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Creeping Concern Over Fraudulent Residents Applications

Fraudulent Residents Applications
November 2018

A recent study finds that the majority of property management companies have been affected by fraud, but due to the emerging nature of the problem, they are not well equipped to manage the issue.

There is growing concern among property management companies about fraudulent applications, particularly those filed online, according to Forrester, an independent consulting group.

Its study found that the majority of property management companies have been affected by fraud, but due to the emerging nature of the problem, they are not well equipped to manage the issue.

“Misunderstanding and Inconsistency: The State of Fraud in the Rental Housing Industry” commissioned by TransUnion, found that more than eight out of 10 decision makers at property management companies have experienced fraud up to 20 times within the past two years. The online survey conducted mid-year was sent to 153 multi-family and single-family property management organizations and released in August.

The study found that online rental applications are a primary driver for the fraud that exists in the rental housing industry. Online applications now outpace those that are submitted in-person, with nearly 59 percent of applications taking place online.

One category of fraud the study identified was the “synthetic renter,” whereby a rental applicant would present his or herself as someone else or as “synthetic,” meaning no one’s true identity. Darby Development Company Vice President Victoria Cowart, CPM, says one of her community recently dealt with a similarly troublesome case known as third-party fraud.

“The applicant used her sister’s identity and moved in after signing all her documents as that person,” Cowart says. “Discovering this, we evicted and had her arrested the same day. I worked with the police department to get them to charge her with forgery—multiple counts. We are still dealing with the courts on this matter.”

TransUnion suggests that when someone applies with a false identity, they may have intent to conduct criminal activity.

“Those using synthetic [or fraudulent] identities often build credit profiles and use it to ‘break out’ (once they have access to extensive credit) with large amounts of purchases in a short amount of time before they can be caught,” Mike Doherty, Senior Vice President, TransUnion, says. “Apartment communities might observe the effects of this type of fraud through behaviors such as large volumes of package deliveries. But the residents’ intent could also be other criminal activity (e.g. dealing drugs), which may put other community members at risk.”

Evicting fraudulent residents can become complicated.

“We see this type of fraud regularly,” Thomas I. Howard, Associate Attorney, Brownlee Whitlow & Praet, PLLC, says. “The process varies from state to state and from court to court. In our experience, although this is a crime, the police will not take an active role in the removal of the fraudster without a court order. The next best option is a fast-track procedure for removal.

“In South Carolina, we have a process through which the fraudulent party would be deemed a trespasser instead of a tenant, which allows us in some cases (depending on the court) to file with the court five days after a written request to vacate. If the fraudulent party fails to vacate, a notice to quit action is filed, which provides the fraudulent party with five days to request a hearing as opposed to the normal 10 days for an eviction due to a lease violation.”

According to Todd Whitlow, Partner with the firm in North Carolina, “Unfortunately, if a hearing is requested, the process can take up to 30 days before the fraudster is removed from the residence. A civil trespass action can take up to six months or more to remove a trespasser, and an eviction takes about 45 days to remove a resident who has violated the lease.”

Some sort of legal process is required, Whitlow says, “but why should a trespasser have more or approximately the same rights to stay as a tenant with a lease? We believe that if law enforcement will not assist, the key is to provide as expedited a process as possible for removal of the fraudster.”

An example of such an expedited process would allow for immediate filing, a short court date (seven days or less) and a short appeal period (seven days or less, if the State requires such an appeal period), Whitlow says. “If the fraudulent party could be removed in two weeks it would likely make a criminal think twice before committing this type of fraud,” he adds.