Property fraud is big business with tens of millions of pounds a year lost to scams targeting both landlords and tenants. To mark International Fraud Awareness Week, we look at some of the most common and how you can protect yourself.
From criminals taking out mortgages on empty properties to students being stung for thousands in deposit scams, around 250 property frauds a month are reported to the UK’s national fraud and cyber-crime reporting centre ActionFraud.
And this could just be the tip of the iceberg.
The Metropolitan Police alone received 1,029 reports of rental fraud, to the value of nearly £2.5 million between April 2015 and March 2016, with the Land Registry and Trading Standards also investigating frauds totalling millions.
The trend shows no signs of abating, so how do you protect yourself and what should set alarm bells ringing?
Fraud targeting landlords
Landlords are particularly at risk of property fraud, according to experts at the Land Registry, whose intervention has stopped fraud on 204 applications concerning properties worth more than £92 million since 2009.
The Government department’s Property Alert system was set up to tackle a scam in which fraudsters try to “steal” a property – most commonly by stealing the homeowner’s identity and selling or mortgaging the property without their knowledge. They then disappear with the money leaving the true owner to deal with the consequences.
Buy-to-let landlords, owners of mortgage free properties and those who live abroad are most vulnerable to this kind of crime, with fraudsters frequently changing their name by deed poll to steal the owner’s identity.
Landlord Penny Hastings was one of those to fall victims to such fraudsters.
She called Land Registry’s property fraud line after becoming suspicious that someone had fraudulently sold a property in London which she owned and rented out.
It turned out the tenant was part of a fraud ring and once he’d rented Penny’s house using a false identity, he and an accomplice put the house on the market.
The accomplice was a lady who had changed her name to Penelope Hastings by deed poll and then secured a passport in that name.
Fortunately the Land Registry – suspecting a fraud – did not register the sale. This meant that the real Penny Hastings still maintained the legal ownership of the property. Unfortunately, an unwitting buyer had already paid £1.35 million for it.
The Property Alert scheme was set up by the Land Registry to prevent such frauds. Homeowners, including landlords can register their details and get an email alert when there is activity on the property being monitored, such as a mortgage being taken out against it or a change of ownership details.
The recipient can then decide whether they think the activity is suspicious and act quickly if so. The alert email tells them who to contact should they be concerned.
Alasdair Lewis, Director of Legal Services at Land Registry said: “The high value of property makes it an attractive target for fraudsters.
“We know that fraudsters target homes that are rented out so it is particularly important for landlords to be vigilant and follow our advice to minimise the risk of becoming a victim of property fraud.
“Fraudsters will usually steal the homeowner’s identity and try and sell or mortgage the property, leaving the real owner to deal with the consequences.
“While Land Registry is doing all it can to detect and prevent registration fraud, no system can be 100 per cent fraud-proof, which is why we encourage all landlords to sign up to our free Property Alert service.
“You can monitor up to ten properties and you will receive email alerts about certain applications such as for a new mortgage or change of ownership.
“If you spot anything you think is suspicious you should take immediate action such as by calling our property fraud line. It is also important that we have up to date contact details for any landlords not living in their property so we can reach them if necessary – you can have up to three addresses in the register including an email address.”
So far 62,000 people have signed up to the service.
Owners who feel their property might be at risk can have a restriction entered on their property. A restriction is intended to stop activity such as a transfer or a mortgage, unless a conveyancer or solicitor confirms the application was made by the rightful owner. There is no fee for home owners to register this restriction so long as they do not live in the property they wish to protect.
Other property scams
Someone selling your home is an extreme example – but there are range of other frauds in which fraudsters are specifically targeting landlords.
In one such scam someone posing as a tenant will answer an ad for an property online and ask to pay by Western Union – or a similar service.
They then ‘accidentally’ pay too much, apologise and ask for the money to be returned. The original payment will bounce and the fake tenant will receive the ‘repayment’.
Another is the fake payment invoices scam.
The National Fraud Intelligence Bureau has received of a high number of reports about emails containing a piece of malware and either claiming to be an invoice or containing details of transactions.
The bureau, which is responsible for gathering and analysing intelligence relating to fraud and financially-motivated cybercrime, said the specific wording of the email is new and convincing. It contains details of a fake order which appears to have been sent by a legitimate company (the email address of these companies is “spoofed”).
The payment method is described as a credit card payment, with details of a fake transaction number.
The email will state that the recipient ‘can find more detailed information on the purchase in the attached file’.
Many fall victim by opening the attachment because they cannot remember placing an order and wish to find out more. However, opening this attachment may infect your computer with malware.
The telephone numbers provided at the bottom of the email are not genuine and are often connected to people that have no knowledge of the email or that their number is being used.
An example of a fake email
Thank you for using our services!
Your order #1190618185 will be shipped on 30.08.2014.
Date: August 27, 2014. 03:36pm
Payment method: Credit card
Transaction number: 43000F36A771
Please find the detailed information on your purchase in the attached file (order_2014-08-27_14-56-37_1190618185.zip)
Sales Department ******
Police have now issued advice to landlords who receive a suspect email:
- Do not click on any attachments or links within emails unless you are sure that you know who has sent them.
- If you have not recently made an order with the company specified in the email do not open the attachment.
- Check the legitimacy of the email with the company that have supposedly sent it – it is a good idea to find a telephone number for them independently from the email as the phone number provided may be fake or go straight to the suspect.
- Ensure you have up-to-date anti-virus software and perform regular scans.
- If you have opened the attachment be extra vigilant when logging on to online banking and consider having your machine checked by an expert.
- If you think you have been a victim of this type of email you should report it to Action Fraud, the UK’s national fraud and cybercrime reporting centre.
Of course, landlords and property owners are not the only victims of fraud.
Criminal agents are another concern – often scamming both landlords and tenants simultaneously.
Although each case is different, criminal agents typically set up a seemingly legitimate business, but after setting up tenancies steal rent due to landlords and deposits paid by tenants.
Usually they close the business and flee before trading standards or the policecan catch up with them.
In Wales agents must be registered to the Rent Smart Wales scheme, which came into force last year and agents with Client Money Protection schemes in place guarantee that the money is safe from fraud.
By 1st April 2019, all property agents will be required to be part of an approved Client Money Protection Scheme.
It is estimated that letting agents currently hold approximately £2.7 billion in client funds and yet, if a letting agent is not covered by CMP, both the landlord and tenant could stand to lose their money if they either go into administration or take off with the cash.
In another move in the fight against criminal agents, the government has introduced powers allowing local authorities to slap criminal agents with banning orders.
Fraud targeting tenants
As the letting agent scenario demonstrates tenants as well as landlords are frequently targeted by scammers. Indeed, one of the most common property scams targets tenants.
This scam sees fraudsters advertise a property online, demand a huge deposit then disappear. It is only when the tenant turns up that they discover the property was either never for rent in the first place – or has been rented out to multiple people.
And while the victims in this case are tenants the fraud can have a huge impact on landlords as well, with the criminals frequently using the name of the property’s genuine landlords – impacting on their professional reputation.
Action Fraud is the national fraud and cybercrime reporting centre. Steve Proffitt, deputy head of the organisation, said this kind of scam is all too common.
He said: “We see a tremendous amount of activity when students start looking for properties ahead of a new academic year.
“Generally they are either conned into renting student accommodation that simply doesn’t exist or, as is more usual, duped into multi- renting the same property.
“The fact that students can be based some distance from the city or town in which they will be studying plays into the hands of these criminals as everything is online.
“Sometimes a property shown will simply be someone’s house that has never been available for rent.
“On other occasions fraudsters will hold ‘viewings’ of a property that they know is empty and talk students into handing over a hefty deposit, sometimes as much as four to five months’ rent usually in cash.
“Sometimes they can take money from six or seven students all desperate for the rental, then all turn up at the start of term and the ‘landlord’ and their deposits – as much as £5,000 in London – are nowhere to be seen.”
Cash for viewings
Other, similar scams have seen fraudsters posing as landlords place ads asking for cash in exchange for viewings – something a genuine landlord would never do.
Criminals are picking up ‘deposits’ of £1,500 – and were nowhere to be found when the would-be tenant turned up to be shown around.
Often they tell prospective tenants they are coming from abroad, and give them a hard luck story about being stood up when they have flown over to host viewings before.
They can even give fake web addresses for bone fide deposit protection schemes, to reassure these prospective tenants their ‘viewing deposit’ money will be safe and can be very convincing.
Sites such as Gumtree – commonly used by fraudsters in such scams – have said they are working in conjunction with the police and Action Fraud to tackle the issue.
Advice for landlords
Proffitt said the best advice he can give to landlords and letting agents to avoid becoming the victim of property fraud is to know their tenants.
- always go on a viewing with a client and never release the keys – particularly regarding a void property and never allow anyone to ‘stay on’ after you leave. It is not unknown for fraudster take an imprint of the key and get it made up later, so it is important to stay vigilant.
- Make sure you are there and you can verify the details of the people moving into your property. Know your tenant. Don’t just rely on an agent. You need to do your own due diligence.
- Make sure you sign up for the Land Registry Property Alert scheme. Those without mortgages are particularly at risk, as anybody can come along and impersonate you and sell your home. It isn’t that difficult to obtain utility bill. There was a case recently when someone managed to take out a £1.2m bridging loan on a property they didn’t own. They were found out and convicted, but this shows it can happen.
In terms of tenants Proffitt said a number of issues should raise red flags.
He said: “I would say to those looking to rent a property that they should only pay what is reasonable when it comes to a deposit.
“Alarm bells should be ringing if upfront fee is more than you would expect to pay and high pressure tactics are used to encourage you to give them the money.
“Do some searches before you go ‘round and make sure it ties in with what you were expecting and wherever possible make sure every dealing is bank account to bank account rather than cash or bank transfer.
“In fact if someone purporting to be a landlord doesn’t ask you about setting up a direct debit it should also act as a red flag.
“Similarly it would be usual – particularly regarding student lets – for them to ask for someone to act as a guarantor to underwrite the contract.
“If there is any way to pay be credit card do it, as there is an added layer of protection.”
He said it is all too easy for documents to be forged in the digital age and that the lack of face-to-face contact in the modern world makes like easier for fraudsters trying to take advantage of landlords.
He said: “It is easy for criminals to forge document using software like Photoshop and there are also fraudulently obtained genuine documents to consider.
“Because everything is online these days and very little is face-to-face it is very easy for criminals to order genuine documents in someone else’s name.
“In terms of the criminals behind these kinds of scams, there is likely to be organised crime at work in situations where fraudsters are trying to take ownership of a home – there has to be some level of organisation.
“But in terms of the rentals it is very opportunistic. The issue that we have when it comes to tracking fraudsters down is that it all happens very quickly. The fraudsters hold the viewings, take the deposits and disappear.
“As often the fraud is only discovered months down the line – for example when students are due to move in – it makes things very difficult.”
I think I may be the victim of property fraud – what do I do?
If you believe you may have been the victim of property fraud there are a number of helplines you can call.
- Land Registry’s property fraud line can be contacted on 0300 006 7030 or by email at email@example.com.
- National fraud and cybercrime reporting centre Action Fraud can be contacted on 0300 1232040.
- The Citizens Advice consumer helpline can also act on reports of scams or frauds and can be contacted on 03454 040506.
An earlier version of this article was first published in RLA members’ magazine Residential Property Investor.