FSCO tips on rental scams (Getty Images; Vector illustration)
Can you imagine getting a call asking you if your rental unit was still available, only you never posted an ad to rent out your suite. Fact is, you’ve been happily co-habiting with your basement suite tenants for the last two years. Welcome to the latest rental scam: Your phone number, pics and details of your rental suite are co-opted by a con-artist who reposts the info along with details of a tenant open house—a date and time when interested tenants show up with their credentials to apply for an apartment lease. A variation of this scam is that a con-artist will simply post a pic and info about your home or apartment and list it as short-term accommodation, typically to dupe tourists and vacationers out of their money. And despite media attention and public service announcements these types of rental scams are happening more and more frequently.
It’s one of the reasons why the Financial Services Commission of Ontario is launching a rental scam Twitter discussion today (July 9, 2015) at 1pm EST.
The discussion should prove lively, but even before the fur flies, I’d like to chime in with my two cents.
HIJACK OR PHANTOM SCAMS
While there are many versions, there are two typical rental accommodation scam, known as the hijacked scam and the phantom scam, according to the U.S. Federal Trade Commission. While similar, the phantom scam is often used on vacation rental while the hijack scam is the more involved of the two. In the hijack scam, a person pretends to be a landlord and posts pictures of a house, condo, or apartment for rent. The ad will demand payment of first and last month’s rent as well as a security deposit—and all this money must be handed over to the so-called landlord during the application process. In the phantom scam a person will posts pics of a home—such as a cottage or a vacation property—along with instructions on how to book the rental using a wire transfer.
But can these scams really net the con-artists serious coin? Absolutely. A few years ago, for instance, a con-artist used the hijack scam to bilk three would-be renters in Toronto’s Broadview-Danforth area out of close to $20,000. Somehow this con artist got access to an empty apartment in a low-rise building near the area’s Metro station. Prospective tenants turned up, saw the place, fell in love, filled out an application, and handed over their money (usually in the form of cash, but even cheques will do). The con-man then gave them a key to the apartment. On the first of the next month, three people showed up to take possession of the rental suite—that’s when they realized they’d been conned.
Considering the average rent for a two-bedroom in Toronto is just over $1,800 it’s not hard to imagine how a renter could lose over $5,000 in just one scam. So how can you protect yourself from this type of fraudulent activity?
#1. KNOW YOUR MARKET
Most renters know the neighbourhoods they want to live in. They know the cafes, the hotspots, the parks and the pizza joints. But to protect yourself from rental scams, you also need to know what market rent is in your ideal ‘hood. Why? Because con-artists often use a strategy of pricing fake apartments at rental rates that are well below market value, explains RentalScams.org. Since these scams are all about neighbours—more people attracted, means a higher percentage who are conned and more money in the pockets of the fraudsters.
Now, if you do find a place that’s priced cheaper than other apartments in the same area find out why. Good reasons include: the person is subletting, the landlord has lowered the rent slightly to attract more tenants, or it’s a shorter-term rental (say three to six months, rather than one year). If, however, the landlord dodges your questions or keeps emphasizing how it’s such a good deal and you need to hand over the money to secure the apartment, W-A-L-K away. It’s a con. There is no free lunch. There is no steal of a deal. If a landlord lowers rent, there’s always a legitimate reason.
#2. DON’T USE CASH. EVER
I was shocked a few years ago when, during a tenant open house, an applicant walked up, handed me their application and an envelope that contained enough money to cover first month’s rent. Surprised, I asked her why she was giving me cash. “Because that’s how you apply for apartments,” was her response. Ok. She was new to Canada. English wasn’t her first language and perhaps someone had told her that this was the process. But I was stunned. Of course, I gave her back her money, but I also asked her to be careful. Landlords shouldn’t accept any money until a lease has been signed between the tenant and the landlord. If they do, I told her, you run the risk of losing your money.
Thing is many tenants will use cash or an e-transfer to pay their rent. I’ve had tenants who, without fail, etransfer me the rent every month. While etransfers offer some form of a paper trail, cash doesn’t…and that can be a big problem. If you do opt to use cash for rent make sure you get a rental receipt. At least then you have a record of proof that you’ve paid your fair share for living in the place.
But paying by cash isn’t the only way to lose your money. You also shouldn’t wire money or etransfer money, says the Federal Trade Commission. “Wiring money is the same as sending cash — once you send it, you have no way to get it back.”
Instead, consider using certified cheques, or post-dated personal cheques (as long as there’s enough time to put a stop payment on the cheque if you find out you’ve been scammed). When paying for vacation rentals I prefer sites that offer payments by credit card. Why? Because you typically have 30 to 90 days to claim a fraudulent charge on your card—and not receiving a service, such as a vacation rental, is considered fraud.
#3. VERIFY THE FACTS
I admit it. I’ve rented places based on online ads. I never saw the place before renting it out and just assumed that the person was on the up-and-up. And I’ve been lucky…or smart, depending on your perspective.
Ideally, you want to verify that a place exists. Mapquest or GoogleMap the address. Inspect the pics. Does it match what the ad says and shows? If the ad says sleeps 10 and it looks no bigger than a 100 square foot box that should be a B-I-G-R-E-D flag.
For vacation rentals consider using a professionally-managed site. You might pay a bit more, but these sites often will not release money to landlords until 24 hours after the rental stay has started. This way, you have 24-hours to notify whether or not you’ve been duped. In the U.S. you could use VayCayHero, Rentini or VacationRoost.
#4. INSURANCE WON’T PROTECT YOU
For those on vacation be aware that travel insurance typically does not cover rental fraud. You best protection against vacation rental fraud is to become aware of how scams work and do careful research.
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