Safeguarding your portfolio from property-related frauds
Property-related fraud risks are an ever-present threat to landlords. The threats range from simple misuses of your property by tenants, that can contravene your mortgage, insurance or tenancy terms, through to rare but severe cases where fraudsters use increasingly sophisticated tactics to exploit vulnerabilities in property records and personal information to perpetrate property theft.
Rental properties are particularly vulnerable, since your ability to maintain physical oversight of how your let addresses are used, is limited. This article highlights the three major threats to be aware of, to help you plan how you to safeguard your portfolio.
Threat 1: companies being registered at your rental addresses
This is one of the most common threats property owners face today. It is, unfortunately, a relatively simple process to fraudulently set up a company at Companies House using any address or name. Landlords face two risks.
One, a tenant registers a company at your rental address. Even if the company is a legitimate enterprise of the tenant, you are still exposed to potential financial risk, as your address becomes linked to a company and its activities. Plus, the company activity at the address can contravene your mortgage terms or insurance policies.
Two, your address is used fraudulently to set up a bogus company. This crime has been making headlines recently, revealing both the ease with which it can be carried out and also how rife the issue is. Fraudulent companies can be set up for various reasons: it may be part of broader frauds to create a means by which to receive stolen money or to use the fraudulent company to take out loans, with no intention of repayment. If your address is associated with a fraudulent company, there are potential financial threats, including credit score issues for you or your tenants. The time, effort and finance required to reverse these issues can be significant.
Efficiently staying on top of this threat is challenging: manually checking your properties and identity on the Companies House website is possible, but is time-consuming to do continually. Considering an on-going, automated monitoring solution can remove the hassle and proactively alert you to attempts to misuse your identity or addresses. It’s also important to remind tenants of the terms of the tenancy agreement relating to commercial activities in your rental property.
The BBC’s Watchdog programme recently highlighted that 18 houses in one street in South Wales had 48 bogus companies registered at them. Similar cases have been found in Worksop, Nottinghamshire and Leigh-on-Sea, Essex. The BBC has also reported that 750 bogus companies have been set up in an attempt to scam high-profile entrepreneurs, with 39 bogus firms being fraudulently registered to one victim. The issue is rife and landlords need to be aware.
Thereat 2: tenants sub-letting your property without permission
Today’s high-demand rental market is dynamic and fast-moving, in part thanks to a multitude of online platforms enabling a rental property - or just a room within a property - to be advertised and sub-let quickly, often without the landlord’s permission or knowledge.
The opportunity of sub-letting to make some extra cash, or to cover the cost of rent while away from the property, is naturally appealing for some tenants. For the landlord, however, there are significant risks. For example, if a property is damaged by an unauthorised sub-letter, insurance policies can become invalid, and the financial burden of repair will not be covered.
Losing control of who is occupying your property is fraught with risk, and yet it can occur relatively easily. Making your position on sub-letting clear to tenants is vital, as is making sure that’s reflected in your tenancy agreement terms. Manually and regularly searching lettings sites and listings can provide some visibility, though with an ever-growing suite of online sources for lettings to be advertised, it would be easy to miss an attempt to sub-let your property.
48% of sub-lets by tenants are not reported to the landlord, according to Direct Line business research.
Threat 3: your property being stolen through title fraud
Finally, a rare and extreme threat is title fraud, a digital crime that can result in property being stolen. A rouge tenant, or even a fraudster with no connection to your property, can easily access your name, address and mortgage status via HM Land Registry for a nominal fee, and use these to target your property by cloning identity documents to illegitimately transfer property ownership. Once in control, they can sell the property, take out loans, or leverage it for their own financial gain - all without the legitimate owner's knowledge until after the crime has been committed.
This sophisticated fraud, involving identity theft, takes planning and is often executed across several months, setting up the conditions to steal and then sell a property. While rare, landlords remain at a higher risk, as their details are shared with tenants through the rental process and they are not present at the property – meaning correspondence relating to a fraud won’t always be picked up.
Combating this evolving threat is a challenge. Be vigilant with how you use your identity, take sensible measures to protect yourself – limit the abilities for your identity documents to be copied. Ensure your contact details with government agencies are always up to date, so you can be contacted if needed.
HM Land Registry provides some free basic safety nets and safeguards. Their property alert email service, which is restricted to only cover up to 10 properties, will let you know if they receive an application to change the title deeds of a property – a useful mechanism to alert you to wrong doing. However, by the time such an alert is sent, a title fraud is in its final stages – completion of the sale of your property may have already happened, so you will still be faced with the fallout of property theft.
There is also a service available to put a restriction on your property’s title as a safeguard against frauds. It is important to remember that extreme cases like title fraud are high-risk, sophisticated crimes. So fraudsters are aware of these mechanisms and, just as they use evolving methods to clone and copy identities, they are doing likewise to circumnavigate these basic safeguards. With the title restriction, a fraudster can copy the requisite conveyancer’s certificate, including the pre-defined wording that is published on the HM Land Registry website.
BBC Radio revealed there were 41 case of property theft in 2022.
So be aware of the limits of the free protections available – they provide some assurances, but are not proactive or fool proof against the evolving threats landlords face today.
The common thread in these three threats landlords face is that you may only become aware of the fraudulent activity once the fraud has taken place, leaving you to deal with the aftermath, whether that’s bogus companies headquartered at one of your properties, unauthorised tenants sub-letting your rooms, or even discovering your title deeds have been changed and property stolen. You need to be vigilant and, where possible, use proactive solutions to protect your portfolio and identity.
You can learn more about how Title Guardian is partnering with the NRLA to offer a new, first-of-its-kind smart technology solution to help members combat threats such as these, here.
