How to Identify and Prevent Alibi Companies in Rental Management

In the rental management business, tenant screening is an important process that determines the stability of property management. In recent years, however, an increasing number of prospective tenants have been using alibi companies to fraudulently pass the screening process, posing a serious problem for rental management companies and landlords.

Alibi companies are companies that issue false certificates of income or employment, pretending to be employed by a company where they are not. These deceptive practices have resulted in many cases where prospective tenants who would not normally pass the screening process end up signing contracts.

In this article, we will explain in detail the reality of alibi companies and how to spot them based on our long years of experience in the rental management business as INA & Associates, Inc. We will provide you with practical knowledge to establish an appropriate screening system and achieve stable rental management.

What is an alibi company?

Definition and Structure of an Alibi Company

An alibi company, also formally known as an "enrollment company," is a company that provides services to make it appear as if the user is working for the company. They are mainly used by watermen, freelancers, part-time workers, self-employed, and unemployed people to pass the tenant screening process for rental contracts.

These companies establish paper companies and provide the following services

• Answering phone calls to verify enrollment
• Preparing and issuing pay stubs
• Preparation of proof of employment
• Falsification of withholding tax slips
• Preparation of job offer letters

Fees for the use of alibi companies generally range from several tens of thousands to several hundred thousand yen, and in most cases, the services are provided for a limited period of time until the lease contract is concluded.

Background of the Use of Alibi Companies

Stable income and a reliable place of employment are important factors in screening tenants for rental properties. However, the following occupations may be disadvantageous even if they actually have sufficient income:

Occupations that are likely to be disadvantageous in the screening process

• Water business (cabaret clubs, host clubs, etc.)
• Sex industry
• Freelancers and sole proprietors
• Part-time job
• Temporary worker
• Unemployed/job seeking

Increasingly, people in these professions are using alibi companies to move into properties with better conditions. Especially in popular urban areas, the demand for alibi companies is increasing as screening standards are set more strictly.

Impact on the Rental Industry

The presence of alibi companies is having a serious impact on the rental industry as a whole, including the following

Impact on landlords and management companies

• Increased risk of rent delinquency
• Trouble with neighbors
• Decrease in property values
• Increased management costs

Impact on sound tenants

• Difficulty in moving in due to stricter screening
• Stricter guarantor requirements
• Increased initial costs

Impact on society as a whole

• Decline in confidence in the rental market
• Widespread fraud
• Increase in legal troubles

In light of this situation, we in the rental management business need to properly identify alibi companies and strive to maintain a healthy rental market.

Specific Methods for Detecting Alibi Companies

Basic Checkpoints

In order to detect the use of an alibi company, it is important to pay close attention at each stage of the tenant screening process and confirm the following basic checkpoints

1. check the reason for moving

A prospective tenant's reason for moving is an important clue to infer his/her living and financial situation. Many people who use alibis tend to give vague reasons, such as the following

Reasons for moving to a new location that should be noted

• I want to live closer to work" (specific commuting time and transportation are unclear)
• I want a change of environment" (no specific reason given)
• Family reasons" (tends to avoid details)

When these reasons are asked, more specific questions should be asked to confirm their truthfulness.

2. verifying the authenticity of identification

The following points should be checked in detail on the submitted identification documents:

Check points for driver's license

• Match between the photo and the person's facial features
• Consistency of the contents of the description
• Traces of forgery (blurred letters, differences in color, etc.)
• Confirmation of expiration date

Health insurance card checkpoints

• Consistency between the name of the employer and the declared contents
• Validity of the insurer number
• Consistency of issue date and starting date of employment

3. detailed investigation of the employer's information

The most important factor in detecting an alibi company is a thorough investigation of the employer's information. The following procedures are used to verify the information:

Confirmation of the company's existence

• Obtain a certified copy of the company's corporate registration
• Confirmation of the contents of the company's website
• On-site inspection of the company's location
• Investigation of the company's reputation in the industry

Confirmation of contact information

• Verify the existence of the representative telephone number
• Naturalness of telephone response
• Knowledge level of the representative
• Answers to questions about the company's operations

Specific checks during enrollment verification

Enrollment verification is one of the most effective means of detecting an alibi company. The following methods can provide a more reliable confirmation.

Multiple phone calls

Since it is often impossible to detect an alibi company with a single enrollment check, multiple checks can be made using the following methods

Confirmation at different times of the day

• At different times during business hours
• During lunch break
• After business hours (checking the contents of the answering machine)

Confirmation by different representatives

• Separate calls by multiple representatives
• Confirmation by different questions
• Check for consistency of answers

Confirmation by detailed questions

In addition to simple enrollment verification, the following detailed questions can be used to determine whether or not a company is an alibi:

Confirmation of details of submitted documents

The following characteristics and unnatural points may be found in the documents prepared by alibi companies.

Check points of pay slips

Check the formality

• Company name, address, and telephone number
• Condition of the seal stamp
• Paper quality and printing condition
• Uniformity of layout

Confirmation of content

• Breakdown of basic salary and various allowances
• Deduction of social insurance premiums
• Basis for income tax calculation
• Consistency of payment dates and payees

Examples of unnatural points

• Inappropriate amount of deduction for social insurance premiums in relation to income
• Incorrect income tax calculation
• Company seal is unclear or inconsistent
• Consecutive monthly statements are in different formats

How to verify the Gensen Choshuhyo (Certificate of Withholding Tax)

Gensen Choshuhyo is an important document to confirm annual income and tax amount, but it is often forged by alibi companies:

Items to be checked

• Consistency between the amount of payment and the amount after deduction of employment income
• Basis for calculating the amount of income tax
• Deductions for social insurance premiums, etc.
• Consistency between the location of the company and the name of the tax office

Characteristics that should be suspected of forgery

• Obvious errors in the tax calculation
• The company seal is unclear or its shape is unnatural
• The quality of the paper is extremely poor
• Inconsistencies in the information

Conduct on-site investigation

If it is difficult to make a judgment based on documents or telephone confirmation alone, an on-site inspection that actually visits the company's location is also an effective means.

Points of the survey

Confirmation of the building and office

• Installation of signage and nameplates
• Consistency between the size of the office and the number of employees
• Actual status of sales activities
• Reputation from the neighborhood

Investigation of the surrounding environment

• Whether the location is suitable for the type of business
• Existence of other companies in the same industry
• Convenience of transportation access
• Actual status of commercial activities

However, when conducting a site survey, sufficient care must be taken to ensure that the other party does not realize that you are conducting a survey. It is also important to conduct the survey within an appropriate scope so as not to invade privacy.

Risks and remedies in the event of failure to detect an alibi company user

Risks of Failure to Spot a Resident Using an Alibi Company

If a tenant who uses an alibi company is not detected and a contract is signed, the following serious risks may occur to the landlord or management company.

Economic risk

High probability of rent delinquency

Many tenants who use alibi companies have problems with their ability to pay rent because their reported income is false. If their actual income is insufficient to pay rent, there is a high probability that they will fall into arrears early after moving in.

Difficulty in collecting arrears

Tenants who signed contracts with false work information have no real contact information or source of income, making it extremely difficult to collect delinquent payments when they become delinquent. Legal proceedings also increase time and costs significantly because accurate information cannot be ascertained.

Problem of restoration costs

In many cases, tenants who are in financial difficulties are unable to bear the cost of restoring the property to its original condition when they vacate, and the landlord is forced to bear the cost.

Management Risks

Occurrence of neighborhood problems

Some tenants who use alibi companies to move in may have attitude problems, and there is a risk of the following problems occurring:

• Noise problems
• Violation of garbage disposal rules
• Inappropriate use of common areas
• Unauthorized subletting

Decrease in property value

Ongoing problems and delinquency issues may damage the overall reputation of the property, leading to a decline in property value and an increase in vacancy rates.

Legal Risk

Risk of voiding the contract

If false declaration at the time of tenant screening is discovered, it may be grounds for invalidation or termination of the lease contract. However, the actual cancellation procedure will take time and cost a lot of money, and the tenant will have to bear the burden of rent income and management costs in the meantime.

Difficulty in claiming damages

In most cases, when claiming compensation from tenants for damages caused by false declarations, recovery is difficult because the actual financial resources and whereabouts of the other party are unclear.

What to do after discovery

The following is a step-by-step explanation of what to do if the use of an alibi company is discovered after the contract is signed.

Actions to be taken immediately

Detailed investigation of the facts

• Identification of the scope and content of the false declaration
• Investigation of the actual source of income and place of employment
• Sorting out discrepancies between the contract documents and the actual situation
• Collection and preservation of evidentiary materials

Confirmation of legal basis

• Confirmation of clauses regarding false declarations in the contract
• Consideration of applicable legal measures
• Consultation with lawyers and other experts

Step-by-Step Procedures

Phase 1: Direct negotiation with the tenant

First, confirm the facts with the resident and discuss how to proceed. At this stage, the following points are emphasized

• Calm and fact-based discussion
• Confirmation of the tenant's ability to pay rent in the future
• Consideration of the possibility of continuing the contract
• Seeking a solution

Phase 2: Review of contract terms

If the tenant has the ability to pay, consider changing the terms and conditions, such as

• Setting up an additional co-signer
• Increasing the security deposit
• Reducing the rent (depending on the property's terms)
• Obligation to provide regular proof of income

Step 3: Consideration of legal action

If a negotiated settlement is not possible, the following legal measures will be considered:

Reinforcement of preventive measures

To prevent damage caused by alibi companies, it is important to take the following preventive measures

Reinforcement of screening system

Introduction of a multifaceted examination approach

• Independent examination by multiple personnel
• Utilization of external examination organizations
• Use of AI technology to determine the authenticity of documents
• Strengthening cooperation with credit bureaus

Clarification of screening criteria

• Establishment of screening criteria by occupation
• Detailed verification items for income verification documents
• Establishment of standard procedures for enrollment verification
• Response flow when suspicious points are discovered

Review of contract terms and conditions

Contract clauses for risk mitigation

• Strict termination clauses for false declarations
• Obligation to submit proof of income on a regular basis
• Stricter requirements for guarantor eligibility
• Strengthening of cooperation with guarantee companies

Optimization of initial costs

• Review of security deposit and key money settings
• Consideration of increasing security deposits
• Extension of prepaid rent period
• Obligation to use a guarantee company

By comprehensively implementing these measures, it will be possible to minimize damage caused by alibi companies and realize stable rental management.

Conclusion

The problem of alibi companies in rental management goes beyond mere falsification of documents and has become a serious social issue that undermines the credibility of the entire rental market. By properly implementing the methods for detecting and dealing with alibis described in this article, it is possible to maintain sound rental management.

Reconfirmation of Important Points

Five basic principles for spotting alibi companies

1. Conduct multifaceted screening - Comprehensive judgment based on a combination of document verification, enrollment verification, and interviews
2. Verification through detailed questioning - ask a series of specific, detailed questions, not just a superficial check
3. Multiple verifications - Do not make a decision based on a single verification, but verify multiple times at different times and in different ways.
4. Leverage expertise - stay up-to-date on industry trends and tactics and take the latest countermeasures.
5. Preserve evidence - Collect and preserve evidence appropriately in case of detection.

Next Action Plan

The following actions are recommended for everyone involved in the rental management business:

Immediate actions to be taken

• Review and strengthen current screening procedures
• Provide education and training to staff
• Establish a system of cooperation with external professional organizations
• Review of contract clauses

Medium- to long-term initiatives

• Establishment of information sharing system with industry associations
• Introduction of an examination system utilizing the latest technology
• Improvement of legal response capabilities
• Continuous improvement of preventive measures

INA&Associates Inc. provides solutions to these issues by utilizing the latest technology and our extensive experience. If you have any questions about your rental management needs, please contact our experts.

Frequently Asked Questions

Q1: Is it completely illegal to use an alibi company?

A1. While the service of an alibi company itself is not directly illegal (although it is most likely a crime), depending on the purpose of use, you may be charged with the following crimes

• Fraud - entering into a contract with false information (up to 10 years in prison)
• Forgery of private documents - using forged documents (imprisonment from 3 months to 5 years)
• Attempted fraud - punishable even if discovered before the contract is signed

If it is discovered after the contract is signed, you will also be liable for civil damages.

Q2: If I feel suspicious during the enrollment check, to what extent should I ask detailed questions?

A2: It is appropriate to ask questions within the following scope:

Appropriate questions

• Basic information about the company (nature of business, number of employees, etc.)
• Applicant's work status (department, position, years of service, etc.)
• General working conditions (working hours, holidays, etc.)

Questions to avoid

• Questions related to personal privacy
• Detailed salary amounts
• Information related to personnel evaluation

It is important to keep questions within the scope of business necessity and to be polite to gain their cooperation.

Q3. Is it possible to evict a tenant who used an alibi company?

A3. It is possible to evict a tenant for misrepresentation , but the following conditions must be met:

Conditions under which eviction is allowed

• The contract clearly stipulates a clause for termination due to false declaration.
• The fact of false declaration can be objectively proven.
• The false declaration involves an important element of the contract
• The relationship of trust has been seriously damaged

Actual procedure

1. Detailed investigation of facts and collection of evidence
2. Sending a notice of contract cancellation
3. Negotiation of voluntary eviction
4. Implementation of legal procedures (mediation, lawsuit)

However, it may take several months to a year before the actual eviction.

Q4. If I use a guarantee company, will the alibi company problem be solved?

A4. Using a guarantee company reduces the risk of rent delinquency, but does not completely solve the alibi company problem:

Advantages of using a guarantee company

• Subrogation in the event of rent arrears
• Reminder service on behalf of the tenant
• Support for legal procedures

Remaining risks

• Neighborhood troubles and management problems
• Non-payment of restoration costs
• Deterioration of the property's reputation
• Cases falling under the warranty company's disclaimer

Therefore, it is important to conduct an appropriate tenant screening in conjunction with the use of a guarantee company.

Q5. How can I get information on the latest modus operandi of alibi companies?

A5. The following methods are recommended to obtain information on the latest modus operandi and countermeasures:

How to gather information

• Participation in training sessions of industry associations (e.g., National Association of Real Estate Agents for Leasing and Property Management)
• Subscribing to specialized magazines and industry media
• Participation in information exchange meetings with peers
• Collaboration with law firms and research firms

Continuous learning

• Regular in-house training
• Sharing and analysis of the latest case studies
• Periodic review of countermeasure methods
• Guidance by outside experts

INA&Associates Inc. also provides the latest information and support for countermeasures, so please feel free to contact us.