Whole building investment scam widens

The scandal surrounding dubious lending practices and falsified loan documents on investment properties widened last week with the Asahi Shimbun newspaper obtaining over 1,000 records of correspondence that allegedly implicates real estate agents and several Suruga Bank employees. The correspondence, which took place via email and LINE messages, is alleged to show the bank staff receiving numerous falsified documents including faked rent rolls for investment buildings.

In recent years, unethical real estate spruikers have been targeting company employees, doctors and other high-income salaried workers to offer them ‘high-yielding’ whole building investments, such as rental flats, in regional areas with prices ranging from 10s to 100s of millions of Yen. The real estate agency introducing the property has a tie-up with Suruga Bank to provide financing. Suruga’s financing is highly dependent on the property’s rent roll, with more financing provided for buildings with a higher level of rental income.

According to the Asahi newspaper, the real estate agents sent both genuine and faked rent rolls to the bank via email. The rental income on the faked documents was inflated by as much as 1.7 times. When the bank’s valuation team were going to inspect the property, the real estate agent would make sure that curtains were installed in the vacant rooms to make them appear occupied from the exterior, and connect electricity to those rooms.

The regional bank has been under pressure after it was discovered that income statements and other documents used to obtain loans for buyers of share houses were falsified. Initially the victims were thought to have been limited to investors of one particular failed share house company, but it is now becoming evident that the practice is potentially widespread throughout various investment spruikers.

In 2017 the bank identified potential improper lending and abruptly stopped working with several real estate …continue reading