9 Common Tenant Scams And How To Prevent Them

Tenant scams are one of the major problems faced by property owners in the Oklahoma real estate landscape. In fact, they have become a growing concern in the rental world, with an increasing number of landlords falling victim to fraud. According to Snappt, fraudulent rental applications nearly doubled in just six months during 2020, rising from 15% to 29%. During the same time, 85% of landlords reported falling victim to rental fraud, a significant increase from 66% the previous year.

For property owners like you, these scams can not only cause financial losses but also damage your reputation and create unnecessary headaches. From fake rental applications to unauthorized subletting, these scams come in many forms, and they can often be difficult to detect without careful screening and vigilance.

As a successful property manager with over two decades of experience, I have encountered many of these scams throughout my career. And through trial and error, I’ve developed strategies to identify and prevent these fraudulent activities. In this article, I’ll explore some of the most common tenant scams in Oklahoma City and provide my exact practical tips that you can use to protect your rental property and avoid falling victim to these schemes.

So let’s get started!

1. Invalid or Overpaid Checks

Ever received a suspiciously large check?

The Financial Crimes Enforcement Network (FCEN) reported an 84% rise in check fraud between 2021 and 2022. Similarly, JP Morgan’s 2022 Payments Fraud and Control Report revealed that 66% of financial professionals encountered check fraud in both 2020 and 2021.

This rise in check fraud extends to the real estate industry, too, where invalid or overpaid checks from tenants have become one of the most common and damaging scams for property owners who rely on timely rent payments.

• In invalid check cases, tenants often provide fake checks for the first month’s rent or security deposit to get access to the unit quickly with no intention of paying rent. Existing tenants also use this tactic for late rent payments or to buy time, gaining extra days or weeks in the property without paying rent.
• In overpaid check cases, tenants pay or send large amounts of money upfront to you, greatly exceeding the amount that needs to be paid. They do it deliberately, and later, they will ask for a refund, saying it was an error. Once refunded, they may stop paying rent, leaving property owners at a loss.

In both cases, it can be very hard to detect the scams by yourself since these checks seem very legitimate at first. You will realize these funds are invalid only when you go to the bank to cash out. Now you are left with no rent payment, loss of money(refunded and corrected check amount), and even have to deal with a complex eviction process, which can cause mental and financial strain on you.

How to Prevent:

• Deposit checks immediately and confirm their validity with your bank.
• Do not use any funds from a deposited check until the check has officially cleared. In some cases, this could take weeks. 
• Encourage tenants to use online payment platforms that verify transactions.
• Do not refund overpayments immediately. Wait for checks to clear before issuing any refunds.
• Be cautious of suspicious behavior and treat overpayments as potential red flags.

2. Fake Rental History Documents

According to a new survey by the National Apartment Association (NAA) and the National Multifamily Housing Council (NHMC), over 70% of 75 property owners and managers reported receiving fake applications from prospective tenants during the past 12 months.

The above stat shows that faking documents and applications in real estate is not a new thing. In fact, it is one of the most common challenges faced by property owners and managers. They do this to appear more financially stable than they are or to cover up their previous records like eviction, late payments, and other red flags. It includes fabricating rental history documents, such as falsifying references, rent payments, fake employment records and altered pay stubs, or lease agreements, etc.

How to Prevent:

• Conduct thorough tenant screening to verify their background, credit history, and rental history.
• Try to contact previous landlords directly and confirm the tenant’s rental history, including payment habits, behavior, and lease duration.
• Ask for original versions of rental agreements, payment receipts, and references. Fake documents are often presented digitally, so asking for hard copies can help.
• Consider using third-party payroll verification services to confirm employment and income. These services often provide direct confirmation from the employer about the applicant’s salary and work status.
• Look for inconsistencies in the application, such as mismatched addresses, missing information, or unusual discrepancies between the application and the references.
• Meeting the applicant in person helps you assess their behavior and spot any inconsistencies in their story.
• Check for inconsistencies (rounded numbers, poor formatting) and cross-check with bank statements or W-2s.
• Use fraud detection software (e.g., Snappt) to flag forged pay stubs.
• Contact employers directly to confirm income details.

3. Fake Credit Report

Another common tenant scam you need to be aware of is tenants faking their credit reports. Credit reports clearly show how well a person handles their financial responsibilities. With credit reports in hand, you can easily access a tenant’s poor credit scores, unpaid debts, delinquent accounts, or past bankruptcies. And that is why tenants who have a poor financial history may prefer to fake their credit reports to make themself look more reliable. For this, they go online, use some templates, and manipulate them to make it their own.

For you, as a property owner, it can cause severe problems. With a fake credit report, you never know your tenant’s true financial past activity. This raises the question, “should i rent my property to bankrupt tenant?” To avoid these risks, learn what to look for on a tenant credit report, such as payment patterns, outstanding debts, and red flags for fraud. This knowledge ensures you screen tenants confidently and protect your rental income. You would not know if a tenant can reliably pay rent or have the intention to do so in the future. You are at high risk of losing your rental income, extended vacancy periods in your property, and even may have to deal with the expensive eviction process.

Moreover, the presence of dishonest tenants can create an unsafe or disruptive environment for other tenants in multi-unit properties, potentially damaging the landlord’s reputation and trust with their other renters.

How To Prevent: Implement a Thorough Tenant Screening Process

• Use professional screening services. These services often provide more accurate and thorough reports, reducing the risk of fraud.
• Compare the credit report with other application information, like employment history, income verification, and references. Any discrepancies can signal potential issues.
• Ask tenants for supporting documentation, such as pay stubs, tax returns, or bank statements, to verify their financial stability.
• Be cautious if the tenant is hesitant to provide certain documents or if the credit report has inconsistencies such as unusual formatting, spelling errors, or missing information.
• For tenants with questionable credit, request a larger security deposit to mitigate potential risks.
• Make your criteria for approval transparent and consistently apply them to all applicants, ensuring fairness and preventing discrimination.

4. Delaying Rent Payment for Longer Duration

Occasional delay in rent payment is a common thing in the rental industry. And it is understandable, too, since it can occur from genuine financial hardships or unexpected life events. However, delay in rent payment month after month can be a challenging issue for you and even raise questions about the tenant’s intention and reliability.

Some tenants use these tactics in order to scam landlords and purposely delay rent payments, thinking they will get away without facing significant consequences. They may pay rent for a month or two and then stop entirely. Then, they often make repeated excuses, avoid you, misinterpret lease terms, exploit leniency, or misuse grace periods to push deadlines further. Their motive is to live in your place for free as long as you don’t catch them and take legal action.

For landlords who rely on timely rent payments, it can cause a significant financial strain. This activity not only disrupts your immediate cash flow but also can complicate your long-term financial planning.

How To Prevent:

• Ensure your lease agreement clearly outlines rent due dates, late fees, and consequences for delayed payments. This sets expectations upfront.
• Implement a reasonable late fee structure for missed payments. This encourages tenants to pay on time to avoid extra costs.
• Provide various payment methods, such as online payments, bank transfers, or checks, to make it easier for tenants to pay.
• Send reminders a few days before the rent is due, and follow up immediately after the due date if payment is missed.
• Establish open communication with tenants. If they face financial difficulties, try to negotiate a temporary arrangement or payment plan instead of allowing delays to continue.

5. Lying About Co-tenants

Misrepresenting or lying about co-tenants is another common scam that tenants use to bypass background checks and avoid inspection of individuals who might not meet the landlord’s approval criteria. They may misrepresent or completely hide the identities of additional occupants living on the property, which can lead to overcrowding, increased wear and tear, and liability issues for you.

Additionally, if an undisclosed individual gets injured on the property or engages in illegal activities, you could be held accountable in certain situations, depending on local laws and the lease agreement. Moreover, these hidden co-tenants might have problematic histories, such as prior evictions, poor credit, or criminal records. This lack of transparency undermines your screening process, potentially exposing the property and other tenants to harm.

How to Prevent:

• Include a clause in the lease agreement that requires tenants to disclose the names of all individuals living on the property. Make it clear that failure to do so will result in penalties or eviction.
• Schedule periodic property inspections to verify the number of occupants while respecting tenant privacy.
• Specify that all additional occupants must be approved by the landlord before moving in. This includes background checks and verification of their identity.
• Conduct thorough background checks not just for the primary tenant, but also for anyone who will be living on the property. This can help catch problematic individuals early on.
• Encourage tenants to report any changes in the number of people living in the property. Offer incentives, such as reduced rent for early disclosure, to encourage honesty.

6. Illegal Sublets to Third Parties

Illegal subletting the room to third parties is another common scam tactic tenants use to exploit the property for personal gain. In fact, it is one of the most expensive renter scams that you have to deal with.  In these cases, your tenants may sublet rooms or entire units to individuals without your knowledge or approval, often at an inflated rent price. They often do so to profit from the arrangement, charging a higher rent than they pay. Thus, rental scams targeting landlords often involve illegal sublets, where tenants exploit the property and finances of landlords.

This not only violates the terms of the lease but also exposes you to potential issues such as unauthorized occupants, increased wear and tear, and the risk of liability for any damage or illegal activities conducted by the subtenant. Additionally, it can complicate your ability to evict the original tenant or resolve disputes, leading to prolonged vacancies, legal challenges, and lost rental income.

How to Prevent:

• Specify in the lease agreement that subletting is not allowed without written approval. Be explicit about the consequences of violating this clause.
• Conduct periodic property inspections to ensure no unauthorized tenants or subtenants are living in the unit while respecting the tenant’s privacy.
• Screen tenants thoroughly before signing a lease. Look for red flags that may indicate a tendency for dishonesty or risky behavior.
• Include penalties in the lease for illegal subletting, such as eviction or monetary fines.
• Address any suspicious behavior promptly and have a legal strategy in place in case subletting issues arise.
• Encourage neighbors or other tenants to report suspicious activity, such as unfamiliar people entering or exiting the property.

7. Hiding Property Damage

Hidden property damage is another expensive tenant scam in the rental properties. While any normal wear and tear damages are acceptable, tenants must be held responsible for severe damages, especially for deliberate property destruction or negligence.

Some tenants may attempt to conceal damage they caused to the property, either during their tenancy or at the time of moving out in an effort to avoid paying for repairs or facing penalties. They might cover up visible damage with quick fixes. And since it is temporarily covered, you are unable to address it sooner which can lead to serious damages and higher repair costs in the long run.

Additionally, out of malice, frustration or an attempt to avoid paying rent, they may deliberately damage something in the rental property and then report to the Licensing and Inspections Department that the property manager has not made the repairs. Once the Licensing and Inspections Department issues a violation or citation, you may have to face fines, legal complications, or pressure to address the issue promptly, even though the damage was caused by the tenant.

How to Prevent:

• Schedule routine inspections during the tenancy to spot any early signs of damage or hidden issues. This will help you catch problems before they escalate.
• Conduct a thorough move-in and move-out inspection along with the tenant. This ensures both parties can agree on the condition of the property.
• Make sure the security deposit is sufficient to cover potential damages caused by the tenant. This will give you leverage in case you need to make repairs.
• Communicate the importance of maintaining the property and the consequences of damaging it. Clear guidelines can deter intentional harm or negligence.
• Ensure that all maintenance requests are addressed promptly. Ignoring minor issues can lead to larger, more costly problems later on.
• In case of doubts, hire professional inspectors to evaluate the property and identify potential hidden damage that might not be visible to the untrained eye.
• Building a positive rapport can encourage tenants to be more transparent about issues, rather than attempting to conceal them.

8. Service Animal Scams

In Oklahoma City, both Federal and State law entitles people with disabilities to have service animals or emotional support animals in housing, even if a property has a no-pet policy. These laws ensure everyone has equal access to housing opportunities. However, it is often seen that tenants misuse this provision by falsely claiming that their pets are service animals to bypass pet restrictions or fees.

While simply having a pet is not a problem, they can cause property damage, noise pollution, health issues, etc. And when the tenant moves out, since you don’t take any pet fees, you have to cover it from your own pocket. Additionally, such fraudulent claims can damage trust and weaken the protections especially designed for individuals with genuine needs. 

How to Prevent:

• Ask tenants to provide proper documentation from a licensed healthcare provider that verifies the need for a service animal or emotional support animal.
• Ensure that your property’s pet policies clearly distinguish between pets and service animals. Service animals cannot be discriminated against, but emotional support animals do not have the same rights to housing as service animals.
• Be aware of online services offering fake “service animal certificates.” These are not legally valid and can lead to tenants misusing the system. Only official documentation from healthcare providers is acceptable.
• Keep updated on federal, state, and local regulations surrounding service animals to ensure compliance and protect both tenants’ rights and your property.
• Although service animals cannot be charged pet fees, you can charge for any damages caused by the animal. Make sure the lease specifies tenant responsibilities for property upkeep.

Recommended: You can also include pet screening policies to manage potential risks associated with pets in rental properties.

9. Resetting the Eviction Process

Last but not least, resetting the eviction process is a tactic used by tenants to delay their removal from a property. In this scam, tenants usually pay a small portion of the overdue rent or ask for some additional time in the property during the eviction process. If you accept the payment or grant him extra time in the property, it can legally reset the whole eviction process. This means you must start the eviction process from scratch, including reserving notices and re-filing paperwork. Thus, it’s critical to understand what happens if you accept a partial rent payment. Consult a landlord-tenant attorney in your state to confirm whether partial payments reset eviction timelines under local law.

Additionally, tenants may file legal challenges or dispute the eviction on technicalities, such as arguing you didn’t follow proper procedure or citing discrepancies in the eviction notice. These actions can force you to go through the legal process again, causing delays that extend the amount of time a tenant can remain in the property. This type of delay can be financially burdensome for you as you continue to suffer legal fees and experience a loss of rental income. The longer the eviction process drags on, the more costly it becomes for you.

How to Prevent:

• Never accept partial rent payments once the eviction process has started, as this can legally reset the process. Only accept full payment if you are willing to stop the eviction.
• If a tenant asks for more time, be cautious. Agreeing to extra time could reset the eviction process. Stick to the timeline you’ve set in the eviction notice.
• Ensure that all eviction notices, deadlines, and procedures are followed exactly as required by local laws. Any small mistake can give the tenant grounds for a delay.
• Keep detailed records of all communications with tenants, including any payments, promises, or requests for additional time. This will help in case the tenant disputes the eviction process.
• Work with a qualified local attorney to ensure the eviction process is handled correctly. They can help you avoid legal pitfalls and challenges from tenants.

Tenant Fraudsters Conclusion

In conclusion, realtors in Oklahoma City have reported a notable increase in rental scams recently. It is critical for you to stay aware and proactive in your screening processes to prevent falling victim to these fraudulent activities. Otherwise, you risk facing financial loss, legal issues, potential damage to your reputation, and mental stress. 

If you do fall victim to a scam, it is important to contact local authorities for assistance.

However, with the tips mentioned above, you can significantly reduce your risk of falling victim to these tenant scams and safeguard your rental property and income. If it feels complex and too much work for you, especially if you don’t have the proper knowledge. I suggest you go for a professional property management company like OKC Realty Home Services.

At OKC Realty Home Services, we specialize in providing comprehensive tenant screening and management services, ensuring that your property is protected from fraud. With 25+ years of experience in property management, we have the knowledge and expertise to handle these challenges on your behalf. Let us take the stress out of managing your rental property so that you can focus more on your main priorities: business growth and goals.

Contact us today!

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