4 key ways to avoid tenancy fraud

8 February 2023

With referencing fraud on the rise in the UK, here are three ways that letting agents and landlords can reduce the risk of a fraudulent application.

Fraudulent activity in the referencing process is on the rise in the UK, with an increase in attempted fraudulent applications seen at Goodlord since January 2022. However, there are some steps that your agency can take to catch this fraudulent activity before any contracts are signed. 

1. Use open banking to complete income checks

Asking tenants to use open banking is always the first recommendation that we make at Goodlord to help reduce the risk of fraud in the referencing process.  

Open banking can offer a faster and more secure way to verify your applicant's income and recurring rental payments, as your referencing provider can check more than just the rental or salary amounts.

The frequency and consistency of payments can also be assessed, giving a much clearer and more realistic picture of how your applicant acts - making it easier to spot any inconsistencies that point to fraudulent activity.

The information provided through open banking can also be double checked against pay slips or statements, to create an extra layer of protection against any potentially fraudulent documents.

For your tenants, they benefit from a faster and more secure process. The provider doesn't get full access to their bank account. Open banking simply gives a snapshot of their financial situation, to help build a picture of their financial profile and their suitability as a tenant.

2. Carefully check the ID of your applicant

Whether you need to complete the right to rent checks - a legal requirement in England - on a tenancy or not, checking the identity of your applicants is a key step in the referencing process.

You should make sure that the picture in their ID matches the person standing in front of you. Some providers, such as Goodlord, use facial recognition to match photos of applicants to the photo on their ID when undertaking the checks.

Agents in England need to double check the original document in person too, to meet their right to rent obligations - unless using Identity Document Validation Technology (IDVT), which can help you complete your right to rent checks online.

Fraudulent documents are also not always easy to spot, but you can double check that the fonts and colours match the official list of documents that you can find on the government's site.

Free tenant checklist: Preparing for referencing

3. Ask your applicant pre-qualification questions to spot any unusual trends

Pre-qualifying your tenants is key to combating fraud. Ask questions and listen to your applicant's story. How much do they earn and what's their job - does that match what you'd expect?

You should also monitor the demeanour of the applicant. Excessive impatience at the time the checks are taking coupled with a lack of responsiveness to the requests for information could be a flag that something is not right.

4. Raise any concerns with your referencing provider

If you have any concerns, it's always worth mentioning those to your referencing provider, as they can bear that in mind when making checks.

For example, fraudsters sometimes make multiple applications in the hope that one of them is accepted, rather than applying one at a time - which means that, if they're caught once, they may make the same mistakes again. If your agency starts to see trends in any fraudulent activity, make sure that you're sharing that information with your supplier.

As much as technology used by suppliers can help to speed along the referencing process, a human is always involved to add that extra layer of protection, and they'll be able to take on board any suspicions you may have.

Further reading