Landlords Should Expect Increased Government Scrutiny of Rental Housing Fees

Over the last several years, I have seen a substantial increase in government scrutiny, both federal and state, regarding the fees being charged by landlords and property management companies. In my opinion, this trend will only continue to grow in intensity and scope.

Historically, many landlords viewed fees as a relatively minor issue. Application fees, administrative fees, amenity fees, re-rental fees, utility billing fees, convenience fees, technology fees, move-in fees, lease renewal fees, and similar charges became increasingly common throughout the rental housing industry. I was even made aware of a landlord who charged a tenant a $25 fee to meet with the property manager to discuss the 5-Day Notice the tenant had been served. Now, that is completely ridiculous.

However, federal and state regulators are now paying very close attention to those fees. Wisconsin’s view is that fees charged to a tenant should only reimburse a landlord for its actual out-of-pocket costs.

The Federal Trade Commission (“FTC”) has made so-called “junk fees” a major enforcement priority. The FTC even issued a request for public input regarding hidden and misleading fees, including fees charged in the rental housing industry.

Additionally, a coalition of 27 state Attorneys General recently sent a letter to the FTC urging the adoption of nationwide rules regarding rental housing fees. The letter specifically addresses concerns about mandatory fees that allegedly increase the true cost of renting housing.

Government agencies are not simply talking about these issues. They are actively bringing enforcement actions

For example, the FTC and the Department of Justice announced a significant settlement with Greystar, one of the nation’s largest property management companies, over allegations of failing to disclose fees and making misleading representations about the true cost of apartment rentals. Greystar agreed to pay $24 million and to stop deceptive advertising practices.

Likewise, the FTC also filed a major enforcement action against Invitation Homes concerning alleged hidden fees and deceptive practices. The proposed settlement of that case involved Invitation Homes paying $48 million, agreeing to advertise true rental prices, and stopping other alleged unlawful behavior against renters.

Whether landlords agree with the government’s position or not, landlords should understand where the industry is heading. The pendulum is starting to swing back in the opposite direction

One of the biggest areas of concern involves whether landlords are adequately disclosing all mandatory fees that increase either:

(a) the tenant’s total monthly housing cost, or

(b) the tenant’s total move-in costs.

DATCP’s view is that anytime you publish or advertise the rent amount for a rental property, including talking to a rental applicant over the phone, landlords and property management companies must also disclose any other mandatory fees that increase the total annual and/or monthly rent. Failure to do this violates ATCP 134.09(9), which states that no landlord may “Fail to disclose, in connection with any representation of rent amount, the existence of any non-rent charges which will increase the total amount payable by the tenant during the tenancy.”

I had a client who displayed all rental ranges for the various types of rentals it offered on one page of their website and all mandatory fees on another. DATCP felt that my client was misrepresenting the total monthly cost by failing to include the additional mandatory fees on the same web page as the rent amounts. My client was required to combine the two pages.

But it is not just the failure to disclose fees. It is also the nature and amount of the fees.

Landlords should also understand that regulators are increasingly scrutinizing the nature and amount of fees themselves. In my experience, DATCP’s general position is that fees should only reimburse landlords for actual out-of-pocket costs and should not function as additional profit centers.

Importantly, this increased scrutiny is not limited to massive national companies.

My firm represents landlords and property management companies throughout Wisconsin who are being investigated by the Wisconsin Department of Agriculture, Trade, and Consumer Protection (“DATCP”) regarding fee practices and fee disclosures. Most of the Civil Investigative Demands (CIDs) we have defended in the last two years have focused largely on my clients’ charging of rental fees and the amounts of those fees. This is not theoretical. It is happening right now.

Both federal and state governments are clearly moving toward increased investigation and regulation of rental fees. Landlords and property management companies that review their practices now and take any necessary actions will likely be in a much better position than those that wait until they face a DATCP investigation or are defending a lawsuit brought by the Wisconsin Attorney General's Office.