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.
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
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.
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
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.
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
Impact on sound tenants
Impact on society as a whole
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.
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
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
When these reasons are asked, more specific questions should be asked to confirm their truthfulness.
The following points should be checked in detail on the submitted identification documents:
Check points for driver's license
Health insurance card checkpoints
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
Confirmation of contact information
Enrollment verification is one of the most effective means of detecting an alibi company. The following methods can provide a more reliable confirmation.
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
Confirmation by different representatives
In addition to simple enrollment verification, the following detailed questions can be used to determine whether or not a company is an alibi:
| Question items | Points to check | Answers you should pay attention to |
|---|---|---|
| Description of the company's business | Can you provide specific and consistent explanations? | Vague or contradictory answers |
| Number of employees | Appropriate answer based on size | Extremely few or many |
| Type of work | Natural work schedule for the type of job | Unnatural working hours and holidays |
| Salary structure | In line with the market rate in the industry | Amounts far out of line with market rates |
| Entry date into the company | Consistency with submitted documents | Time of year different from documents |
The following characteristics and unnatural points may be found in the documents prepared by alibi companies.
Check the formality
Confirmation of content
Examples of unnatural points
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
Characteristics that should be suspected of forgery
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.
Confirmation of the building and office
Investigation of the surrounding environment
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.
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.
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.
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:
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.
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.
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.
Detailed investigation of the facts
Confirmation of legal basis
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
Phase 2: Review of contract terms
If the tenant has the ability to pay, consider changing the terms and conditions, such as
Step 3: Consideration of legal action
If a negotiated settlement is not possible, the following legal measures will be considered:
| Type of action | Applicable conditions | Expected effects | Points to note |
|---|---|---|---|
| Notice of contract termination | In case of serious misrepresentation | Early surrender | Proof of grounds for cancellation is required |
| Request for Surrender | When rent is in arrears | Forced eviction | Time-consuming and costly |
| Claim for compensation for damages | When economic loss occurs | Recovery of loss | Low possibility of recovery |
To prevent damage caused by alibi companies, it is important to take the following preventive measures
Introduction of a multifaceted examination approach
Clarification of screening criteria
Contract clauses for risk mitigation
Optimization of initial costs
By comprehensively implementing these measures, it will be possible to minimize damage caused by alibi companies and realize stable rental management.
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.
Five basic principles for spotting alibi companies
The following actions are recommended for everyone involved in the rental management business:
Immediate actions to be taken
Medium- to long-term initiatives
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.
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
If it is discovered after the contract is signed, you will also be liable for civil damages.
A2: It is appropriate to ask questions within the following scope:
Appropriate questions
Questions to avoid
It is important to keep questions within the scope of business necessity and to be polite to gain their cooperation.
A3. It is possible to evict a tenant for misrepresentation , but the following conditions must be met:
Conditions under which eviction is allowed
Actual procedure
However, it may take several months to a year before the actual eviction.
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
Remaining risks
Therefore, it is important to conduct an appropriate tenant screening in conjunction with the use of a guarantee company.
A5. The following methods are recommended to obtain information on the latest modus operandi and countermeasures:
How to gather information
Continuous learning
INA&Associates Inc. also provides the latest information and support for countermeasures, so please feel free to contact us.