It was recently reported in the Palm Beach Post that Federal authorities had arrested and charged three Palm Beach County men with perpetrating an “elaborate fraud scheme” to take possession of at least 80 homes for the purpose of collecting hundreds of thousands of dollars in rent and deposits.
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The properties involved were owned by a well known and respectable Georgia based Real Estate Investment Trust (REIT). The alleged perpetrators broke into the homes, changed locks and lock boxes in order to lure interested tenants into signing leases and writing checks or paying cash for advanced rent and security deposits. To lend credibility to their venture, they also set up a Florida Corporation with a similar name to carry out their scheme, according to authorities.
During the real estate meltdown, due to an over abundance of foreclosures and short sales, it was not uncommon to hear of isolated instances where people were renting out homes that they either did not own or had abandoned in a foreclosure or short sale. Because the volume of activity was overwhelming for banks, owners and the courts, it was not unheard of for tenants to pay rent for months or even several years before discovering that the people they were paying rent to didn’t actually own the property or have the right to rent it out.
While this kind of fraud is unusual, it is still a good idea to play it safe. And since an ever increasing number of people are finding it necessary to rent instead of own, here are some important tips to keep in mind if you are planning to rent:
- Use a professional real estate agent to locate a property and negotiate the terms of your lease. Most properties available are on the MLS (Multiple Listing Service), which is what real estate agents use to search for properties for their clients. The only people who can list properties on the MLS are real estate agents. Real estate agents are valuable resources and usually can negotiate better terms on your behalf. Real estate agents who are also members of the National Association of REALTORS® are regulated by the state also adhere to a very strict code of ethics designed to protect you.
- Use a Florida Bar Association approved lease. These leases are written to give you all the protection of Florida law. (Chapter 83.000 of Florida statutes governs landlords and tenants). If a landlord/owner uses a lease that does not state it is Florida Bar Approved, be sure to check it out thoroughly before signing it.
- If you find a property on your own which is not listed by a real estate agent, you should check with the county tax records to see who actually owns the property. If the property is corporate owned, check with the Florida Division of Corporations, (www.sunbiz.org). and you can find out who owns the corporation. Any discrepancy in ownership, particularly with who rent checks and security deposits are to be paid should be questioned and investigated thoroughly before signing anything or handing over any money. As an added protection you might want to check court records to see if the owner is in a lis pendens (foreclosure). If so, they may not even have the legal right to rent the property to you.
- Do not pay cash under any circumstances. If you do not have a checking account, go to a bank and purchase a cashier’s check. A cashier’s check is traceable, so if needed you can obtain proof of where the money went. You can also stop payment on a cashier’s check. Money orders can be used, however, they aren’t as easy to trace or to stop payment. If a landlord/owner refuses to take anything other than cash, walk away. And, by all means, avoid paying your monthly rent in cash without getting a signed receipt from the landlord.
Since Florida is a state with a lot of seasonal rental properties, here are a few added things to consider:
- If using a private service such as those found on the internet, check them out thoroughly before signing anything or paying any fees.
- Again, as with standard rentals, you can use both the county tax records and state corporate records to be sure the owner of the property is also the landlord. If rent is being paid directly to a third party, be sure to carefully check that the third party is duly authorized to collect that rent.
- If at all possible, check out the property before you sign a lease. There is nothing more disappointing than arriving for your vacation and finding that the property you are renting for several months is not what you expected.
As in any type of financial transaction, when you plan to rent property, it is always best not to proceed blindly and to check everything out carefully before signing anything or handing over any money. Using a real estate professional is the best way to avoid any pitfalls or mistakes when you rent a property. When it isn’t possible to use a real estate professional, remember the old adage, “caveat emptor” (let the buyer beware), and if you have any doubts, check it out.