When you move into a new apartment or rental home, you expect your new landlord to ask for first, and maybe last month’s rent, and possibly a security deposit. After that, all you need to do is make sure you pay your rent on time, right?
Not these days.
Over the last decade, renters have been subject to a welter of new fees, many for amenities or services once included in their rent. The change coincides with the investment of billions of dollars in rental properties by private-equity firms, hedge funds, real estate investment trusts and other institutional investors.
These firms boost their profits by cutting costs and increasing revenue — not just by raising rents, but also by collecting more in fees. One private-equity owned company disclosed it collected $14 million in fees and another $12 million in unrefunded deposits in a single year.
Back to the future
“This maneuver on the part of landlords is not new,” says Janet Portman, co-author of the book “Every Landlord’s Legal Guide.” “Back in the ’80s landlords did all sorts of things to rake in more revenue.”
One beauty was the “Tenant Initiation Expense Reimbursement fee” landlords collected when people moved in. Tenants challenged the fee in civil courts and judges ruled that it was nothing more than a nonrefundable security deposit and thus illegal.
Some fees have been around for years and can be found in most leases. Application fees, for one, cover the landlord’s cost of running a credit check to make sure you can afford the rent. Late fees and early-termination fees reimburse landlords for losses when tenants don’t fulfill their obligations in leases.
Other fees are new and not widely known: an elevator-reservation fee, a decoration fee and a pipe-snaking fee are a few examples. The legality of such fees varies from state to state. A few outlaw certain fees, others say fees are unenforceable if not in the lease. Most have minimal renter protections. States are more willing to limit certain levies, such as late fees; Maine caps them at 4% of monthly rent; landlord-friendly Texas allows as much as 12%.
An encyclopedia of fees