Junk fees imposed on renters

The Biden administration said recently that they are cracking down on hidden junk fees imposed on renters.

How is this going to work? Will exposing the fees eliminate or reduce them, or have no effect at all?

I’ve watched my 24-year-old kid pay $150 tenant application fee, $200 roommate change fee and the new place she just moved into charges $150 redecorating fee if she leaves after the end of her 1 year lease (but is waived if she stays a 2nd year). Very annoying.

I had several Rentals in the past and never charged this level of fees.

However, I managed my own properties. If there is a Management company involved, these fees probably cover the Owners out of pocket costs.

Mgmt Companies will charge to get a credit report and screen an Applicant and to make up a new or updated Lease.

Roommates do pose a problem. If any move out, they often want to break the lease.

However there are exceptions.
A favorite story was when I rented to 3 guys. The rent came in on time for several years and there were no problems, until I got a call that they were moving out. To my surprise, when I got there, there were 3 roommates but none of the original 3 were still there. They left the place in reasonable condition. I guess I got lucky on these Roommates!

BTW, the Government is part of the problem.
In the early days I could get a Credit report faxed to me with a Phone Call and my Credit Card. Privacy Laws made this more difficult and encouraged the use of Property Managers who had the systems in place to get Credit Reports.
This is not to say Privacy Laws are bad but they do increase costs.

We always charge an application fee. Pulling a credit report and a criminal background check on an applicant is not free. I have also noticed it separates the serious tenants from the “tire kickers”. I can assure you its not much a profit center. We tell the prospective tenants up-front what we are looking for in terms of credit scores, so they can decide if its worth an application fee.

Back when I was a young adult renting, there were no application fees, no credit checks, no criminal background checks, not even last month’s rent up front, and certainly no ‘roommate change’ or ‘redecorating’ fees. So it pains me to hear what my daughter’s having to cough out, just as she’s trying to get herself established.

I can see the rationale behind the application fees and advantages, but I can imagine it’s abused sometimes (as Biden says in the link above).

In the mid-1980s I worked for a state senator, and one of the bills referred to his committee was to require landlords to pay the tenants interest on their deposits. I was a tenant at the time and interest rates were pretty high. At the public hearing, several landlords testified, and their #1 complaint was that in order to pay the tenants the interest, they’d have to get their SSN to set up an escrow account. No one wanted to ask tenants for their SSN. It was a different world back then. The bill died that night for a second reason – no tenants showed up to testify in favor of the bill.

Going back to my original question, what can Biden do about the stupid fees, I’m thinking…nothing?

I’d give it a chance before assuming nothing can be done about outrageous tenant application fees.

But a big part of the problem is just plain ole greed by the opportunistic syndicates and companies that have recently come on the residential rental scene. They see an opportunity to cash in on the scarcity of housing for people like students and lower-income folks. As a landlord I use a service provided by TransUnion called SmartMove. The the price for a full report is $43 and is paid by the applicant directly to TransUnion. I get a full credit report, criminal background check and rating based on past rental history.

I think Biden’s idea to partner with information sources like Affordablehousing.com is a good idea. In his speech he said “They’re updating their websites to show renters all the hidden fees up front so you can know the full cost before they sign a lease.”

Rentals, and any fees that may be imposed are a local or state issue, not federal, and therefore Biden really has no say.

It’s POTUS’s job to lead the country. An effective information campaign espoused from the presidential bully pulpit is among the many tools available for them to accomplish that task.

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Maybe this is a job for Kamala.

She gets stuff done!

What makes those “junk” fees as opposed to any other fee? Were they not mentioned in advance? It seems like the fees are entirely clear and voluntary.

I disagree. Yes, the President can say or espouse anything, but implying the executive branch has any jursdiction on something that is clearly a local matter is laughable.

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  1. For the POTUS to sign an executive order creating a council to create guidelines for business sectors is nothing new. And suggestions originating from the President bully pulpit often have a significant influence on their target audience. That action does not suggest jurisdiction, it infers that that action has an effect on the outcome of the subject being addressed.

  2. As a real estate broker and a landlord, I can tell you that the reach of he Executive Branch’s legal power DOES extend to the local level of real estate transactions. Good examples of that fact are fair housing laws, and issues that deny Constitutional rights to prospective tenants and owners. Most of those issues can manifest themselves in the form of rental fees and rates.

I understand that you disagree with the concept of local governance being overruled by federal law, but it’s a matter fact that it exists right down to you and what you want to do with your property.

Voluntary for the landlords, not the tenants.

The Biden Administration defines junk fees as “unnecessary, unavoidable, or surprise charges
that inflate prices while adding little to no value.” I would say “roommate change” fee is a junk fee – 3 bedroom house, 3 tenants, 1 moves out and the new one moving in pays the roommate change fee (each has a 1 year lease, renewable if they stay). Can’t think of any justification for this. We still don’t know what a “redecorating” fee is, but it sounds like a junk fee to me.

It would help if renters could compare apples to oranges. If one apartment is $750 + fees and another is $1000 and no fees, the $750 might not be a good deal. It sounds like Biden is pushing for that, at least.

My kid also told me that some landlords will require 2 months’ security deposit, like when a tenant (student, no matter their age) doesn’t have a guarantor on the lease, or when their credit isn’t stellar. Was this law based on a few horror stories, or some real statistics proving bad tenants are so common that charging the good people this extra money will make up for the risk?

We have had a couple of instances over 20 years where we asked for an extra months security deposit due to poor credit or past delinquencies. We are always up front with the tenant about why we are doing it and its their choice to proceed or not. There are strict rules that regulate the treatment of security deposits, so its not like we can co-mingle it with rent payments. I don’t see an issue here…

But your tenants are already out the $100-$200 application fee when you ask for the extra deposit, no?

I don’t see how young people can pay 3-4 months rent just to move in – first month, last month, security deposit, maybe extra security deposit. Plus utilities and possible deposits there. And do the same a year or two later when they move again, and put up money on a new place before they’ve even gotten their deposit(s) back from the previous one.

Yes there are rules regarding security deposits in the landlord-tenant codes. After what I witnessed at the public hearing about interest on deposits, you wouldn’t blame me for thinking the codes aren’t developed with accurate data but instead by people who have the money and power.

We charge a $50 application fee to cover the credit and background check and we inform applicants exactly what we are looking for on a credit report BEFORE they apply. You would be amazed how many people think their credit score is in the high 700s and it comes back in the mid 500s because they don’t understand the impact of charge-offs and delinquent debt. Trust me that its better to have no tenant than a bad tenant…

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