According to new data from tenant due diligence and guarantee firm – Homeppl – the Build to Rent sector is being targeted by fraudsters, with a 364% rise in tenant fraudulent applications in the past six months. 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.
“We have seen a sharp rise in fraudulent tenant applications within the Build to Rent sector over the past six months.
“In the last three 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%.”Alexander Siedes, CEO and Founder, Homeppl
The Build to Rent sector has been growing exponentially in recent years. While utilities are bundled into the monthly rent, and some schemes offer no deposits, Homeppl report that these features present opportunities for potential fraudsters.
With no deposits, potential fraudsters can avoid any upfront costs – the inability to pay a deposit would usually be a red flag. They also 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.
Landlords can then be left vulnerable legally and financially, with losses potentially running into the tens of thousands due to unpaid rent and utilities, damage to the property and legal costs.
Alexander 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.
“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.”Alexander Siedes, CEO and Founder, Homeppl