Watch out for deposit fraudsters!

As the silly season approaches we see the predictable increase in activity of scammers and con-artists defrauding the public of their hard-earned money. Deon Botha, CEO of specialist Rental guarantee company Rentmaster says “Scams to steal money paid across as security deposits to secure rental property is an old trick that can easily be detected and prevented with some basic security checks before paying across your money”.

Scam # 1: Hijack and sell what’s not yours

The scam works as follows. The scammer picks an area that is in demand, in other words where there are many people looking for a place to stay, typically more than there are available places. This creates competition, and people are frequently disappointed finding places taken by the time they make an enquiry. As such people have to move fast to secure a place as it becomes available.

The scammer then finds a suitable listing on one of the online market places, frequently Gumtree as anybody can quickly and easily create a listing with no security checks of any kind. He or she then uploads the photos of an existing listing, and creates a new listing with their contact details. They frequently also offer it at an excellent price to make it even more attractive.

When interested tenants make contact, either by email or by mobile phone, their story is usually that “Yes, the place is still available but there have been many enquiries. The first one to pay the security deposit secures the place”. When the tenant asks to view the place first, they are given the run-around, at times even arriving at a location only to have the appointment cancelled due to an “emergency” of sorts. The scammer also usually uses an application form from a reputable organisation they have sourced somewhere to lend them credibility.

Here are some warning signs to look out for:

  1. The person is vague when asked when you can view the place. They make excuses about how busy they are and how many people are enquiring. They offer viewing appointments at a time still to be confirmed.
  2. They keep telling you that there are other interested parties and that payment of the security deposit will secure the place.
  3. The bank account they provide for payment is in their own name, not in the name of the agency whose application form they offered.

You can identify these scams with some basic fact-checking up front.

  1. If they offer you an application form, call the company and verify that this person is an authorised agent. Make sure you’re speaking to the company and not an imposter, a friend of the scammer who’s briefed to answer a cell phone and put your mind at ease. Verify the agency’s contact number from their website or by obtaining it from a trusted source like directory enquiries,
  2. If they claim to be an estate agent, verify their membership with the Estate Agency Affairs Board. You can do this online at their website where all agents and agencies are listed. Ensure that they have a valid Fidelity Certificate that protects your security deposit from theft and misappropriation.
  3. If they claim to be the owner, insist on viewing the property. Do not get pressurised into paying a deposit to secure the place before you’ve met the owner at the property itself.

Scam # 2: Sell what’s yours… over and over

Unfortunately, there’s an even more sophisticated and brazen variation on above. The scammer actually obtains a rental property, typically under a fraudulent or stolen identity. They pay the real owner a security deposit, and then promptly re-advertise the place as available. They then take security deposits from several parties at the same time, who arrive at the property, each one thinking they are the new legitimate tenant, having signed a lease and paid their deposit. The scammer invested one month’s rent to secure the place and then rapidly achieved a 5-times or more return by on-selling the lease illegally, disappearing into the night leaving behind a throng of angry people arguing about who actually has the right to move in.

This one is much harder to pull off and thus quite rare, but it does happen. It is also harder to prevent or detect as it all seems above board. The only practical way to prevent this is to make an effort to find out if the person offering the rental is in fact the registered owner or an authorised agent. Ask them to prove it by furnishing for example a rates bill from the municipality.

Botha advises landlords and tenants to: “check the credentials of all parties involved thoroughly before you hand over money or keys. If it smells fishy it probably is and if it sounds too good to be true, ditto”.

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