The build-to-rent (BTR) sector has seen a 364% rise in fraudulent tenant applications in the past six months, according to data from tenant due diligence and guarantee firm, Homeppl.
To correlate with this trend, the detection of fraud in this space has seen a significant increase in value, meaning landlords are ultimately saving £1.59m from not accepting fraudulent applications.
Homeppl noted that BTR properties are high quality and include onsite extras, utilities are bundled into the monthly price, there is often no deposit and renters have the right to leave with short notice periods, making them an attractive option for renters.
The fact that utilities are included, and the absence of a deposit, means that potential fraudsters not only avoid upfront costs, but they also only need to pass one identity check before being approved by the letting agency, making it easier for them to get away with a fraudulent application.
Alexander Siedes, chief executive and founder of Homeppl, said: “We have seen a sharp rise in fraudulent tenant applications within the build to rent sector over the past six months.
“In the last three months one of Homeppl’s clients found 3.5% cases of fraud in the build to rent sector, which highlights the vulnerability of the sector and the property agents who act as landlords.
“And while agents using our tenant referencing systems can be safe in the knowledge that fraudsters will not be able to fool our unique fraud detection tests, most checks are unable to reliably detect fraud or authentic data.
“Our clients have 0% defaults – the industry average is 8%.
“The build to rent sector was initially driven by demand in London – and that is still where most incidences of tenant fraud take place as the properties tend to be high end and therefore a target for illegal subletting – but the trend has now spread across the UK.
“The companies looking after these developments need to ensure they have procedures in place to identify these issues and stop them before the losses become unmanageable as this will have a detrimental impact on the market at a time where demand for rental properties has never been higher.”