Posted August 22, 20243:26 pm
Stacy Holmes recently began what she thought was going to be the routine task of paying her rent online.
Then a prompt appeared on the property management company’s website demanding a nearly $60 processing fee for paying by credit or debit card. The month before, it was only $10.
“I was shocked,” Holmes said. “They did this without notifying any of us. I told them, ‘I will not be paying the $60 fee.”
Avoiding the higher fee comes at an inconvenience. In order to keep a $10 processing fee, Holmes has to pay the rent in-person at the bank the property management company uses.
Tenants increasingly are worried about more than having enough money for rent. Landlords and the property managers they use are often tacking on a host of fees. They’re called rental “junk fees” because the charges themselves or their inflated prices often aren’t based on the services rendered.
“Landlords and management companies are looking to maximize the amount of money that they can earn,” said Amy M. Riegel, executive director of the Coalition on Homelessness and Housing in Ohio (COHHIO). “Oftentimes, these landlords are not located within our communities. It’s not like you’re renting from your high school best friend’s grandma.”
Junk fees are on the rise at a time when housing is becoming less affordable for many working-class families. And it’s often hard for renters to avoid them unless the junk fees aren’t written into a renter’s lease.
At every stage of the rental process, people are being hit with junk fees. As they look for a place to live, renters often are required to pay application processing fees – some as high as $100 to $150. Application fees typically are not refundable if the person doesn’t get the unit. If the renter does land the unit, they can be charged an administrative fee. And forget paying just the first and last month’s rent in advance. Many landlords and property managers now want three months of rent in advance plus a security deposit.
Once a tenant, the renter can face other fees. Fees for basic maintenance in common areas such as hallways. Fees for cable and technology packages, which are required even if the tenant doesn’t want cable and internet service or gets it directly from a service provider. Late fees, which are often so high that they equal a substantial portion of a tenant’s monthly rent.
Landlords and property management companies often don’t disclose these junk fees to renters at lease-signing. Junk fees are often arbitrary: Not all renters are forced to pay them. And as Holmes discovered, fees can skyrocket with little or no warning.
“We think that this is a completely deceptive consumer practice that we are seeing all across the state,” Riegel said of junk fees.
Renters have few legal protections against these fees
In the absence of any Ohio rental junk fee laws, and minimal protections in Greater Cleveland, such fees are usually legal. If unpaid fees mount enough, a landlord may choose to file for eviction. (A bill aimed at cracking down on junk fees was introduced in the Statehouse in May, and the Biden administration has proposed regulations aimed at tackling junk fees.)
“It is unfortunate that in Ohio, when it comes to tenant-landlord relationships, all the power is in the hands of a landlord,” Riegel said.
Andrew Morris, who owns Realty Trust Services LLC, the property management company from which Holmes rents her Maple Heights home, said that junk fees “are a matter of perspective.”
“[W]e believe that every fee or service we charge for includes a benefit we wouldn’t be able to offer without the charge or offsets a cost we otherwise couldn’t easily bear as a company,” he wrote in an email to Signal Cleveland.
Of concern among many housing advocates is what they see as a growing tendency toward a lack of transparency in the junk fees tenants are being charged. Instead of being linked to specific things such as paying the rent or receiving internet service, their purpose isn’t always clear.
This includes the “administration fee” or the “administrative fee” many landlords are now charging once a tenant moves into a unit. Some rental websites give a general description of administration fees as covering such things as rental applications and holding a unit. However, many landlords and property management companies already charge a separate application fee and a separate holding fee. Administrative fees typically are $100 or more, said Kris Keniray, associate director of the Fair Housing Center for Rights & Research,
“I haven’t seen these clearly defined, so I don’t know for certain what they cover,” she said.
‘We need some regulation’ to get rid of junk fees'
The fee for paying rent with a credit or debit card on the Realty Trust Services website recently soared after the company started using different software, Morris said. He said the vendor managing payments chose not to use a flat $10 fee. Instead, the new fee is based on 4% of a tenant’s total monthly rent, which means the cost is substantially higher.
“We don’t earn the money-processing fee,” Morris wrote in an email to Signal Cleveland.
He doesn’t consider the high-priced processing charge a junk fee because he said tenants can avoid it. They can pay in-person at the bank. Morris said the $10 fee covers costs such as his staff manually entering these payments into the company’s accounting system.
In fact, there is a way for tenants to pay their rent without incurring a fee, Morris said. This is by making an automated clearing house (ACH) payment, which electronically transfers money from the tenant’s checking account to the company.
“I find we have the best results for the residents and our landlord-clients when tenants choose the free option,” Morris emailed Signal Cleveland. “But sometimes the other options are really useful in a pinch and they are well-used, even with the additional costs associated.”
Holmes said she looked for a free option in the portal on the company’s website where tenants pay rent.
“Personally, I haven’t seen one on the website,” she said. “Once I saw that $58.72 fee, I was in shock and I exited the website.”
Holmes believes it is unfair for landlords and property management companies to charge tenants such high fees, especially for paying the rent.
“We need to see some regulation or have some accountability happening, aimed at getting rid of these junk fees,” she said.
Morris said he does not oppose his industry coming up with junk fee standards. He also “would support legislation that requires potential fees to be disclosed clearly.” He said such disclosures could be on the first page of a lease, in a company’s marketing materials and on the web page before an online rental application.
“Though I believe increased transparency would help consumers make educated decisions, I think far-reaching legislation will have a dampening effect which will hurt tenants and landlords negatively in the long run,” Morris emailed.
“Either options and services will be withdrawn from the market, meaning some people will have less options – usually the people that need them most – or the extra expenses will mean further increases in [the] base cost of service to both landlords and tenants,” he wrote.
Many tenants and housing advocates don’t see any scenario in which charging high or questionable fees can benefit tenants, especially when landlords legally have the upper hand in Ohio. Riegel of COHHIO said she is frustrated by the lack of research about just how much junk fees are impacting Ohio renters. She said having such data would make it easier to lobby for regulations and legislation to pinpoint the problem.
“I think that that imbalance just emboldens a lot of groups to take advantage, especially of individuals who might be more vulnerable in our communities,” Riegel of COHHIO said.
Tenants increasingly squeezed by high rents and high fees
Rents started spiking in Greater Cleveland and Ohio before the pandemic and have remained high in the post-pandemic housing market. Many working families are already struggling to pay the rent – even before junk fees are piled on top of it.
A recent COHHIO report points to the high number of working-class families being squeezed by a lack of affordable housing. The report shows the gap between what many working-class Ohioans make and the rents they are faced with paying. The rents used in the report were even a little lower than those for the typical two-bedroom apartments in Ohio and the state’s metro areas and counties. The analysis, which used government data, estimates the average wage of the typical renter.
In Ohio, a person needs an hourly wage of $20.81 to afford a two-bedroom apartment renting for $1,082 a month.The typical renter’s hourly wages fell short at $18.26. In much of Greater Cleveland, a person needs an hourly wage of $21.31 to afford a two-bedroom apartment renting for $1,108. The typical renter’s hourly wage of $19.82 doesn’t reach this threshold.
Riegel said the report shows that many families are struggling to pay the rent. She said junk fees only add to this burden. Matthew Vincel, managing attorney of The Legal Aid Society of Cleveland’s Housing Practice Group, said these two factors combined can cause a potential crisis for families.
“In the context of eviction, usually those late fees come into play,” he said. “When these landlords are charging these extraordinarily large late fees, they add up, and they can often become the basis for filing an eviction.”
So, even being a few days late with the rent can potentially trigger eviction.
Tenants in Cleveland, Cleveland Heights, Euclid, Lakewood and Warrensville Heights have protection against landlords from exorbitant late fees because ordinances limit what can be charged. In Cleveland, for example, most late fees cannot be more than $25 or 5% of the monthly rent.
“[T]enants should be aware of limits on late fees in their community and understand that they have the right to refuse to pay late fees that exceed the caps put in place by local ordinances,“ Vincel said.
Junk fees haven’t been around for that long
The trend in landlords and property managers charging junk fees appears to be a wrinkle in the pandemic/post-pandemic housing market.
Vincel said the rise in the nonrefundable application fee offers an example.
“These application fees are fairly new,” he said. “Five years ago, landlords accepted that background checks were just the cost of doing business and it wasn’t something that they tried to pass on to tenants.
“Now they’re doing it because they can – particularly in the Cleveland area,” Vincel said. “There is such a lack of affordable housing that people are desperate. If they see that the only way that they can find a decent place to live is to pay four, $100 application fees, then that is what they feel they have to do because they feel they have no other options.”
He said junk fees often don’t reflect the true costs landlords bear for rendering a service. For example, Vincel said background checks and other screening usually cost landlords no more than $30 to $40. Application processing fees are increasingly three to five times that amount.
When Signal Cleveland posted a story several weeks ago asking readers for their experiences with junk fees, application fees were a common complaint. Several wondered whether landlords were using the practice as a money-maker. They believed landlords had a practice of continuing to accept applications after a unit was rented.
Keniray of the Fair Housing Center said readers may have a reasonable hunch. She said a few years ago, she was part of a discussion between landlords, fair housing advocates and others aimed at finding ways to address local housing needs. The issue of finding a solution to renters having to pay multiple application fees came up. Keniray said landlords and property management companies waged protests.
“One very large corporate housing provider, who was part of the dialogue, said, ‘No, no, no, no, no! That’s part of our revenue stream,’” Keniray said.
Most landlords don’t view applications as a revenue stream, said Ralph McGreevy, chief operating officer of the Northern Ohio Apartment Association (NOAA). It is the largest industry organization for multifamily property owners and management companies in Northeast Ohio.
McGreevy said he doesn’t believe junk fees are very common, especially among what he calls “professional” landlords and property management companies. He defines professionals as those who do the work full-time with a staff of at least 10. For example, he said NOAA’s members’ application fees range from $45 to $60.
“Charging junk fees is like taking a meal that you don’t deserve,” McGreevy said.
He said charging fees that don’t reflect the true cost of doing business could potentially undermine a business.
“You don’t put your career in jeopardy for a couple of bucks on a junk fee that you could get in trouble with,” he said.
Landlords can’t charge junk fees not in tenant’s lease
Holmes said she was unfamiliar with junk fees before renting her Maple Heights home from Realty Trust Services.
She had lived in her own home for years. After a divorce, she found herself back in the rental market. Holmes rented a house in Walton Hills for a few years from an individual landlord, who didn’t charge rental fees. Then the landlord sold the house, giving her only 40 days to find a new place.
“I kind of had to find what I could find,” she said. “That’s how I even ended up where I’m at now.”
After signing the lease, Holmes said a Realty Trust Services employee told her that she would have to pay a $35 monthly renters’ services fee. She didn’t feel in a position to challenge it because she needed a place to live.
After moving in, she resented paying the fee because she didn’t see what she was getting for it. She emailed the company about the $35 fee.
“I don’t get any services from you guys,” she said, paraphrasing an email she sent the company.
“You guys don’t offer snow removal, you don’t offer lawn service. You don’t offer anything. I’m not paying it.”
She also believed that she wasn’t getting basic services. Holmes reported moisture and mold in her basement and some related issues to the management company. Holmes said it took Realty Trust Services about six weeks to begin addressing them.
“This was assigned to an outside tech,” Morris emailed Signal Cleveland. “The tech told us that the tenant wasn’t getting back to her.”
Holmes has text messages showing her communications with the maintenance team.
The company never pushed back when Holmes decided to stop paying the $35 monthly fee.
“[A] residents benefit package shouldn’t have been assigned to her at the time she signed her lease,” Morris wrote. “We weren’t requiring that.”
There probably is another reason the property management company didn’t force Holmes to continue paying the $35 fee. Legal Aid’s Vincel said she had the benefit of one of the few legal protections against junk fees.
“The best way for tenants to avoid these fees is to execute a written lease that clearly outlines what fees they will be responsible for outside the monthly rent amount,” he said.
Source: Signal Cleveland - How 'junk fees’ can squeeze renters and trigger evictions