history to secure rental properties… especially in a market where demand for property outstrips supply.

Why is this so detrimental to landlords, estate agents and build-to-rent companies?

Because the stakes are so high. On average a bad tenant will cost a landlord approximately £33,000 in defaults, legal and eviction costs.

If applicants feign their financial and residential history then that leaves landlords across the UK more vulnerable to experiencing these real financial costs far more prolifically than if the UK was in a period of economic growth.

Companies tend to lay off staff, incomes are more likely to be frozen, interest rates increase all whilst the cost of living and rent go up.

Fraud prevention could save or bankrupt smaller letting agencies

In periods of economic downturn, smaller firms tend to feel a squeeze on the ability to grow, invest or even operate at total capacity.

Did you know that we’ve recently detected fraud to the tune of £160,000 for one of our BTR (Build-to-rent) clients? We prevented a US-based criminal from illegally renting a luxury apartment from them in East London.

Whilst bigger rental agencies can somewhat offset the financial consequences of these undiscovered cases, smaller agencies may not be able to take the economic hit and survive. If landlords incur such exorbitant expenses because their agency failed to identify bad tenants then they're likely to take their business elsewhere.

Larger letting agencies can be hit badly too. In the last three months alone we detected £1.35m worth of fraud for just one of our clients.

Illegal subletting and the cloaking of financial viability are damaging in the best of times. They are totally disastrous in the worst of times.

How can letting agents and landlords be better at detecting fraud in the wake of a UK Recession?

One of the main reasons fraudulent tenants are able to lock in long leases under false pretences is down to either a lack of willingness to conduct a thorough referencing check or the lack of capability to do so.

Homeppl has conducted a recent survey interviewing 100 owners & co-owners of estate agencies. 52% of them revealed that they had to deal with tenants who submitted fake salary information during the tenant referencing process in the last two years.