Build to Rent Top Target for Tenant Fraud With 364% Rise in Fraudulent Applications in Past Six Months, Saving Landlords Almost £1.6m
- 25.10.2021 12:40 pm
The Build to Rent sector is being targeted by fraudsters with a 364% rise in fraudulent tenant applications in the past six months, according to data from tenant due diligence and guarantee firm Homeppl. To correlate with this upward trend, the detection of fraud in this space has seen a significant increase in value, meaning landlords are ultimately saving £1.59m from not accepting fraudulent applications.
Build to rent - where homes are built specifically for rental purposes rather than for sale and are owned and managed by a professional firm - has been growing exponentially in recent years.
The properties are high quality and include onsite extras, utilities are bundled into the monthly price, there is often no deposit and renters have the right to leave with short notice periods, making them a hugely attractive option for renters.
However, their appeal is also their downfall. The fact that utilities are included, and no deposit is due means that potential fraudsters not only avoid upfront costs - inability to pay a deposit would usually be a red flag - but also, they only need to pass one identity check before being approved by the letting agency, making it easier for them to get away with a fraudulent application.
The landlord is then left vulnerable legally and financially, with losses potentially running into the tens of thousands thanks to unpaid rent and utilities, damage to the property and legal costs.
Alexander Siedes, CEO and Founder of Homeppl said:
“We have seen a sharp rise in fraudulent tenant applications within the build to rent sector over the past six months.”
“In the last 3 months one of Homeppl’s clients found 3.5% cases of fraud in the build to rent sector, which highlights the vulnerability of the sector and the property agents who act as landlords.”
“And while agents using our tenant referencing systems can be safe in the knowledge that fraudsters will not be able to fool our unique fraud detection tests - which use behavioural analysis, financial algorithms, and Open Banking data to validate the person’s identity and financial abilities - most checks are unable to reliably detect fraud or authentic data. Our clients have 0% defaults - the industry average is 8%.”
Siedes says that as the build to rent sector continues to grow, the problem of rental fraud will only increase.
“The build to rent sector was initially driven by demand in London - and that is still where most incidences of tenant fraud take place as the properties tend to be high end and therefore a target for illegal subletting - but the trend has now spread across the UK. This brings the total size of the sector to 205,500 homes completed or in development.* And as the sector grows, so will the fraud.”
Siedes concludes: “The companies looking after these developments need to ensure they have procedures in place to identify these issues and stop them before the losses become unmanageable as this will have a detrimental impact on the market at a time where demand for rental properties has never been higher.”