Landlords Are Charging You Junk Fees For Services That Screw You
AP Photo/Jeff Chiu
Tenants are paying fees to have their credit scores lowered, among other dubious services.
Deca Property Management, which manages roughly 1,400 residential and commercial properties in the St, Louis, Missouri, area, says its tenants “know we’re here to help.” In the company’s newer lease contracts, that help includes a mandatory $45.95-a-month “resident benefits package” that includes a fee to Deca for reporting whether they’ve paid their rent to various credit bureaus. In effect, tenants are paying for the privilege of their landlord hurting their credit scores.
This so-called benefit package is just one example of a menagerie of junk fees that landlords across the country are charging their tenants, according to a Lever analysis of approximately 400 court records from eviction and other civil cases. These fees significantly increase the costs of renting an apartment, experts say, and can be for services that landlords are legally required to perform as well as “benefits” that are not in tenants’ best interests.
Practically anything can be a reason for landlords to charge a tenant a fee. Have a low credit score? That could cost you a “risk mitigation fee.” Live in an apartment infested with bedbugs? That could leave you with a pest fee. Even applying to rent an apartment can set potential tenants back hundreds of dollars in application fees, which tenants pay despite no guarantee that they will ever be allowed to rent the apartment.
The Biden administration has taken limited steps to try to rein in tenant junk fees and the Federal Trade Commission recently proposed a rule requiring the disclosure of mandatory fees in the total price of any product or service, including housing.
In response, landlord lobbying groups have claimed that the problem the FTC is trying to regulate doesn’t exist in their industry.
“Housing providers do not charge ‘junk fees,’” wrote the National Association of Residential Property Managers, a lobbying group for the property management industry, in a comment responding to the proposed fee-disclosure rule. Rather, the lobbyists claimed that landlords charge fees for “legitimate business reasons and to help cover the costs of concierge-type services.”
Experts disagree. “Rent is already sky high in most places,” said Ariel Nelson, a staff attorney at the National Consumer Law Center. “There’s already an affordable housing crisis. And then people have to pay these junk fees on top of their rent.”
The Credit-Report Catch-22
Fees for reporting rental payment statuses to credit bureaus, such as the benefit package fee charged by Deca Property Management, are particularly pernicious because the actions of credit bureaus can make it harder to rent anywhere else
By including rental payments in credit reports, landlords make it much harder for tenants to get back on their feet if they have trouble paying rent on time or get evicted. That’s because landlords typically check credit reports before allowing a tenant to move into an apartment. And because the United States is in the midst of an affordable housing shortage, landlords can afford to turn away tenants who have evictions or late fees on their credit report.
These credit reporting fees are becoming easier than ever to charge tenants, thanks to the help of tech startups.
Deca’s resident benefit package program is run by a tech startup called Second Nature, according to a flier advertising the benefit package. Along with a competing startup called CredHub, Second Nature says it can administer a benefits package at no cost to the landlord. These benefit packages include services that ostensibly could be helpful, such as identity theft protection or “concierge” services that help tenants set up their utilities when they move into a new apartment.
But both companies’ benefit packages also include a service that reports rent payments to credit agencies. Deca describes this as “credit building” in its flier, and says that by reporting rental payments, tenants could see “average increases of 23 to 42 points” in their credit scores.
An analysis of several court cases where Deca filed to evict their tenants suggests these reports don’t always benefit renters. Even when tenants are late on their payments, Deca continues to charge the fees for their “resident benefit package,” according to copies of “rental ledgers” filed as part of Deca eviction cases reviewed by The Lever. Presumably, Deca continues to report tenants’ payment histories to the credit bureaus.
Deca’s resident benefit package fee is mandatory, and that appears to be by design. While Second Nature, the company that Deca uses to administer the benefit package, merely recommends that landlords make their benefit package a mandatory fee, CredHub says its credit reporting feature is mandatory.
“Allowing residents to opt out defeats much of the purpose of credit reporting, especially with regards to reducing delinquency,” CredHub’s website reads. “Naturally, the residents that opt out are the ones who are least likely to pay on time.”
“It’s really concerning that this is mandatory,” said Nelson about the benefit package. “Some of these things could be… things that people don’t want.”
Risky Fees
Landlords are able to make money off tenants even when they refuse to rent to them. One of the most common types of fees — application fees — are charged to tenants before they even move into an apartment. According to the Council of Economic Advisors, landlords collected an estimated $276 million in application fees from tenants in 2023. These application fees can range from $25 to $350 per tenant.
Application fees add up when tenants apply to multiple apartments. Some states have taken action to limit application fees: Application fees are prohibited in Massachusetts, and a new law in Rhode Island allows tenants to supply their own credit and background reports in lieu of paying an application fee. But many states don’t regulate application fees at all. Even when states do regulate the fees, landlords often ignore the laws with little to no consequences.
In practice, landlords can charge an application fee even if they don’t intend to rent to the person applying for the apartment. Landlords don’t always disclose rental prerequisites to applicants, such as not having a criminal background or having a certain credit score, according to a report from the National Consumer Law Center.
Even when landlords are willing to rent to tenants with less desirable credit scores or criminal records, they are able to collect additional fees. Some landlords, such as AMOSO Realty, a property management company in Missouri, charge a “risk mitigation” fee for tenants with low credit scores, according to documents filed as part of an eviction proceeding. (AMOSO Realty also charges its tenants a mandatory resident benefit package fee that costs $75 a month, which includes credit reporting for rental payments).
In a copy of an AMOSO lease filed as part of an eviction case, the risk mitigation fee was justified as a way to compensate the landlord for the increased “risk” of renting to someone with a low credit score.
“Broker’s experience has shown that tenants with credit scores below the optimal amount are more likely to pay late or otherwise default on their lease obligations, creating a higher workload and more risk for Broker,” read the lease. “Therefore, Tenant does have to pay a monthly Risk Mitigation Admin Fee in the amount of $50.00 due on the same date as the monthly rent.”