Property owners commonly charge fees for legitimate reasons, while others charge them to increase revenue. If all the fees were reflected in the rent, it would increase, and the price would be less competitive. Thanks to a bill signed into law in October by Governor Newsom, starting in July you must clearly notify tenants and potential tenants the fees they may be charged.
Senate Bill 478 received wide support in the legislature. It doesn’t outlaw specific fees, it just requires that they be clearly stated. The charging of hidden fees is compared to the long-illegal “bait and switch” practice of advertising something at one price while the actual cost is higher. The new law states in part that the following would be illegal:
“(29) (A) Advertising, displaying, or offering a price for a good or service that does not include all mandatory fees or charges other than either of the following:
(i) Taxes or fees imposed by a government on the transaction.
(ii) Postage or carriage charges that will be reasonably and actually incurred to ship the physical good to the consumer.”
The state’s Attorney General or someone harmed by these practices can file a legal action. That person can seek an injunction and restitution. If enforced by the state, there are potential criminal penalties of jail time and a fine.
The White House in July announced its efforts to confront “junk fees” by landlords, including commitments by online listing services to list fees in addition to rent. Critics of these fees claim they distort the market when tenants aren’t made aware of them. A $1500/month apartment may be a $1750/month payment when fees are included.
What is a “Junk” Fee?
A “junk” fee is a highly inflated or unnecessary fee charged on renters not to cover a landlord’s actual costs but to generate revenue or shift costs traditionally part of the rent payment. They’re not included in the rent price to make a unit appear more affordable than it is and may be used to try to skirt local ordinances or state laws.
What Types of “Junk” Fees Do Some Landlords Charge?
The White House announcement cites the results of a survey about rental fees by the National Consumer Law Council (NCLC). Their 2022 survey of legal services and nonprofit attorneys received 95 responses from 26 states and Washington, DC. Some of the “junk” fees they report include:
- Nonrefundable application fees can be higher than the landlord’s cost to process the application and could be assessed even when no rental unit is available. Some property owners take applications and collect fees from applicants they know won’t be approved. A California housing advocate stated they routinely see application fees from $50 to $150 per person
- Late payment fees beyond what’s allowed by state law
- California housing advocates stated they’ve seen utility fees for group billing and “ratio utility billing system” contract fees, which are “onerous and impossible for the tenant to investigate or challenge.”
- Many landlords don’t want to be paid by check in person. If that happens, they may charge a fee. If they prefer to be paid online or through a third party, fees the tenant must pay apply
- Some tenants pay fees for what’s usually part of rent – liability insurance covering the landlord, not the tenant. Some leases require tenants to get their own renter’s insurance. One California advocate reported a landlord who didn’t allow the tenant to shop around for their coverage. They chose it for the tenant and required them to pay for it
- Often, state laws mandate landlords to post notices concerning a tenant’s rights and responsibilities. A Utah advocate stated local landlords typically charge $50 for printing a notice on a piece of paper and taping it to a tenant’s door
- If the building has a new corporate owner, they commonly present new leases to tenants with more fees and increased costs. A Maryland advocate stated that even though tenants have existing leases, new corporate landlords try to implement fees and change the lease before it expires. A Texas advocate stated corporate landlords impose extreme fee increases to force existing tenants out so they can charge higher rent to new tenants
- Advocates report landlords charging fees instead of a security deposit to avoid laws governing them. A tenant leaving a unit may get their security deposit back, partially or entirely, depending on damage to the property, but that doesn’t apply to fees
If you have questions about what fees you can legally charge or are in a dispute with a tenant about your fees, call us.
AWB Law is Here to Help
If you’re a residential landlord with questions or concerns or need legal representation, call the legal team at AWB Law at (949) 244-4207 or complete our online contact form today to schedule a consultation.
