The White House has recently expanded its fight against junk fees to the realm of rental housing. Jonas Bordo of Dwellsy, who consulted with the administration on its new initiative, breaks down this often-confusing topic.
Los Altos, CA (August 2023) – If you’ve ever rented what you thought was a great apartment at a reasonable price, only to be hit with an onslaught of unexpected fees that ended up stretching your budget (elevator fee-what’s that?!?), you know: so-called junk fees suck!
The White House agrees. On July 19, President Biden announced a “new effort to crack down on “rental housing junk fees” that often come as an unexpected—and burdensome—surprise to renters. Dwellsy CEO and cofounder Jonas Bordo, who served as a subject matter expert to the Biden administration as it formulated its approach, isn’t surprised that junk fees are making waves. He has noticed a recent rise in hidden costs to renters, and he says they bring an additional level of challenge to the already-complicated rental search.
“The White House points out that everything from repeated application fees to excessive amounts of ‘convenience fees’ can make the total cost of an apartment much higher than renters expected or can even afford,” points out Bordo, coauthor, along with Hannah Hildebolt, of Everything You Need to Know About Renting But Didn’t Know to Ask: All the Insider Dirt to Help You Get the Best Deal and Avoid Disaster (Matt Holt, August 2023, ISBN: 978-1-6377439-2-8, $21.95). “Their aim is to protect renters by requiring more transparency from landlords and cracking down on fees that are unreasonable or unfair.”
As an individual renter you may not have the power to change national policy, but you don’t have to sit there and wait to be hit by junk fees you didn’t see coming, either.
“Understanding how rental fees work, which ones to watch out for, and how to protect yourself can save you a lot of stress and regret—not to mention money,” says Bordo.
His new book addresses rental fees in detail. Since it covers the entire rental process, from preparing for the rental search to getting your security deposit back after your lease is up, you’ll want to keep it handy as you search for new digs. With several decades’ experience as a renter, landlord, property manager, and current CEO of the largest U.S. rental marketplace, Bordo himself is a trusted authority on all things rental-related.
Here, he shares eight things renters should know about so-called “junk fees.”
First, understand what a hidden fee or “junk fee” is.
When you view a rental listing, the property’s rental rate is clearly advertised. But often, there are additional fees and costs that may not be thoroughly disclosed. They can range from background and credit check fees to move-in fees to pet fees. Some may be a one-time expense, while others are recurring. NOTE to EDITOR: See attached tipsheet for a list of common hidden fees to watch out for.
“The White House calls these ‘junk fees,’ but no matter how you refer to them, the bottom line is that they’re often unexpected expenses that can seriously affect a renter’s budget,” says Bordo. “Sometimes they can derail moving plans altogether. As we’ll see, some of these fees are more legitimate than others. But until the White House 100 percent succeeds with its efforts, it’s your responsibility as a renter to identify and understand these expenses—and to plan accordingly.”
You’re not imagining it: There have been a cascade of new fees in recent years…
And not just in the realm of rentals. If you’ve flown lately, you know that there have been an avalanche of add-on fees for baggage, seat selection, and more—sometimes costing more than the fare itself.
“I suppose it was inevitable that landlords learned from the airlines’ example and looked for
opportunities to increase revenue,” comments Bordo. “We are seeing more creativity from landlords on how to get more income out of their properties. As for renters, well, they’ve grudgingly accepted it. What’s the alternative, after all?”
Landlords have more control over fees than rent.
Landlords have limited ability to increase rent because it’s controlled by the market. If a landlord lists a rental at a price that’s higher than comparable properties, it’s more likely to stay vacant. However, landlords can add fees to their leases and increase the amount of the fees as needed.
“All landlords look for ways to increase their revenue and may try new fees to see if they ‘stick,’” says Bordo. “That said, most landlords aren’t trying to be unreasonable—and many are simply trying to make their own ends meet as costs rise. Unscrupulous landlords who use fees to drive up their profits unfairly are (thankfully) in the minority.”
Some rental fees do make sense…
Cash-strapped renters may not want to hear it, but there’s often a good reason why landlords charge fees. Hidden costs help cover various expenses like maintenance and repairs, property taxes, property insurance, legal fees, etc.
“Take pet fees, for example,” explains Bordo. “Lots of pet owners are grumpy about this hidden cost, but it’s a bit like a toll on a highway. There are additional costs associated with having pets at a community or in a rental (think additional cleaning and damage repair), and it makes sense for those costs to be borne by the people who impose them on the community.”
…But there are mystery fees that often don’t.
Truly unfair or predatory junk fees are happening in a relatively small slice of rentals, but with 46 million rental households in the United States, you can certainly find examples. Bordo points to a landlord charging a $75 fee for sending out notices. (“It’s absurd,” he says. “Nobody should be doing that.”)
“You’re most likely to see landlords behaving badly when they have a portfolio of rentals, but are under the radar from a PR standpoint,” Bordo explains. “Think slumlords who are comfortable owning crappy apartment communities and not taking care of them. Large firms are usually transparent about the fees they charge (assuming renters make the effort to learn about them) because they are concerned about maintaining a good reputation. Smaller ‘mom and pop’ landlords typically don’t get creative with fees because they just can’t administer them.”
The real issue is usually the surprise factor…
While the majority of hidden fees do make some amount of sense, they are usually surprising to renters. For instance, you move into a new apartment building and there’s a fee to reserve several parking spaces for the moving truck. According to Bordo, that’s where the real frustration usually comes from: renters didn’t anticipate the fee and may not understand why they’re being charged.
“On a related note, I think fees are a reminder to renters that this is not your home to do with as you please,” he adds. “It’s someone else’s property that they are loaning to you…in return for a significant amount of your hard-earned money. Having to shell out for fees, particularly recurring ones, erodes people’s comfort in their own places.”
…Which is exacerbated by the complexity of leases.
A root cause of renters being surprised by fees is the fact that lease agreements tend to be complex…far too complex, in Bordo’s opinion.
“When there’s too much complexity, people figure that they can’t actually understand it, and they just sign,” he explains. “Then they’re surprised when fees come up that they didn’t anticipate. We need simpler agreements and simpler fee structures.”
Your best defense is to always read your lease.
Yes, as Bordo acknowledges, they are complex and often confusing. But always read your lease thoroughly. What is the landlord allowed to do? What fees are included? When and how often are they due? What happens if your payment is late? If something isn’t clear or you have questions, ask for clarification—and don’t sign unless you feel confident you can abide by the terms of (and fees in) the lease.
“If you are charged a fee you didn’t expect, go back to your lease,” Bordo advises. “It should include any fees that are charged. If the lease doesn’t say the landlord can charge the fee, you can challenge it. Speak to the landlord or his/her representative and ask them to point out the section where the fee is explained. If it isn’t there, the landlord doesn’t have a leg to stand on.”
“When I spoke with the White House team, I suggested that they work with property management software companies to get hidden fees disclosed through their systems,” Bordo concludes. “Making it easier for landlords to share these expenses up front is a good first step toward making hidden fees less, well, hidden. Until that happens, asking the right questions and thoroughly reading through the rental agreement is your best defense against being blindsided by a budget-busting fee.”
“Wait, I Owe My Landlord HOW MUCH?” Hidden Fees Every Renter Needs to Know About
Insights from Jonas Bordo, CEO and cofounder of Dwellsy, and coauthor along with Hannah Hildebolt of Everything You Need to Know About Renting But Didn’t Know to Ask: All the Insider Dirt to Help You Get the Best Deal and Avoid Disaster (Matt Holt, August 2023, ISBN: 978-1-6377439-2-8, $21.95).
When you find a rental you like with an asking price that’s within your budget, it’s a great feeling. But many renters’ happiness quickly sours as their bank accounts are buffeted with additional fees and expenses—many of which are unexpected.
Although the White House refers to them as “junk fees,” many of these hidden costs do serve a legitimate purpose. The problem is, renters often aren’t aware of them before committing to a new place, and find their budgets stretched to the breaking point by expenses that can add up to 20 percent of the cost of rent.
To avoid finding yourself in this stressful position, familiarize yourself with common fees you may have to pay. Then, talk to your potential landlord and read your entire lease to find out what you’ll be on the hook for. Don’t sign the lease unless you clearly understand your financial responsibilities as a renter and feel confident that you will be able to cover them.
Here are some of the most common up-front and ongoing fees you may be responsible for. Note that all price ranges are estimates. The fees you’ll be asked to pay, and how much they’ll cost, will vary based on your location, rental property type, and individual landlord.
Timing: When you decide you’re serious about a place
Application fees often help landlords cover the cost of preparing and processing lease agreements—but this fee isn’t just about recovering costs. Forcing you to put a little money down helps them identify who’s really serious about the place. Sometimes, application fees also cover the cost of background and credit screenings—but not always—so be sure to check!
Timing: At the time of application
Landlords usually run credit checks to assess renters’ financial responsibility and overall ability to pay. Note that “hard pulls” on your credit can affect your credit score, so only authorize these checks when you’re sure you want to move forward with a rental application.
Timing: At the time of application
Many landlords want to ensure that their renters don’t have a history of evictions, criminal convictions, and other red flags. A background check can take several days to complete, so plan accordingly and don’t wait until the last minute to apply for a rental. If you do have an eviction or criminal record, be up front with your potential landlord and explain any extenuating circumstances.
Cost: As low as $100 – As high as one week’s rent
Timing: Usually after you’ve been approved, but before you’ve signed the lease
The landlord may charge this fee to take the property off the market before you sign the lease. It typically holds the rental for a couple of days until you can get the lease signed and come up with the other funds required. This fee is usually non-refundable if you back out of the place. If you move in, it’s typically used to reduce other move-in costs, such as payment of first month’s rent or a security deposit.
First and/or Last Month’s Rent
Cost: One month’s rent
Timing: When you sign the lease
This is pre-payment of rent. It’s typical to have to pay the first month’s rent, and some landlords will also ask you to pay the last month’s rent up front.
Cost: Usually (but not always) one month’s rent
Timing: When you sign the lease OR by the time you get the keys
This is a payment that is held by your landlord as security in case you damage your rental beyond what is considered normal wear and tear. Security deposits can also be used to cover unpaid rent, cleaning costs, and other fees. It’s unusual, but not unheard of, to have to pay first and last month’s rent and a security deposit. Usually, it’s just the first month’s rent and either the last month’s rent or a security deposit.
Move In/Move Out Fees
Timing: When you move in or out
These fees are intended to cover the use of facilities (booking an elevator or loading dock, reserving parking spots, etc.). They are generally non-refundable, but in some cases, you’ll be refunded a security deposit when you hand back elevator keys or other items. Moving fees could be added to the up-front payment with your first month’s rent or added to a later invoice.
Cost: $300-$800, OR a percentage of a month’s rent (often 30 percent – 80 percent)
Timing: Before you move your pet into the rental
This is something like an extra security deposit for the place. Despite your best efforts as a pet owner, your landlord may incur extra costs related to damages or cleaning—and this fee allows them to recoup some of that money.
Cost: 8-12 percent of a year’s rent
Timing: Prior to moving in
In some markets—most notably, New York City—many renters work with brokers to help them find an apartment. Most brokers charge a big, non-refundable fee for this service. If you’d like to avoid this cost, look for “no fee rentals.”
Some landlords include energy, gas, water, sewer, and trash fees in the rental rates, while others bill utilities separately from the rent—or require renters to pay these expenses directly. Internet and cable are usually the renter’s responsibility. Be sure to clarify up front how each of these expenses is charged.
Depending on your rental and where you live, utilities can be a minor expense or a big one. For example, average water bills in 2022 in West Virginia were $105 per month, but in North Carolina they averaged $20. Your landlord should be able to give you a ballpark figure of what you can expect to pay before you sign a lease.
Many suburban apartment complexes allot you one free parking space, but require you to pay for any additional spaces. In urban locations, landlords often charge for every parking spot. (And since they usually include a garage and/or driveway, most single-family home rentals have no parking charge.)
Prices vary wildly for parking: as low as $75 and as high as $600 per month. Make sure you know what you need and ask about the cost up front.
While some places have pet deposits (a larger, up-front fee, mentioned above), others charge pet rent. This is a monthly charge for all pet owners, usually assessed on a per-pet basis. Cats are usually $25-$50 per month, and dogs are often $30-$80 per month.
Some landlords require you to have renter’s insurance, which protects your personal property from theft, fire, burst pipes, damage a visitor might cause, etc. (The landlord’s insurance policy protects the building itself against the same things.)
Renter’s insurance can be as little as $5 per month or as much as $20 per month, depending on what you sign up for. Your landlord may recommend or try to sell you a specific policy, but you are free to do your own research and shop for one that works for you. For instance, you might consider a policy with liability coverage, which will protect the property against damage you might cause to it. It can also provide coverage if someone else injures themselves in your rental.
Rent Processing Fees
Depending on the situation, the form of payment can bring real expenses for the landlord. This is particularly the case for credit cards, where the “merchant fees” charged by the credit card companies are 2 percent or more of the charge. With other fees, the landlord may be trying to incentivize their desired form of payment by making the other forms more expensive. There should always be a way to pay the rent that has no extra cost associated with it, so make sure you know what it is and that you can live with it.
Rent processing fees could be 2 to 5 percent of the monthly rent if you’re paying by credit card, and are often less than 1 percent of the monthly rent for other “convenience” forms of rent processing, such as paying by ACH. In some cases, the landlord insists on electronic payment and charges a fee (around $25) for payment by check or money order.
Some rental properties have storage units available for rent, ranging from $50 to several hundred dollars a month. Be careful: sometimes landlords will allow renters to use a storage unit for free for the first few months, and then begin charging—which can take people by surprise. More typically, though, you’ll be given the option to rent a storage space (or not) from the beginning of your lease, and your payments won’t come as a surprise.
On top of these common up-front and ongoing expenses, your lease will probably include a list of fines and fees you may be charged if you fail to live up to the terms of the agreement. For instance, your landlord may charge a late fee (usually ranging from $25 – $100) if your rent payment is late.
You may also be charged a smoking fee (as low as $250 or as high as a month’s rent) if you smoke in a non-smoking building. This fee could be charged at the end of the lease, or multiple times in the course of the lease if you continually break the rules. It is intended to create a powerful incentive to eliminate smoking in rental properties. The smell of smoke can be very difficult to eliminate—and can lead to significant vacancy for the landlord.
While these are two relatively common fees, each landlord will have their own set of rules and regulations—and fines for breaking them. Be sure to read this part of your lease carefully so that you aren’t surprised by an unexpected charge. You have enough fees and expenses on your plate already!
About Jonas Bordo:
Jonas Bordo is the coauthor, along with Hannah Hildebolt, of the book Everything You Need to Know About Renting But Didn’t Know to Ask: All the Insider Dirt to Help You Get the Best Deal and Avoid Disaster. He is the CEO and cofounder of Dwellsy, the free residential rental marketplace that makes it easy to find hard-to-find rentals.
About the Book:
Everything You Need to Know About Renting But Didn’t Know to Ask: All the Insider Dirt to Help You Get the Best Deal and Avoid Disaster (Matt Holt, August 2023, ISBN: 978-1-6377439-2-8, $21.95) is available from major online booksellers.
Dwellsy is the renter’s marketplace: a comprehensive residential home rentals marketplace based on the radical concept that true, organic search in a free ecosystem creates more value than the pay-to-play model embraced by all of the current rental listing services.