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Rental scams are on the rise. In 2021 alone, 11,578 people in the U.S. lost more than $350 million to rental scams, according to the FBI’s Internet Crime Complaint Center.

“There’s a magnitude of rent fraud that happens in commercial real estate,” said Suzanna DaSilva, Commercial Term Lending Treasury Sales Group Manager at JPMorgan Chase. “It can be check, ACH, cash, digital—it can even go as far as a property manager committing fraud.”

It’s important for multifamily owners and operators to understand their payments fraud risk and protect their businesses from common types of rent payment fraud. 


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Rental check fraud

Checks are the payment method most vulnerable to fraud, according to the 2023 AFP Payments Fraud and Control Survey Report. In 2022, 63% of respondents reported their organizations faced some kind of check fraud activity. 

“Checks just touch so many hands that they’re easier to manipulate,” DaSilva said. While check use has decreased overall, checks are still commonly used for multifamily rent payments. 

A common scam occurs when an applicant or renter provides you with a cashier’s check for too much money. The renter then urgently asks you to refund the difference. Only after you provide the refund do you discover the check was counterfeit. 

In other instances, the applicant writes a check for the correct amount, but backs out of the lease agreement and requests a quick refund. To prevent check fraud, train your employees to never accept or cash checks written for the wrong amount. Your employees should also make sure a check has cleared before issuing any sort of refund.

Cash rental payment fraud

Documentation is key when collecting rent payments. And it’s especially important when renters pay with cash. 

“When there's a historical track record of a landlord collecting rental payments via cash, there’s a level of comfort that happens,” DaSilva said. Sometimes owners become too comfortable and fail to properly document payments. 

Without documentation—such as a written record or receipt—it’s hard for owners to show that a renter has missed a payment or underpaid rent. That could make it difficult to enforce the terms of the lease.

ACH rental fraud

Fraudsters often exploit ACH payments’ time delay in common scams, which include:

  • ACH debit chargebacks: With this type of fraud, a resident claims to their bank that an ACH debit was unauthorized and urgently requests a refund. Especially if they don’t have a history of paying via ACH, the resident may be able to successfully dispute the charge and pull the money from your account. While this can be easier for you to contest if there’s a lease agreement in place, it can also be frustrating and time-consuming.
  • ACH rent deposit scams: Asking residents to electronically deposit rent money into your account using your account number and routing number means you can’t reject the payments—which could compromise your ability to take action if necessary. Additionally, with that same account number and routing number, fraudsters can make unauthorized ACH payments and transfer money from your account. 

Credit card chargebacks

Digital payment methods aren’t fraud-proof, either. Similar to ACH debit chargebacks, credit card chargebacks happen when renters dispute charges to their cards. Scammers take advantage of this process and may dispute charges for rent. If the bank moves forward with the chargeback, multifamily property owners and operators lose the funds.

How to prevent rent payment fraud

“It's challenging to stop rent fraud altogether, but we take a lot of pride in helping clients be proactive instead of reactive,” DaSilva said. 

To protect against rental scams and fraud, multifamily owners and operators can:

  • Thoroughly screen applicants: It’s critical to conduct a comprehensive screening of applicants, which should include an identity verification, and criminal and credit checks. You can also use resources to examine an individual's payment history or see if there are any claims against them. And don’t just request personal and employment references—follow up. 
  • Digitize the rent payment process:  “More than anything, make sure you have the right infrastructure to collect rent payments,” DaSilva said. Adopting rent payment technology can help make the rent payment and collection process more efficient and reduce fraud.
  • Train your employees on best practices: Understanding each payment method’s fraud vulnerabilities can help you from becoming a victim. For example, you and your employees should never accept or cash checks written for the wrong amount or share your ACH account information with residents.
  • Work with a financial institution that understands your needs: It’s important to work with a commercial real estate-specific banking team experienced in fraud protection. Dedicated bankers can provide valuable industry knowledge and determine the best products and control settings for your needs.

Learn how multifamily property owners and operators can protect their businesses from wire fraud.

© 2023 JPMorgan Chase & Co. All rights reserved. JPMorgan Chase Bank, N.A. Member FDIC. Visit jpmorgan.com/commercial-banking/legal-disclaimer for disclosures and disclaimers related to this content.

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