Landlords: 4 Rental Scams to Avoid
Read this before taking on your next tenant
I live in the toughest rental market in the country right now — San Francisco. You might think that means that landlords are in the driver’s seat out here. But in fact, some landlords here have had such bad experiences with tenants that they are choosing not to rent out their apartments.
While most landlords won’t have the experience of renters taking a sledgehammer to their back door when they get locked out, it’s clear that landlords need to protect themselves.
Watch out for these four scams in particular.
Related: Have A Mortgage? Avoid These Scams
The deadbeat tenant scam
Don’t confuse this one with renters who are having a hard time paying rent due to a sudden job loss or illness. The deadbeat tenant scam occurs when tenants move into a place with no intention of paying rent, forcing the landlord to evict them. The entire process can take three months or more until the tenants are forced to move, giving them plenty of time to line up their next victim.
Some scammers have bragged about their cons. Incredulous landlords have posted about this scam on Craigslist and other rental services, sometimes posting the offenders’ names or warning other landlords about their posts.
How to prevent it: Before renting to anyone, do a thorough background check, including a credit and criminal history search. You may need the tenants’ permission to do a credit check. If he or she balks, that’s a red flag.
“Most landlords can protect themselves by doing their homework. It is surprising how many people don’t do this carefully,” says Charley Goss, head of government affairs for the San Francisco Apartment Association.
“I always tell landlords to do their own background and credit check,” Goss says. “In this competitive market, many prospective tenants will bring their own reference checks, but printed out references or credit histories are easy to forge. The other advantage of doing a background check yourself is you need to get their social security number and driver’s license number, so fraud is less likely.” Goss advises landlords to make a copy of the tenants’ drivers’ licenses, too.
After the background check, call the prospective tenant’s current employer and at least two recent landlords. Also, be sure to meet the tenants before you agree to rent to them. “People should rely on their gut,” says Goss.“I believe when you meet someone face to face you get a pretty true impression of them.”
One common sub-scam is to use a friend to pose as the employer or landlord. To protect against this ploy, verify the person works at the company — and call back the employer with another question to make sure you’re talking to the right person. Also check addresses online to make sure the “landlord” listed actually owns the property.
Related: 10 Ways to Avoid Scams in 2015
The tenant utilities scam
In this scam, landlords agree to a lower rent in exchange for the tenants paying the water bill. Even though this may be part of the rental contract, some tenants neglect to pay that bill.
Local laws often hold landlords ultimately responsible for water payment. Cities will generally not shut off the water if a tenant doesn’t pay, but as landlord, you may get stuck with the bill when you finally find out about it. (Also, if the tenants owe on other utilities at your house, you’ll have to pay for those when you sell it.)
“This happened to me in Sacramento, California, when a tenant of mine died and her husband moved out,” says one landlord who asked to remain anonymous. “They had agreed to pay the water bill, but I found that they had never paid it. I had been charged supplemental property taxes for the water without realizing it, and between that and the current fees, it set me back at least $5,000. I felt like such a fool.”
How to prevent it: Call the utility companies from time to time to make sure tenants’ bills are current, and be aware of your responsibilities under local rental laws.
Another smart step: Make sure your lease reflects these constantly changing laws. Charley Goss says that in highly regulated rental markets, “A three page boilerplate lease from the Internet just won’t cut it. And if it is two years old, it is probably out of date.”
Have your lease agreement reviewed by local lawyers to ensure it keeps up with changing tenant’s rights. In San Francisco, for example, the city has added new regulations in the past year about bedbugs, mold, rent control and Airbnb. “In general,” says Goss, “the more regulations you have written into a contract, the more recourse you have.”
The extortion scam
This scam sometimes crops up in neighborhoods plagued by foreclosures or vacant houses. In this scam, people break into a vacant house, claim to have a rental contract and then tell the landlord they won’t move out until he or she pays them to.
“This happened next door to my property in the Central Valley [in California],” said another landlord who wished to be anonymous. “The house was vacant and a group of adults with a pit bull broke into it through the back door. When the landlord called the police, they waved a handwritten piece of paper that said ‘rental agreement’ at them and the police backed off. When the landlord finally arrived — he lived out of town — they told him they wanted $1,500 to move out. He called the police and even showed them his title to the house, but they still didn’t do anything, claiming it sounded like a rental dispute.”
How to stop it: Call your code enforcement agency, which you can find online on your city’s website. Typically an extortion gang will need power to stay comfortable while they wait to see whether they’ll succeed. In the Central Valley case, the gang ran an extension cord to the neighboring landlord’s home to tap electricity. A call to code enforcement was all it took for city officials to arrive and clear them out.
The international "I accidentally overpaid" scam
This fraud, also known as the Nigerian 419 scam, usually involves a prospective renter from overseas who sends you a certified check for the rent. The fraudster typically sends twice as much “by accident,” and politely asks for the landlord to wire him back the excess money. The certified check turns out to be fraudulent and the landlord winds up out all the rent money, plus the additional hundreds or thousands of dollars he wired back to the “tenant.”
How to prevent it: Don’t accept a prospective renter in another country until you have done a thorough background check,and never accept a certified check from overseas (only cash through a service like Western Union). The check may appear to clear the bank, only to bounce weeks later. If a prospective renter “overpays,” refuse to accept the check. Any money you send back will likely be lost forever.