Restricting move-in fees: a messy bill

The principle of restricting abusive practices by landlords in charging excessive move-in fees is great. In practice, it’s messy, and the proposed ordinance to do just that demonstrates that messiness in its full glory.  This afternoon, Council members Sawant and Herbold will hold a hearing to consider their proposed ordinance, the latest installment in what Sawant calls a “tenant’s bill of rights.”

You can read the bill here, and the proposed amendments here.

The bill actually does several things, but the two main ones are that it caps the amount a landlord may charge for non-refundable move-in fees and a security deposit, and it requires landlords to allow tenants to pay those fees and any required last-month’s rent in installments.

So here are the new rules:

  1. The combination of security deposit and non-refundable move-in fees can’t be more than one month’s rent.  Non-refundable move-in fees include a tenant screening report and a cleaning charge, and if an amendment is adopted also a criminal background check and a credit report.
  2. Further, the non-refundable move-in fees (NRMIF) can’t exceed 10% of one month’s rent — except the screening report. If that pushes the total over 10% then it’s ok for it to creep into the other 90% reserved for the security deposit, but the total of NRMIF and security deposit still can’t go over one month’s rent.
  3. A landlord can’t charge any other one-time fees at the beginning of a rental agreement.
  4. If a cleaning fee is charged as part of the NRMIF, the landlord may not deduct any other cleaning charges from the security deposit at the end of the rental.
  5. If an amendment is adopted today, a landlord may charge an additional security deposit for pets, but it may not be more than 25% of one month’s rent.
  6. A landlord must allow a tenant to pay the security deposit and NRMIF in installments:

– For a rental agreement of 6 months or longer, the tenant can make 6 consecutive payments of equal amounts;

– For a rental agreement of 30 days to 6 months, the tenant makes 4 payments;

– For a month to month agreement, the tenant makes 2 payments.

– Landlords are not allowed to charge interest on installments.

7. A landlord must allow a tenant to pay the last month’s rent in installments:

– For a rental period of 6 months or longer, the tenant makes 6 consecutive equal payments;

– For a rental period of 60 days to 6 months, the tenant makes 4 payments;

– For a month-to-month agreement,  the ordinance doesn’t specify the rules.

– Landlords are not allowed to charge interest on the installments.

8. According to sections 7.24.040 and 7.24.060  this ordinance is retroactive to existing rental agreements.

9. If a tenant fails to make an installment payment on the security deposit, NRMIF, or last month’s rent, then it triggers a “10 day comply or vacate” notice rather than the traditional “3 day pay or vacate” notice for nonpayment of rent. And because of that, it’s further specified that subsequent payments cover the rent first before the installment payments so that a landlord can’t turn a non-payment of NRMIF into a nonpayment of rent.

10. Landlords must provide the tenant a written checklist to describe the condition and cleanliness of the premises at the beginning of the rental period. It must be signed and dated by both the landlord and tenant.

11. Landlords must give month-to-month tenants a written summary of landlord and tenant rights once a year.

12. If an amendment is adopted today, the Department of Construction and Inspections (SDCI) will have authority to enforce the ordinance (though that new responsibility comes without additional funding for the department).

13. If a landlord enforced rules or charged fees contrary to this ordinance, he or she is subject to fines from SDCI ($500 for the first offense, $1000 for subsequent offenses). In addition, he or she must pay the tenant any actual damages incurred, plus double any SDCI fines, plus double the amount of any security deposit unlawfully charged or withheld, plus attorney fees and costs.

The ordinance has a typical “severability” clause meaning that if some parts are thrown out later by a court, the rest of the ordinance remains valid and in effect. This is particularly important for this ordinance because the cap on fees is certain to be challenged in court as a violation of Washington State’s prohibition on rent control.

My suggestion: this bill should be titled The “Fuck it, I’m just going to list my place on AirBnB” Ordinance.

Landlords will need both an accountant and an attorney to navigate all of this.  Tenants too — it’s just simply too complicated and requires too much math to figure out what is, and isn’t legal. Big landlords with multiple properties will figure this out, but smaller ones, or people renting out their backyard cottage, mother-in-law apartment, or second home won’t bother. If people can’t figure this out, the ordinance will do more harm than good.

A better approach on the fee cap might be to have a slightly higher cap (on could argue that one month’s rent is too low anyway — even Sawant’s own example violates it) and dispense with some of the micro-management. And it’s not clear that requiring landlords to give an option for installment payments is really workable, given all the variations on rental agreements.

Excessive move-in fees is a real problem and a hidden source of discrimination against poorer and disadvantaged communities. It’s great that the Council is looking at this, but it’s not a problem that’s easily solved, and it looks like the proposed solution may be as bad as the problem it tries to address.