Beware of Rental Fraud: When Companies Lease Properties and Disappear with Tenant Money
- Thota Devaraju
- Oct 5
- 3 min read
In recent months, several property owners and tenants have approached Sairam Law Associates with a troubling issue of Rental Fraud — companies taking properties on lease from owners, sub-leasing them to multiple tenants, and later vanishing with the collected rent and deposits. This practice is not only unethical but also creates serious legal and financial problems for both the owner and the tenants involved.
The Emerging Rental Scam Model
Here’s how the scam typically works:
Property Owner’s Side:The owner rents out a residential or commercial property to a corporate entity under a registered lease agreement. The company convincingly presents itself as a co-living, serviced apartment, or corporate housing operator.
Company’s Actions:After obtaining possession, the company sub-leases the same property (or multiple properties) to numerous tenants, collecting hefty advance deposits and monthly rents in its name.
Tenant’s Side:The tenants, believing the company is authorized to sublet, move into the premises and pay rent regularly — until one day communication stops, the office shuts down, and the company’s representatives vanish, leaving everyone in confusion.
Aftermath:
The owner struggles to regain possession because tenants are physically occupying the property.
The tenants discover their agreements are invalid or not directly with the property owner, leading to eviction notices and financial losses.
Example Case: How the Rental Fraud Typically Happens
To illustrate this issue, let’s consider a real-world style example:
A property management company took 30 residential flats on lease, each at a monthly rent of ₹30,000 from different property owners, promising regular rent payments and professional maintenance. Under this corporate arrangement, the owners assumed they were dealing with a reputed rental operator.
However, after obtaining possession, the company sub-leased each flat to individual tenants, collecting ₹10 lakh as a three-year advance deposit per flat. With this model, the company collected nearly ₹3 crore in total from unsuspecting tenants.
For the first few months, rent payments to the owners were made regularly to maintain trust. Later, the company stopped paying rent, shut down operations, and absconded with the tenants’ advance deposits.
As a result:
The owners could not access or rent out their own properties because tenants were occupying them under invalid agreements.
The tenants lost their deposit money and were left with no legal claim against the vanished company.
Both sides faced costly legal battles and police complaints to recover possession and losses.
Legal Remedies and Actions
For Property Owners:
Ensure the tenant (company) has a legal existence and valid business registration (CIN/GST/Trade License).
Restrict sub-leasing in the lease agreement under clear terms.
Include a “No Subletting without Written Consent” clause.
Register every lease deed under Section 17 of the Registration Act for validity.
Regularly visit or inspect the property through authorized representatives.
For Tenants:
Always verify whether the person or company offering the property is the true owner or an authorized agent.
Request a copy of the property ownership (Khata, Sale Deed, or Encumbrance Certificate).
Avoid paying high deposits or large advance amounts to intermediaries.
Ensure the rental agreement mentions the actual property owner’s consent for subleasing.
Cross-check the company’s background and physical office existence before signing any lease.
Preventive Legal Precautions
Police Verification: Owners can require company tenants to undergo local police verification before occupying the property.
Digital Stamp Paper & e-Registration: Register all rental agreements online through official government portals like Kaveri Online Services in Karnataka.
Legal Review: Get your lease or rental agreements reviewed by a property law expert before execution.
Notice Clauses: Clearly mention termination and eviction clauses to handle fraudulent or non-paying tenants quickly.
How Sairam Law Associates Can Help
At Sairam Law Associates, our real estate legal experts assist both property owners and tenants with:
Drafting and registering legally sound rent and lease agreements.
Conducting due diligence on companies and tenants before agreement execution.
Handling property disputes arising from rental fraud or illegal sub-letting.
Representing parties before civil courts, police authorities, and consumer forums.
Final Words
Rental market convenience should never come at the cost of security. Whether you are a property owner or tenant, due diligence and legally structured agreements are your best shields against dishonest companies or intermediaries. Always consult a legal professional before entering any rental or sub-lease arrangement — prevention is far more effective than legal recovery later.
Sairam Law Associates
Your Trusted Legal Partner in Bengaluru
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📩 adv@sairamlawassociates.in Disclaimer
The information provided in this article is intended for general awareness and educational purposes only. It does not constitute legal advice or create any attorney–client relationship. Property laws and rental regulations may vary based on jurisdiction and specific case circumstances. Readers are advised to consult a qualified property law professional or advocate before taking any legal or financial action based on the content of this page.
Sairam Law Associates assumes no liability for any loss, damage, or inconvenience arising from reliance on the information provided herein.