Avoiding Rental Scams
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Rental scams are as old as the landlord-tenant relationship. Historically the most common scam was landlords keeping tenants’ security deposits, often with impunity. Laws like the Chicago Residential Landlord and Tenant Ordnance have curbed these practices so thieves have evolved.
Since the world has gotten smaller, technology more wide-spread, and landlord-tenant relationships more anonymous, the opportunity for outright fraud has never been greater. As you will see, the housing crises, resulting in many empty properties, has provided an opportunity that criminals just can’t pass up.
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What are some current rental scams?
The most common rental scam we have witnessed over the past year is people with no legal right to lease a property “leasing” it to a potential tenant (or many potential tenants) and making off with the security deposit, first months rent, and sometimes even prepaid rent as well.
Another variant on this scheme is charging many potential tenants fees for background checks and making off with that money. A typical fee for a background check is about $50, charge that to tens or hundreds of potential renters and the thief can make out with a lot of money.
Some frauds are more sophisticated than others.
The most simplistic frauds involve people copying legitimate apartment ads off the internet and re-posting them with their own contact information. When a potential tenant contacts the poster, he makes excuses for not having access to the property and asks the tenant to rent it sight-unseen or at least to pay a deposit to reserve the unit. Once the scammer gets money from the tenant, he disappears.
More complicated scams involve criminals that actually have access to the apartment. The huge rash of foreclosures has led to many vacant buildings that are primed for fraudulent schemes. The criminal simply breaks into the building, changes the locks, and is actually able to show the building to potential renters. There have even been cases where the tenant moved in, only to later be told by a bank or real estate agent that the property does not belong to the scammer.
Preventing the most sophisticated scams can be hard, but the following tips will help minimize your risk.
1. Never dealing in cash
The weak-point in almost all fraud schemes is receiving untraceable payment. Sophisticated crooks know that the police can track most common types of payment putting them at risk for arrest. Most criminals will insist an a difficult-to-trace form of payment and if you refuse they will look for an easier victim.
A tenant should never pay a landlord cash for anything. This is especially true for a security deposit and first month’s rent. The tenant should also avoid wiring money, using Western Union or any other type of hard-to-trace cash equivalent such as Moneygram, Bitcoin or MoneyPak.
Legitimate landlords will usually accept regular or cashier’s checks, which are easier for the police to trace if a criminal makes off with your money. Even if the landlord isn’t a scammer, cash only landlords are often highly problematic.
Any attempt by a landlord to be anonymous should be seen as a red-flag. Even in the best-case scenario, this person may be hard to reach if repairs are needed.
2. Demanding a written lease
Oral leases are valid in Illinois, but they are problematic in many ways. If a tenant and landlord want a month-to-month lease that is fine, but the lease should still be in writing to prevent fraud and to lay out the rights and responsibilities of the parties.
Not only should a tenant require a written lease, the tenant should also demand a copy of the lease signed by the landlord.
Landlords often give tenants an unsigned lease to sign and then ask the tenant to send the lease to them for signature. More often than not, the landlord never sends the tenant a copy of the fully executed lease. Ideally, the landlord and tenant should sign the lease in each other’s physical presence and in duplicate so each can walk away with a copy.
3. Never renting sight-unseen
So many bad rental situations begin with a tenant signing a lease for an apartment without seeing it. The tenant, or a friend or family-member of the tenant should absolutely see the apartment in person before signing a lease or transferring funds.
Viewing an apartment helps prevent fraud and also ensures that the tenant is aware of the condition of the unit (which is almost never improved upon before move-in).
Though we are seeing many scams where the “landlord” has access to the unit, insisting on viewing the unit will cut down on the risk of fraud significantly.
4. Meeting the landlord in person
Though some scammers will readily meet tenants in person, many, especially those operating from over-seas, will not. A personal meeting with the landlord will allow you to screen out some con artists and will also allow you to get an impression of the landlord’s personality.
Though many out-of-town landlords are legitimate, insisting on a local landlord or management company will lessen the risk of fraud and usually leads to better service.
5. Speaking with the current tenants
In most cases, landlords are showing a unit that is currently occupied. Currently occupied units are far less likely to be fraudulent operations. If you have a chance, speak to the current tenants outside of the presence of the landlord to find out how the landlord treats tenants and whether anything unusual is taking place.
As a general note, speaking to current tenants might dis-spell misinformation provided by a landlord or their agent. I was once told that the heat in an apartment was $75 a month by an agent and the current tenants laughed in his face and told me it was over $200. (side-note: Landlords must disclose heating costs pursuant to 5-16-010 of the Chicago Municipal Code).
6. Ensuring the written lease identifies the owner or agent
In Chicago, written leases must identify the name, address and phone number of the owner or authorized management agent pursuant to 5-12-090 of the Chicago Municipal Code. 5-12-090 also requires the lease disclose the same information for the person authorized to receive notices and service of process.
When reviewing the written lease, make sure that this information is disclosed and that the address listed is not the address of the apartment or a P.O. box. It doesn’t hurt to Google the address listed to make sure it isn’t a U.P.S. store or similar operation.
7. Identifying the actual owner
From a tenant’s perspective, it is hard to determine who is authorized to lease an apartment. Finding the owner of a piece of property in Chicago is usually possible by finding the PIN on the Cook County Assessor’s website and cross-referencing it with the most recent deed in the records of the Cook County Recorder of Deeds. A skilled researcher should be able to identify the owner of the property except where the property is in a land trust.
Reviewing deeds is helpful, but not without its downfalls. In Chicago, the actual owner of the unit does not need to be disclosed, so the tenant may be dealing with a legitimate non-owner landlord/management agent.
8. Conducting basic research
When considering an apartment, take some time to do a Google search. Google the address of the apartment and also the landlord’s name and the name of the management company. I always do this when a tenant comes to me for help and I have found massive red flags in only seconds on the internet. Never take a chance when renting, there are plenty of other apartments out there.
In addition to an internet search, more skilled researchers can check to see if the property is in foreclosure or has been sold to a bank. Both of which are units that should be avoided as potential targets for scammers or simply because there will likely be poor management.
9. Being aware of market rates
The Chicago rental market is extremely hot, especially in the summer. Because of this, there are few deals to be found and tenants should be suspicious of any apartment that is being offered at far below market rent.
10. Be aware of high-pressure sales tactics
Though the Chicago market is hot and a landlord may have multiple potential tenants. Be wary of any person who attempts to get you to sign a lease or hand over a substantial amount of money on the spot. It is much more common for a landlord to require a background-check fee (usually $50 per tenant) before offering a lease. Of course, there are scams where this fee is stolen, but at least it is much smaller than a full deposit.
Be wary of landlords that have little interest in your background.
What sort of landlords don’t worry about their tenant’s ability to pay, criminal record and past rental record? Scammers and slum-lords. Most legitimate landlords will at least run a credit check, others will also request criminal history and rental history.
11. Using a licensed real estate agent
Many rentals in Chicago are managed by licensed real estate agents and it is not uncommon for tenants to have their own agent, especially in higher-rent neighborhoods. Having an agent represent you is a substantial safeguard because there is less risk that a scammer will list a property with an agent and also because if you are scammed you can hold the agent responsible.
Keep in mind that some scammers claim to be agents and really sophisticated ones even manage to hijack the agent’s accounts and substitute their contact information. All licensed real estate agents in Illinois must be registered with the Illinois Department of Professional Regulation.
12. Avoiding sub-leasing
Sub-leasing is extremely risky for both the original tenant and sub-tenant. Checking the authority of an individual trying to sub-let an apartment is magnitudes more difficult than verifying the actual owner/landlord. On top of that, if something goes wrong recourse may be minimal as the tenant leasing the unit to the sub-tenant may be broke, uninsured and unfindable. If you want to take over a lease, work with the landlord to terminate the old lease and sign a new lease directly with you.
Bonus. Consider renting from large corporate landlords
I always tell tenants that large operations are never the best landlords, but they are never the worst either. Generally, there is plenty of information online reviewing large operations and they usually follow the law and are seldom outright scammers. If, for some reason, you have to rent sight-unseen, a large corporate landlord is probably the safest choice. Additionally, if you have neighbor problems or a bad unit, a large landlord may be able to move you to a different unit. With an individual landlord, you might have to suffer a year of listening to your neighbor’s screaming fights or child learning the violin.
What to do if you have been scammed
Prevention is always far better than trying to recover from a fraud after the fact. In most cases, you will never see your money again and the criminal may get away.
- If you have been scammed, make a police report and give them as much information as possible;
- Notify the Alderman for your district, many aldermen are very active in their wards and will encourage the police to take action;
- Contact the Illinois Attorney General, her office is responsible for consumer protection;
- Contact an attorney or tenants’ rights agency. We are often aware of the common scams and can try to help verify whether you have been a victim.
Scams in the news
- Two Chicago men arrested for trying to collect first month’s rent and a security deposit on an Oak Park home they didn’t own Scammers insisted on cash, house was vacant and tenant was told to change locks herself and not worry about real estate agent telling her to move;
- Portland scheme where “landlords” request cash background check fee and security deposit and then disappear. Landlords were “in Africa working with AIDS patients” and demanded a security deposit before she could see the apartment. Tenant went to the apartment and found the actual owner living there (and knowing nothing about the rental ad);
- Scammers in New York hijacking real estate ads Often requiring Moneygrams or wire transfers prior to showing the property;
- Possible scam in Los Angles. Landlord out of town, never saw inside of apartment, paid first and last month with online cash card. An interesting aspect of this one was landlord claiming to be acting through an attorney asking for even more money;
- Appleton, Wisconsin scammers hijacking listings. These scams have all the hallmarks, wire transfers, sight unseen, landlord out of the country ect.;
- Pennsylvania woman scammed out of $3,600. A more sophisticated scam, landlord had access, used a written lease and even accepted checks (albeit made payable to another individual);
- Kentucky scam – woman loses $1,000 rent and deposit. No access to unit, wire transfer, never met the landlord;
- South Carolina scam with numerous victims. Scammer posing as real estate agent steals deposits from tenants;
- Stamford, CT scammer attempts to steal $2,800. Scammer offers sublease if potential tenant deposits $2800 directly into a bank account.
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