As the summer rental season ramps up, be aware that scams can affect both tenants and landlords. As a property owner looking to rent out your space, you might encounter various fraudulent schemes when advertising your property online. Understanding these scams and recognizing the red flags can save you stress and even financial loss.
Three of the most common scams that landlords face in the District of Columbia include the following:
- Fake Payment Scams
Tenants provide fraudulent checks or money orders for rent or security deposits. These payments appear legitimate initially, but eventually bounce or are identified as fake.
Why it works: Scammers take advantage of the delay between the initial deposit and the time it takes for banks to identify fraudulent checks, allowing them to secure access to the property. Once they do, they have possession and in the District of Columbia, that means a court case to remove them.
Prevention Steps:
-
- Verify Funds: Wait for the check or money order to fully clear before handing over keys or signing the lease. This can take several days.
- Use Electronic Payments: Encourage tenants to use electronic payment methods like bank transfers or verified payment apps, which can be more secure and quicker to verify.
- Bank Verification: Contact the issuing bank to verify the authenticity of the payment instrument.
-
- Identity Theft Scams
Prospective tenants use stolen or fake identities to pass background and credit checks. Once they secure the lease, they may engage in illegal activities or fail to pay rent.
Why it works: Scammers exploit the reliance on documentation and credit reports which, if fake, can be difficult to verify without thorough checks.
Prevention Steps:
-
- Thorough Screening: Conduct comprehensive background checks, including employment and previous rental history.
As a self-managing landlord, this can be both time-consuming and complicated. There are several easy ways to get caught in unlawful methods of screening based on the Districts strict tenant laws. When in doubt to get it legally right, seek out professional help, so you do not inadvertently end up violating regulations in place to protect renters.
-
- In-Person Meetings: Meet prospective tenants in person and request multiple forms of identification to verify their identity. Again, it’s critical to do this within the boundaries of the law. Make sure if you do it for one, do the same process, have the same questions and take the same actions for all interested parties.
- Cross-Check Information: Contact employers and previous landlords directly using publicly available contact information to confirm details provided by the tenant. Make sure you are indeed speaking to their prior or current landlord by preparing very specific questions about their lease agreement or other items a fake reference will not know or will stumble to answer.
- Subletting Scams
Tenants illegally sublet the property to others, often at a higher rate, without the landlord’s knowledge or permission. This can lead to over-occupancy and property damage. You may also not know who is living in your unit or if they would have qualified if you had screened them. Lastly, if they have possession of your property, getting them out involves a court case.
Why it works: Scammers take advantage of landlords who do not monitor their properties closely, allowing them to profit from unauthorized subletting.
Prevention Steps:
-
- Find management: Ensure that preventative steps are taken, to ensure renter compliance with any sub-letting rules you’ve laid down in the original agreement.
- Regular Inspections: Conduct regular property inspections to ensure that only authorized tenants are residing in the property. Inspections in the District are tricky, a landlord cannot just enter at will or too frequently. Be sure you know the rules, or ask a professional for advice before you enter your renter-occupied property.
- Lease Clauses: Include clear clauses in the lease agreement that prohibit subletting without written permission from the landlord. Is your agreement rock solid? Or do you need professionals on your side who know what to do to ensure both you and your renters are protected fairly?
- Neighborhood Watch: Establish good communication with neighbors who can alert you to any suspicious activity or unauthorized occupants. If you used to live at that location your former neighbors and friends are the best way to keep eyes and ears out on what is going on in your property and to alert you to any unusual behaviors.
By taking these preventive measures, landlords can better protect themselves from common scams and ensure a more secure rental process.
Anatomy of a Common Rental Scam
Another prevalent scam starts when you post an advertisement for your rental property. Scammers may copy your listing, post it at a lower price, and pretend they are the landlords. Unsuspecting tenants may pay a deposit to them or even the first month’s rent to these fraudsters, believing they are securing their new home. Here’s how the scam typically unfolds:
Step 1: Scammers take the details and photos from your legitimate listing and create a fake one, often with lower rent to attract more potential tenants.
Step 2: They claim to be out of town and unable to show the property, urging potential tenants to drive by and view the property from the outside.
Step 3: They ask for a security deposit or the first month’s rent via online payment methods before the tenant has signed a lease or even seen the inside of the property.
How to Protect Yourself
Here are some steps you can take to protect yourself from these scams:
Secure Your Listing: Use reputable rental platforms and websites known for their security measures to advertise your property.
Watermark Your Photos: Adding a watermark to the images in your rental listings can prevent scammers from easily stealing your photos.
Educate Potential Tenants: Inform applicants about common scams and encourage them to be cautious of listings that seem too good to be true, ask for money up front, etc.
Meet or Video Call Potential Tenants: If possible, meet tenants in person or through a video call to verify their identity and discuss the rental terms. Requiring a matching photo ID during the application process is an added layer to ensure this is the same person.
Verify Tenant Information: Conduct a comprehensive background check, including credit, employment, rental history, and criminal records.
Red Flags for Landlords
To protect yourself and potential tenants from a scam like this, be aware of the following red flags during the tenant screening process:
-
- Paying All Cash Upfront: If a prospective tenant offers to pay the rent for the entire lease period in cash without a proper background check, be cautious. This can be a sign that they want to avoid detection due to illegal activities or poor credit history.
- Urgency to Move In: A tenant who is pushing to move in immediately, especially without seeing the property, should raise a red flag. They might be trying to rush the process before you notice any inconsistencies in their story or background.
- Lack of Interest in Viewing the Property: Be wary of tenants who do not ask to see the property or who are satisfied with just external views. Genuine tenants will usually want to inspect where they are going to live.
- Poor or Incomplete Documentation: If a tenant cannot provide proper identification, proof of income, or previous rental history, this is a significant warning sign. Scammers often avoid giving out personal information that can be traced back to them.
- Unusual Payment Methods: Be cautious if a tenant wants to use unconventional payment methods like wire transfers or cryptocurrency. Standard practices include checks, bank transfers, or credit card payments, which offer more security and traceability.
Organizations That Can Help
If you find yourself a victim of a rental scam, there are organizations that can offer assistance and guidance:
Federal Trade Commission (FTC): They handle complaints about deceptive and unfair business practices, including rental scams. You can file a complaint at ftc.gov.
Better Business Bureau (BBB): The BBB provides information on businesses, including complaints and scam alerts. Visit their website at bbb.org for more resources.
Internet Crime Complaint Center (IC3): This is a partnership between the FBI and the National White Collar Crime Center, and it allows victims to report internet-related criminal complaints. Visit their site at ic3.gov.
Local Law Enforcement: Contact your local police department to report the scam, especially if money has been exchanged.
By staying vigilant and informed, you can protect yourself and potential tenants from falling prey to these sophisticated scams. Remember, prevention is always better than cure, especially in the real estate market.
*Note: For examples of the three scams included, we have produced some of the content of this article using AI.
Scott Bloom, Owner and Senior Property Manager, Columbia Property Management
Bloom founded Columbia Property Management in 2012. CPM’s goal is to provide a powerful, personal level of service to our clients. We focus on smaller landlords, professionally managing their assets, so they can succeed by investing in rental real estate.
Scott is an active member in multiple professional organizations including the National Association of Residential Property Managers (NARPM) and serves on the property management committee of Greater Capital Area Association of REALTORS® (GCAAR).
For more information and resources, go to www.ColumbiaPM.com
