How to avoid fraud in real estate

Rachael Jenkins

Hopefully we have all heard by now of the Identity Fraud issues that have been going around in real estate. Sales departments have had people claiming to be the owners of properties and listing them for sale - basically trying to sell property they do not own. In Property Management, people have been listing properties as 'Private Rentals', then taking deposits from tenants, and handing out useless keys - the tenants lose their deposit & are also without a place to live.

A third scam has seen tenants applying for rental properties using someone else's details, being accepted, paying deposits (sometimes only even part of this) & moving in - then never paying anything again. As their true identity is unknown, any breach notices, Tribunal hearings, TICA listings and the like are completely unaffected. And then they just disappear - often with the properties being worse for wear and the owners out tens of thousands of dollars. 
So, what do you do? How do you protect yourself and your client?

Well, as the professional agent, we need to ensure that the necessary steps are being taken at all times to establish who we are dealing with - that vendors and landlords are the legal owners of the properties as they are claiming, and that tenants are who they say they are. As a result, NSW Office of Fair Trading (NSW OFT) has come up with some guidelines especially for real estate agents to help prevent being involved in any fraudulent behaviour. Funnily enough, the document is called Real Estate Fraud Prevention Guidelines. You can click here to read more, and the get the link to download your copy. 

The main area of risk open to agents, whether sales agents or property managers, are the penalties based around our professional conduct. When appraising a property for rent or for sale, you need to ensure that you are only dealing with the true owners of the property (or their representative). Based on the current penalties, breaches of this section of the Act are 100 penalty units (or $11,000), as well as possible disqualification from the industry. Penalties are not only for the agent involved, but also hold consequences for the licencee in charge. 

To aid all those involved, in addition to the Guidelines, NSW OFT has also developed a Fraud Prevention Checklist  As part of your office's Best Practice procedures, it is recommended that all agents use this checklist when dealing with vendors and keeping it on file for future use - and personally I would recommend using this when dealing with new landlords also.

As is often the case, these new guidelines speak only of an agent/vendor relationship, however you can understand the similarity of the situation between an agent/landlord situation. The obligations of fiduciary duties, exercising due diligence and acting honestly, fairly and professionally remain the same, and as such, the penalties remain the same. 

The new checklist, however, is a fairly standard (oh, at least I HOPE standard) process used by property managers to check applications. But what other things do you check? Do you get 100 points of ID? Do you do a credit/police check? Do you call all professional, personal and previous rental references? I know what is standard procedure, and I also know what can get out when times are busy, and when you get a "good feeling" about someone.

Please, everyone, in light of the new scams - don't be the one that gets caught out! Make sure you are thoroughly checking & recording details given by referees - if it only pays off once, you will stick with it forever!