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I'm writing a mystery story right now that takes place in Texas and currently the motive is that the victim - a real estate agent - typically leases property to people (particularly people starting a small business) at almost dirt cheap prices but then eventually come to increase the rent to insane prices it forces them away, the victim taking the land for themselves (and to ensure this would happen, they would use their connections to make sure the business would fail, yada yada yada).

I'm fairly sure this is some sort of real estate fraud, but what type of real estate fraud would describe this? Is this even a fraudulent practice in the first place?

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    Why would the RE agent lease out the property at all, if their purpose is to gain control of it, surely they could just skip the "rent out to small business" and "wait several months" and "force small business to close" steps?
    – user4657
    Commented Nov 13, 2021 at 7:31
  • The question is when is this? because modern leases by default have a default runtime before you can adjust rates at all
    – Trish
    Commented Nov 13, 2021 at 9:56
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    @Trish It's not uncommon for a lease for new businesses to have an escalation clause to allow the business to build cash flow. This may mean "free" rent for the first 2-3 months then catch-up on the remaining months.
    – Ron Beyer
    Commented Nov 13, 2021 at 14:20
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    Responding to @Nji, it was me waking up this morning to realize that maybe this scheme doesn't make much logical sense in that regard and perhaps I should reconsider what the scheme is entirely.
    – Justin Sewell
    Commented Nov 13, 2021 at 14:29
  • This doesn't sound like fraud to me. Sharp business practices yes, but generally not illegal and not necessarily deceptive. The word that comes to mind is "gentrification" but I don't think that is what you are looking for.
    – ohwilleke
    Commented Dec 13, 2021 at 19:56

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It is not fraud to have a rent that will increase after a period of time, indeed it is a common and legitimate practice. It would be unethical, and possibly fraudulent, if an agent or broker convinced the would-be tenant to take on a property beyond the tenant's means after the rent increase took effect. That is not common enough to have a special name as far as I know, it would simply be a form of deceptive marketing, or perhaps predatory lending.

If the increase were somehow hidden that would be fraudulent, but it is hard to see how it could work, as any increase would need to be spelled out or at least authorized in the lease to be legally binding. The only way I can see such a scheme working is if the broker found a somewhat naive victim who simply did not read or did not understand the previsions for the later increase.

I recall a somewhat similar scheme in a work of fiction, The Mandeville Talent By George Higgins (author of The Friends of Eddie Coyle). In that book the schemer loaned the victim 50% of the purchase price of a property that the victim intended to convert to a resort on a 10-year mortgage, calculating that the resort would not earn enough to make the large balloon payment, and the schemer would wind up owning the entire property for half-price, plus expensive improvements made by the victim. When the resort did well enough that it was clear the victim would be able to make the balloon payment, the schemer (who was associated with organized crime) had the victim killed so that it could be acquired cheaply from the victim's estate. That could also be called predatory lending, I suppose. A well-written book, IMO.

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I can see two angles to this for a fictional villain-later-victim:

  • The agent isn't just brokering real estate, the tenants are getting into a franchise agreement with an unsustainable business case. The franchisees are required tu buy overpriced junk from the franchise and pay fees on top of that for the use of the trademarks. This might be legal.

  • The real estate agent, the bank, and possibly others are accomplices. The idea is to have the buyers sink their life savings into a business, have the business fail, and then have the bank foreclose. Through various hidden fees and transactions, in the end the schemers have the real estate back, plus all the money their victims had. This might be illegal but hard to prove.
    (What I had in mind here goes beyond predatory lending, with the agent providing overpriced contractors, etc., to extract more money.)

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  • Curiously, what type of fraud scheme would that last idea be described as?
    – Justin Sewell
    Commented Nov 13, 2021 at 15:55
  • @Justin Sewell I would call that "predatory lending" That also covers cases where a broker lends to someone who cannot afford the property in the long ruin in order to collect closing costs and/or commissions. Much sub-prime real estate lending during the most recent housing bubble was predatory in this sense. Predatory auto loans to those who cannot really afford the car being sold as also not uncommon. Similar schemes occur in the rent-to-own appliance market, and in payday lending.
    – David Siegel
    Commented Nov 13, 2021 at 17:08
  • @JustinSewell, depends on who knows what and where the money goes. A loans B money to pay C might be legal where A loans B money to pay A is not.
    – o.m.
    Commented Nov 13, 2021 at 17:20
  • Note that the first angle was allegedly how several fast-food franchises operated (Quizno's?), and may underlie some of the "gig economy" jobs/franchises.
    – Clockwork-Muse
    Commented Nov 15, 2021 at 3:48
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    Getting improvements done on the tenants' dime and then forfeiting the lease would make a certain amount of sense (and is also not necessarily illegal). Abuses of rent to own contracts would be another angle.
    – ohwilleke
    Commented Dec 13, 2021 at 19:58

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