Hidden fees and add-ons to watch for in your lease
By Leigh Raper
Savvy consumers know that companies do all kinds of things to increase the bottom line. Airlines, for instance, charge for a checked bag, while others tack on fees for extra leg room. Cereal companies keep costs down by putting fewer flakes in the same size box. Large potato chip bags have more air and fewer chips.
But consumers sometimes forget their landlord is running a business, too - until they sign a new or renewed lease, that is. Renters may discover that while the rent seems reasonable, the landlord has included itemized charges for utilities or other amenities that add up to a sizable bottom line difference.
The rental market is extremely competitive in many urban markets right now. The most recent U.S. census data showed the largest increase in the number of renters over any 10-year period since 1965, according to the Chicago Tribune.
The jump in the number of renters - up about 8.5 million from a decade ago - has put pressure on both tenants and landlords. Tenants are scrambling to find the right place, while landlords are trying to find the right price. And both parties are getting creative about how and when to spend their money.
Utilities are not exactly a hidden cost, but they are often overlooked by tenants eager to move into a new apartment or renew their current lease. Tenants need to take the expense into consideration when determining the overall cost of the property. Landlord/tenant laws in each state govern how utilities can be billed, and what recourse either party has in the case of missed payments or shutoffs.
Sometimes, utilities are included in the overall rent charge, and stay in the landlord's name. Other times, tenants are required to place the electric or gas bills in their names. (Many municipalities require the water and/or sewer accounts to stay in the landlord's name.)
Then there are situations where master meters serve an entire building, in which case the landlord splits the charges among all the tenants and then bills them individually. This is referred to as third-party billing. Third-party billing makes sense for the landlord, who can advertise a base rental price, but then charge the utilities as an add-on.
Certain cities have clamped down on third-party billing, which they view as deceptive. In Seattle, for example, the third-party billing ordinance covers all residents living in buildings with three or more units. The ordinance was written to protect tenants from unscrupulous landlords who were fraudulently overcharging them.
The Tenants Union of Washington State, a nonprofit formed in 1977 and dedicated to "education, organizing, and advocacy" for tenants, provides detailed information for renters about third-party billing and other important issues related to utility costs.
Many of the best practices they recommend apply to all tenants, regardless of location:
- Ask questions about utility service before you sign a lease
- Set up your utility accounts quickly
- Pay utility bills promptly and keep documentation of all payments
- Take steps to protect yourself with the landlord
- Act immediately to resolve utility disputes
Other "hidden" charges
There are other fees, besides utilities, which might be charged by the landlord. Some of these are optional add-ons determined by a certain tenant's particular situation, but others apply to everyone. Landlords in a competitive rental market might even increase these fees based on supply and demand, MarketWatch reported.
The add-ons can include pet fees or a separate charge for parking. Some properties charge an application fee - whether or not the prospective renter is approved.
Other properties, particularly condos or developments subject to homeowners' associations (HOAs), charge move-in fees for tenant-occupied units. Amenities, such as cable TV or Internet access, which are not considered utilities under most ordinances, might also be billed through an HOA or the landlord.
Of course, this is all in addition to a security deposit and any rent you might have to pre-pay, like first and last month's rent due upon move-in.
Have questions? Need help?
Advocacy organizations, like the Tenants Union in Seattle, operate around the country. These nonprofits offer help and information to renters.
State agencies also provide information for both tenants and landlords. For example, Georgia's Department of Community Affairs publishes a Georgia Landlord Tenant Handbook on its website. A quick internet search will yield similar results in most states.
Sometimes, though, problems and questions can't be resolved just with online information. That is where consulting an expert can be a smart solution. Lawyers who specialize in landlord/tenant law are familiar not only with the underlying law in a given geographic region, but also have experience with the systems and processes that can resolve disputes efficiently and economically. Often, spending money for expert advice early on can yield big savings in time and dollars in the long run.
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