We’re at a really nuanced point in the Toronto area’s rental market. The market continues to be exorbitant, but it’s definitely cooling.
Still, that hasn’t put an end to the complications arising due to the fact that it’s a tough market for renters to break into — even if rents are continually coming down.
According to a figure provided to STOREYS by Menkes Developments, around 50% of rental applications in the last six months have been fraudulent in some capacity.
Director of Menkes Rental Suites Management, Kimberly Sears, further tells STOREYS that the company has screened “over 175 offers to lease” over a six-month course, and of those, “over 90 of them were disqualified due to discrepancies found during the screening process.”
“This could be anything from invalid ID cards, fake credit reports, and manipulated employment letters or pay stubs,” Sears says. “Once we find misleading information, a bigger story typically unfolds from there. Our colleagues in the industry have similarly commented on higher-than-normal averages of fraudulent applicants.”
Toronto realtor with Right at Home Realty Shay Asnani says he has seen a significant increase in fraudulent applications, “particularly over the past year.”
“People will write down that they live at a particular address, and then the person that they've listed as the owner isn't actually the owner of the address," he says. "It's a friend, or something like that." He adds that, as a rule, he’s always scanned rental applications for potential fraud, but that there’s now more of a need than ever before.
“I had a particularly troubling situation where a couple that had applied to a unit that I had listed for rent in the east end had essentially provided fake job letters, fake references, fake credit reports, and they had listed someone who wasn't the landlord as their landlord,” says Asnani. “I contacted the agent who represented their landlord when they were renting that property and I asked that agent, ‘Hey, how were these tenants?’ She told me that they were still in court with them […] and they were a nightmare to deal with: ‘they're still at the place, they're not paying rent.’”
Meanwhile, Sears attributes this nature of increase in fraudulent rental applications to the fact that, for the third straight year, Toronto has been dubbed the most expensive city in Canada, and she cites the Mercers 2024 cost of living city ranking.
“Despite Statistics Canada reporting a 1.9% growth in disposable income per household in Q1 2024, TD economists are reporting a general decline in the debt-to-income ratio for Q2 2024, the lowest level since Q1 2021,” Sears says. “I think the financial struggle of the past couple years is catching up to people, and unfortunately those who might have delinquent payments or spending problems in their past are realizing the consequences now. As a result, it maybe enticing to manipulate one’s employment [and] financial documents hoping no one checks, but we know this will only damage the tenant [and] landlord relationship even more.”
Both Sears and Asnani point out that what we’re seeing play out right now can be, in significant part, attributed to what’s going on with Ontario’s Landlord and Tenant Board.
“With constant delays at the Tribunal level, and some cases taking up to two years to process, landlords need to be more diligent in screening tenant applicants,” Sears says. “A bad tenant can cost a landlord over $25,000 in lost income, not to mention property damage, condo corporation chargebacks, delinquent utilities’ accounts and the associated legal costs for hearings and enforcement.”
“There is too much risk associated with taking a questionable applicant, and as a result of new rules, like landlords being prohibited from taking additional deposits, even when volunteered, in lieu of strong financials, we can see how the system is penalizing both parties versus adapting to the changing market conditions and finding a solution to bridge the gap,” she says.
For Asnani’s part, he’s actively verifying rental applications, as mentioned. “There's essentially a checklist of things that I go through to make sure, because, ultimately, there's a lot of liability on me,” he explains. “Landlords hire me to find them a good tenant, and so I have to make sure that I do everything I can to make sure that that person is who they say they are, and also that they're going to take good care of the place and they're going to pay rent on time — that kind of thing.”
Asnani is sussing out property records for ownership verification, looking at renters’ social media accounts to confirm employment, and using SingleKey to weed out fake credit reports. He’s also jumping on Zoom calls when looking at Equifax reports submitted by clients. This prevents him from dealing with doctored reports.
More broadly, Sears has a plethora of advice for both tenants and landlords. “Come with your financials ready and expect them to be checked thoroughly. If there’s something in your application that might be perceived as questionable, be upfront about it. You’ll have a much bigger chance of success by being transparent,” she recommends to tenants.
For landlords, she urges them to do due diligence — and trust their instincts. “If you don’t have the time or the expertise to do so, work with a rental management company,” she adds. “We offer credit reporting, which offers landlords some assurance for collections if a tenant gets behind, but this service also assists tenants to build their credit with their largest monthly expense, that most don’t get credit for paying on time.”
“I cannot reiterate enough that there are fantastic applicants trying to find units to rent and great landlords waiting to lease them out,” Sears goes on to say. “The fact is that landlords need tenants, and tenants need landlords. Oftentimes in the media, this relationship is portrayed as being adversarial but we don’t have to oppose one side to support the other — it’s possible to advocate for both. In today’s housing market where affordability is a concern for everyone, transparency and respect should be the guiding principles for all participants.”
