Avoiding Common Fraudulent Schemes in the Rental Market

How to Avoid Common Fraudulent Schemes in the Rental Market and How a Real Estate Agent can Help

The process of leasing your home or finding a home to lease can be tedious, but did you know that it can also be dangerous? According to the Better Business Bureau’s Canadian Risk Report of 2022, Rental scams placed number seven on the riskiest scams reported in Canada, with a median loss of $1,600. Landlords are also at risk, with potential tenants providing fraudulent documents. 

What are Rental Scams? 

Rental Scams are false listings on sites like Kijiji and Facebook Marketplace. These listings look incredibly real because scammers have taken real listings that could have been posted by a Real Estate Agent and posted them on these sites that aren’t governed by the Canadian Real Estate Association. These ‘landlords’ are successful at obtaining money from people because they’ll ask for deposits up front before an initial viewing of the property and once they’re successful, they will disappear. Rental Scams can also lead to Identity Theft. Throughout any leasing process tenants need to provide very confidential information like credit checks, bank information, photos of ID and potentially their Social Insurance Number.  When dealing with a scam ‘landlord’ this information can be stolen and can lead to unauthorized bank withdrawals, false applications for loans and more. 

These scams are easy traps to fall into when you’re trying to lease a property without the help of a Real estate agent. Real estate agents have access to your local MLS® database, that is only accessible to be posted on by other REALTOR®s. This means that all the information advertised is accurate and valid. While using a REALTOR® you can rest assured that all your private information will be safeguarded and only shared with appropriate parties with your express written consent. 

Tenants are not the only ones who can fall victim to scams in the Leasing Real Estate Market. Landlords are put at risk by potential tenants providing false documents. Some tenants provide misleading or false information during the application process, such as fake references, inflated income documents, or even fake credit reports. 

How to spot Fraudulent Documents?

When receiving false or inaccurate reference and employment letters, they can and might be just as real as accurate reference or employment letters. Before calling the said employer, ask your potential tenant detailed questions about where they work, how long they’ve worked there and what their monthly salary or payout structure looks like. Keep note of their answers. Afterwards, call the employer that is listed and ask the same detailed questions. If the answers line up and there are no discrepancies, then that should verify the accuracy of the employer.  As for verifying a potential previous Landlord Reference Letter, this can be a little bit more tricky for someone who doesn’t have access to a property information database. The same tactics can be used to verify if said landlord actually did rent to this potential tenant by lining up detailed questions and answers. 

As a landlord you might have quite a few properties to lease or possibly just one. Either way, you don’t want to have to go to court to evict someone that turned out to be a scammer. With the updated Residential Tenancies Act of Ontario, the act specifies the legal grounds for eviction. Another potential scam is tenants who exploit the landlord-tenant laws and eviction process to try to live rent-free.  Individuals may file frivolous complaints about you to the Board and refuse to pay rent. Then they may prolong the eviction proceedings, causing loss of investment property income and added legal fees. 

As a REALTOR® we deal with clients, landlords, tenants and other agents daily. We’ve become accustomed to recognizing deceiving practices used by fraudsters. We also have the tools, databases and time to avoid getting into business with those alike. Real estate agents typically have access to Geowarehouse® which is a centralized database that shows deeds, previous sales and many other property information documents. When dealing with previous Landlord Reference Letters it’s a lot easier to see who actually leased the property to the potential tenant and to get the real information on them. When showing tenants leases we also make sure that they’re qualified to lease and that their credit is legitimate. Most brokerages offer services where potential tenants can get a background check along with their credit check. This helps all parties involved. 

Tips for Avoiding Scams in the Rental Market:

• Only work with licensed real estate agents. 
• Seek professional legal counsel from a lawyer experienced in real estate matters.
• Protect your personal information like financial details.

In conclusion, whether you’re a tenant or a landlord, these scams can easily happen when you’re trying to go about the leasing process alone. These scams can be easily deferred when using a real estate agent. If you are a landlord trying to seek the best Return on Investment or you want to protect your investment properties the smartest thing for you to do is use a Real estate agent.  Additionally if you’re a tenant seeking a suitable home to rent, a real estate agent can help put together a rental application that looks seamless and can help negotiate the terms for you to get the most fair price according to the current market. Overall, we want to make sure that both parties are satisfied with the transaction and want it to be as time efficient as possible because we know that the rental market can move quickly.