'Oddball' move-in fees questioned

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Q: I’m looking to rent at an apartment complex that imposes some oddball fees when tenants move in. In addition to the security deposit, they impose a one-time "initiation fee" (for showing a new tenant around, I guess), a "key fee," and a "lock change" fee. The lease says that I’ll have to pay $250 if the landlord consults his attorney about a problem with my tenancy, and another $500 if they have to serve eviction papers. Is all of this legal? –Orville V.

A: This landlord has figured out a way to move some routine business expenses, which most landlords consider to be overhead, to their tenants’ accounts. These fees can add up to quite a hefty move-in cost, and in states that don’t limit their use, only the market will curb the landlord’s greed. If the move-in costs are so high that tenants look elsewhere, the landlord will be forced to lower them in order to attract applicants.

In a few states, charging fees for expenses related to move-ins is illegal. In California, costs associated with processing a new tenant used to be routinely imposed by a notorious San Francisco landlord, who defended his practice as legal under the state’s security deposit law. That law provided that money collected at the start of the tenancy, to remedy damage beyond normal wear and tear and to cover unpaid rent, must be refunded. Fine, said the landlord — these fees are not intended to be refunded, nor do they cover damage or unpaid rent, so they’re not in violation of the law. The state Legislature promptly amended the security deposit statute to state that security deposits include move-in fees, which made them refundable. Thus ended this landlord’s tidy profit center.

Assuming you are not clearly protected by law from this practice, is there anything you can do? Practically speaking, the last thing you want to do is to rent there, then immediately begin a court challenge to the practice. Your best bet is to size up the total amount of the rent, the market, and any available alternatives, then decide whether it’s worth your while to become a tenant. One way of thinking about the fees is to consider them as additional rent spread across the life of, say, a one-year lease. If the resulting monthly rent is still comfortably within market rates (and you have the cash to fork out), you may decide to rent there; but if not, look elsewhere.

What you’ll probably find is that the advertised rent is slightly below market rates (that’s how the landlord attracts interest), but when the fees are added and spread across a year’s stay, the rent rises to market level or above. The landlord is counting on hooking his prospects with a low rent (and a good presentation), and hopes that the added fees will be something prospects will reluctantly swallow after they’ve become attached to the rental.

Regardless of your renting decision, don’t put those fees out of your mind just yet. Especially if they’re excessive, they should be challenged. Your legislator needs to learn about this practice, as did legislators in Oregon recently. That state’s Legislature has passed a landlord-tenant bill (which the governor is expected to sign), which, among other things, limits the amount and purpose of move-in fees. Landlord groups supported the bill, figuring correctly that if landlords need to cover their overhead, they should do so straightforwardly with adequate rent.

Q: I applied for an apartment at a large complex in Newark, N.J., and was flabbergasted to see that the rental application included a place for me to record my race. I thought this kind of questioning was totally illegal, but the leasing agent assured me that not only is it legal, but he is required to gather that information. Can this be so? –Lisa F.

A: At first blush, what you report does seem wrong and illegal. The federal Fair Housing Act, which applies to most landlords (owner-occupied properties with four or fewer units are exempted), prohibits discrimination on the basis of race and other protected classifications. (In many states, state law extends the same prohibition to those exempted under the federal rule.) Bluntly asking about a prospect’s race could be the first step towards an illegal policy of refusing to rent to people in that group. And the question alone could certainly discourage applicants of a particular race from pursuing their applications. In this respect, the question is no different than, say, an advertisement that makes it clear that young people with families aren’t welcome ("Mature, quiet community"). Conveying a preference for or against a protected class is itself a fair housing violation. …CONTINUED

But let’s step back for a moment and ask if there might be another explanation. After all, landlords who discriminate against people of a certain race or ethnicity are seldom so stupid as to put their discriminatory motives in writing. It’s often not difficult to discern a person’s race by just looking at him or her, and that’s how most discriminating landlords operate. Perhaps a little legal research is in order.

A quick look around the Internet took me to the New Jersey Attorney General’s Web site, which gives us an answer. Back in the 1970s, the Division of Civil Rights implemented a reporting rule, which required owners of 25 or more rental units to annually report the racial composition of applicants and tenants, as well as rental turnovers, rental recruiting techniques, whether the property is barrier-free (to renters with disabilities), and the size and rental rates of apartments. The purpose of the rule is to allow the Division to study patterns of housing occupancy and investigate practices of discrimination.

Predictably, the rule was challenged, though not by tenants, but by a group of builders, owners and managers. They argued that the rule forced them to do something (record and report data on race) that the state’s fair housing law specifically forbids. New Jersey’s Supreme Court didn’t buy it, and upheld the rule as a rational way to remedy the scourge of housing discrimination. The Court likened the rule to the practice of tracking students’ racial profiles in order to monitor school desegregation, or asking employers to report the racial breakdown of their workforce to remedy biased hiring.

There is one feature of your experience, however, that might bear looking into. Your landlord asked you to fill out a form in conjunction with the rental application, instead of simply noting the obvious (your race) on his own, for use in his annual report. And that may have been a mistake. According to the Supreme Court justices who upheld the law, the Division of Civil Rights instructs landlords to note the information themselves, after simply looking at their applicants and tenants ("Inquiry is discouraged and to be resorted to only if no other method of classification is possible," wrote the judges.) Directing landlords to record the data themselves makes perfect sense, because it eliminates the chance that the applicant, upon being questioned or asked to fill out a form, will be offended and conclude that the landlord is discriminating. In the "rare occurrence" when a landlord must ask, says the court, the landlord must inform the tenant of the state rule.

Janet Portman is an attorney and managing editor at Nolo. She specializes in landlord/tenant law and is co-author of "Every Landlord’s Legal Guide" and "Every Tenant’s Legal Guide." She can be reached at janet@inman.com.

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