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It’s the Law By HOWARD BOOKSTAFF, Hoover Slovacek LLP , HAA General Counsel
FRAUDULENT ACTIVITY
Here are tips to help apartment owners and managers avoid fraudulent leasing activity and minimize loss.
THE FEDERAL TRADE Commission states on its website that consumers reported losing nearly $8.8 billion to fraud in 2022. This is up 30% from 2021. The FTC received over 760,000 reports of imposter scams in 2022, making it easily the nation’s most common type of fraud. Losses to imposters more than tripled over the last two years – reported at more than $2.7 billion in 2022. Unfortunately, the apartment industry is a common target for fraudsters. Even the most diligent owners and managers have fallen victim to fraud and imposter scams in connection with leasing. Let’s look at a few tips that may help you avoid certain fraudulent activity and minimize potential damages. Review corporate housing policies. Fraudulent activity often occurs when you engage in corporate housing without knowing exactly who you are leasing to. If an individual wants to avoid certain criminal, credit and rental background checks, they may request that a lease be put into a company name as opposed to their individual name. Without the right policies in place, they may be able to get away with leasing in the company’s name, defaulting on the lease and leaving you with little or no recourse against an insolvent resident. Here are some tips when checking out a corporate housing resident: • Know who you are dealing with. Most companies that are organized entities need to file documents with the Texas Secretary of State office when they are organized. You can confirm whether a company is a corporation, limited liability company, limited partnership or other legally organized entity by checking the Secretary of State’s website at http://www.sos.state.tx.us/corp/ sosda/index.shtml. Companies that are organized by filing documents with the Secretary of State’s office www.haaonline.org
and do business in something other than their official legal Even the most diligent owners and managers have name will be required to file fallen victim to fraud and imposter scams in connecan assumed name certificate tion with leasing. Let’s look at a few tips that may help in the Secretary of State’s you avoid avoid certain fraudulent activity and records. You can also check out an entity’s assumed name minimize potential damages. on the Secretary of State’s website provided above. other residents, you should do the same for In some instances, an entity may be reall adult occupants in a corporate housing quired to file an assumed name certificate in setting. This policy should extend to occuthe county in which it does business. This pants that may move in during the term of can be checked online by going to the applithe corporate housing lease. cable County Clerk’s website. Using these websites to confirm the name Do not give keys out until the lease is and legal status of an entity seeking to sign a fully signed. lease can help assess the legitimacy of the Picture this: A husband and wife are resicompany and may help you avoid fraud. • Have the lease signed by someone other dents listed under the lease. The wife shows up than the principal occupant. A red flag first and says that the husband is out of town should go up if the occupant of the unit is the on business, but she tells you she needs to same person that signs the lease for the commove in with her two kids right away because pany-tenant. Why is the person signing the they have nowhere else to stay. You believe her lease on behalf of a company as opposed to and give her the keys and she moves in. signing it individually? If the company is an About a month later, you still don’t have entity involved in some type of corporate the lease signed by both the husband and housing program, chances are the person wife (only the wife signed), and although the signing the lease on behalf of the entity residents paid their rent, they end up skipwould be an authorized representative who ping out at the end of the second month. is involved in the corporate housing program You send a final account statement to both for the company, not an individual who the husband and wife saying they are responwants to live in a unit. sible for the reletting fee and accelerated rent • Know who is occupying your unit. Every because they skipped out. The husband’s atcorporate housing lease agreement should torney calls and says you can’t hold the husoutline a procedure for identifying, checking band responsible because he didn’t sign the and approving all occupants residing in a lease. You can only hold the wife responsible, unit. Adult occupants should undergo the but she has no income. You realize that it may same nonmonetary checks that residents unbe difficult to hold the husband responsible dergo in your community. If the companyfor breaching a lease that he did not sign. tenant is responsible for paying rent and all A strict policy of requiring a lease be other charges under the lease, monetary signed before keys are given out seems obvichecks (such as employment or income hisous; however, the problem still crops up tory) may not be necessary. However, if you every now and then. Don’t take promises that take steps to confirm the background of the lease will be signed at a later date! In this June 2023
ABODE
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