Spot the fraudster homebuyer

Spot the fraudster homebuyer

MAIN IMAGE: Craig Guthrie, partner at Guthrie Colananni Attorneys and Lorraine Dellbridge, rental specialist for Lew Geffen Sotheby’s International Realty.

A property owner has just signed a sales contract with an interested buyer. A few weeks later, the buyer is missing and there is an unsuspecting tenant illegally living in the property or about to move in.

Rental scams are worldwide on the increase. Last year it was reported that more than 5 million people in the US had lost money due to rental scams.

Locally, fraudsters are also on the prowl for unsuspecting victims. In April the Bester family from Bellville faced becoming destitute after they got scammed by an advert for a rental home on Gumtree. The ‘homeowner’ disappeared after they had paid the R11 500 deposit into her bank account and when they visited the property a few days later they found out she wasn’t the lawful owner – and that they were the second group to fall victim to this rental scam.

Craig Guthrie, partner at Guthrie Colananni Attorneys, says they are aware of quite a few cases where the fraudster has scammed both the owner of the property and the prospective tenant.  He says this scam is often more convincing in that the fraudster poses as the buyer of a property and signs a sales contract which gives the fraudulent buyer some right of access or occupation of the property.  The fraudster then signs a lease with an unsuspecting tenant, who often moves in (or is about to move in) after paying a deposit of one or two months rental and the first month’s rent in advance, never to be seen again. The fraudster defaults on the sales agreement. The owner realises that there is an innocent but unlawful person occupying the property.  If these parties are unable to reach consensus, it invariably ends up as a triple whammy for the unsuspecting tenant:  they have lost their money, have nowhere to stay and are facing eviction proceedings from the owner.

“Any form of deception for financial gain is the criminal offence of fraud.  Paying deposits for rental accommodation where there is no intention or factual ability to supply the accommodation is fraud,” says Guthrie.

He continues that the fraudster is also guilty of criminal offences under section 16 (a) of the Rental Housing Act.  “It is often difficult to get compensation from the fraudster as their identity is often unknown and they have no attachable assets.  Therefore, the only option available to victims is to press criminal charges,” Guthrie explains.

Fortunately, these scams can be avoided.

Check the owner’s details. In most cases, the owner’s details are of public record and recorded at the Deeds Registry. Before paying over any money Guthrie suggests that the records be checked and the owner be asked for proof of ownership and identification to prove that they are in fact the owner. It is also important to sign a lease with the owner of the property. Any other form of arrangement is very risky and is only as strong as the other party’s rights against the owner.  For example, sub-leases terminate when the head lease terminates and a sub-tenant has no rights against the owner and must vacate.

Never sign or pay on sight-unseen. Lorraine Dellbridge, rental specialist for Lew Geffen Sotheby’s International Realty in the Southern Suburbs, advises that a property is never taken sight-unseen and if there are current tenants when viewing the property, to be sure to ask a lot of questions. People tend to trip themselves up eventually.

“Don’t ever come across as desperate as these types of people prey on that,” Dellbridge says.

Use a reputable estate agency. They are legally obliged to FICA and know their landlords, they have facilities to easily verify ownership, and most importantly will hold the deposit in their trust account and usually manage the collection of the tenant’s money in accordance with the Rental Housing Act.  It is comforting to know that a trusted third party is holding the deposit says Guthrie. Reputable estate agents also have indemnity insurance if they too fall victim to such a scam.

“The best line of defence is to use a reputable agency as both landlords and tenants are thoroughly vetted. Any estate agent can check who the owner is of a property and would certainly be willing to assist,” says Dellbridge.

Dellbridge adds that the tenant can also insist that an attorney holds the funds in their account and that it’s only released to the landlord once an ingoing inspection is done. In fact, nothing wrong with an attorney holding the deposit throughout the lease.

Red-flag signs that you could be dealing with a fraudster include the following:

  • Refusing or can’t meet you in person
  • Insisting on cash payments
  • Does not insist on a proper credit and background check
  • Expects payment of a deposit before the signing of a proper lease agreement

Lastly, rental experts advise that tenants should have an attorney or an estate agent inspect the validity of the lease agreement and the owner. The extra cost might just be worth it.

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