MIND YOUR BUSINESS: TIA’S TIPS FOR BETTER RENTAL MANAGEMENT – tenancy fees

Wednesday, February 07, 2024 1:26 AM | Benjamyn Seamans (Administrator)

By: Tia Politi
February 2024

What is a fee? A fee is a non-refundable charge to a tenant, most often for a violation of the rental agreement, but also for certain landlord expenses. A landlord is not obligated to account for or return to the tenant any lawfully charged fee. (Screening fees are charged pre-tenancy, and have their own requirements and restrictions. They are not addressed in this discussion.)

A fee must be described in a written rental agreement. If it’s not in the written agreement or you have not implemented a change in terms in the case of municipal fees, you can’t charge any fees at all. There are two types:  contractual fees and noncompliance fees.

Contractual Fees include:

  1. Late payment of rent fee.
  2. Smoke/CO alarm tampering fee.
  3. Dishonored check fee.
  4. Lease-break fee.
  5. HOA/COA move-in or move-out fees.
  6. Municipal services pass-through fees.

Noncompliance Fees include:

  1. Late payment of a utility or service charge.
  2. Failure to clean up animal waste (pet or assistance animal) from a part of the premises other than the dwelling unit.
  3. Failure to clean up garbage, rubbish, or other waste from a part of the premises other than the dwelling unit.
  4. Parking violations or improper use of vehicles within the premises.
  5. Smoking in a clearly designated nonsmoking unit or area of the premises.
  6. Keeping on the premises an unauthorized pet capable of causing damage to persons or property, as described in ORS 90.405

Contractual fees require no further notice prior to assessment, than being described in a written rental agreement. Once the tenant commits the violation, you assess the fee.

Non-compliance fees require that upon first occurrence of a violation you must provide a written Warning Notice – Notice of Noncompliance – ORHA form #V1. If the tenant commits the same or substantially the same offense within one year, you may assess the fee and may assess repeated fees repeatedly during that year if the behavior continues. 

In the Oregon Rental Housing Association rental agreement, all fees, whether contractual or noncompliance, are due immediately upon default.

CONTRACTUAL FEES

Late Rent
You may charge a fee for late payment of rent when the tenant pays rent beyond the statutorily allowable grace period. If allowed by contract you may assess a late fee for any rent payment received after 11:59 p.m. on the 4th day of the rental period or after 11:59 p.m. on the 7th day of the rental period, depending on what you have stated in the agreement. 

A tenant may be allowed an even longer grace period if they are disabled. When a late fee may be assessed to a disabled resident is dependent upon when they receive their disability payment from the government. Under Fair Housing regulations a landlord must make an exception to their normal policies to accommodate a disability-related need and payments are no exception. So, what’s fair in this situation? I think once you know that the tenant doesn’t get their assistance payment until say, the 10th of the month, it might be reasonable to extend the grace period through midnight of the 14th. 

If you are required to extend your grace period, do it, but don’t change your due date for rent. Just keep it the first but extend the grace period to accommodate their payment schedule. I once had a disabled renter who had no bank account, and no car. She got her disability payments on the 3rd of each month, so I extended her grace period through midnight of the 7th to give her enough time to cash her check and pay her rent.

There are three types of late rent fees a landlord may charge:

  1. A one-time charge in an amount not to exceed the amount customary to the local area. A landlord whose rental is in Bend or Portland may be allowed a higher fee than one whose rental is in Reedsport or La Grande. A reasonably safe amount might be up to $100, but just like everything rates increase over time, and I’m starting to see flat fees of $200 and in one recent case, even $250. Not sure what would happen if the amount of the fee were litigated, so keep that in mind when you’re establishing the amount. I know of one management company who has staggered rates based on the rent amount, so a higher flat fee if the unit is a higher-end property.
  2. The second choice is a daily fee that may be charged as early of the 5th day of the rental period with daily fees being assessed each day after that until rent is paid in full for that rental period only. The daily amount may not exceed 6% of the reasonable and customary one-time amount, so if we agree that a late fee of $100 is reasonable in your market that would mean a daily rate of $6; if we agree that a late fee of $200 is reasonable in your market, then a daily rate of $12. 
  3. The third choice is the most painful of the three for the tenant, and that’s a late fee of 5% of the rent amount for every five-day period or portion thereof until rent is paid in full for that rental period only. These can really add up. For example, if the rent is $1500 per month, then 5% is $75. Multiply that by each 5-day period and if rent isn’t paid until the end of the month the tenant can be responsible for a whopping $450. 

Changing the type or amount of the late fee
A landlord may change the type or amount of late fee in a month-to-month agreement with a 30-day written notice. If they are in a lease, you’ll have to wait to change the fee. All my renters have a late fee amount of $50, low by today’s standards, but I’m in no hurry to change it because they all pay on time. But if they weren’t paying on time, I would serve our new form Late Fee/Renters Insurance Notice of Change in Terms – ORHA form #O15 and change it to option three. The idea is to incentive on-time payment, so if you’re experiencing repeated issues with late payment of rent you might consider this type of change.

Insufficient Funds
Landlords may assess a fee of $35, plus bank charges for any dishonored check submitted as payment by a tenant. It’s very rare, but I did once have a tenant prove that the returned payment was a bank error, and the bank paid the charge on her behalf.

Lease-Break
You may charge a fee to a tenant who breaks a fixed-term lease without cause if provided for in the written rental agreement. The fee may not exceed 1-1/2 times the monthly rent. If you charge the fee:

  • You may not recover unpaid rent for any period of the fixed term tenancy beyond the date that you knew or reasonably should have known of the abandonment or relinquishment.
  • You may not recover damages related to the cost of renting the dwelling unit to a new tenant. 
  • You may not charge a lease-break fee in cases of termination of tenancy related to domestic violence, sexual assault or stalking as described in ORS 90.453(2), or for a tenant being called to active-duty military service as described in ORS 90.472 or 90.475, or if the lease is broken for cause.

Smoke/CO Alarm Tampering
You may assess a fee for tampering with a properly functioning smoke or CO alarm. The fee is not to exceed $250 per occurrence, and you may not assess the fee if the Fire Marshall has already done so. I once managed a fraternity and the fire Marshall had inspected, discovered the violation, and charged the fee and I couldn’t pile on darn it.

HOA/COA Move-in/Move-out
You may pass through move-in or move-out fees assessed by your condominium or homeowner’s association. To pass on the fee:

  • You must disclose the fee in writing prior to accepting any money, even a screening fee. Our application has a box you can check and a blank to fill in to notify the applicant what amount they will be responsible for paying.
  • You must bill the tenant within 30 days of receiving the association’s bill, provide a copy of the invoice with the bill, and allow the resident up to 30 days from the date of billing to pay.

Municipal and Utilities Pass-Through
You may pass on municipal fees and charges to tenants.

  • The pass-through charges must be stated in the written rental agreement.
  • The charge must be imposed on you by a utility or service provider, on behalf of the provider or a government agency for municipal services, or for general use of a public resource related to the dwelling unit, including assessments for street maintenance, transit, public safety, or parks and open space. To assess a municipal fee:
    • You must bill the tenant in writing within 30 days of receipt of the provider’s bill and include a copy of the bill.
    • You must provide the tenant 30 days or more to pay. 
    • If not stated in the written rental agreement, the fee may be added to an existing periodic agreement with 60 days’ written notice. 


NONCOMPLIANCE FEES 

  • Prior to charging a noncompliance fee, you must issue a written warning notice within 30 days of discovery of an initial violation that states a specific noncompliance, and the amount of the fee for a second noncompliance, or for any subsequent noncompliance, that occurs within one year after the issuance of the written warning notice. Use Notice of Non-Compliance – ORHA form #V1.
  • You may not issue a Warning Notice prior to a violation being committed by the tenant.
  • For any specific violation, the right to charge a fee stops one year from the date of issuance of the first written Warning Notice. Once the year has passed, you must issue a new warning notice prior to charging fees again for that specific violation. 
  • Noncompliance fees must be assessed within 30 days of discovery of the act constituting the violation. 
  • You may instead serve a for-cause notice and terminate a tenancy for the violation instead of assessing a fee but may not assess a fee and terminate a tenancy for the same violation; however, you may terminate a tenancy for failure to pay outstanding noncompliance fees billed to the tenant.  

Allowable noncompliance fees include:

  • The late payment of a utility or service charge that the tenant owes the landlord as described in ORS 90.315
  • Failure to clean up animal (pet or assistance animal) waste, garbage, rubbish, and other waste from a part of the premises other than the dwelling unit.
  • A parking violation, or the improper use of a vehicle within the premises.

The allowable fees for these violations are limited to $50 for the second offense, and $50 plus 5% of the rent amount for all subsequent similar violations that occur within one year of issuance of the required written warning notice. 

Two other noncompliance fees are higher:

  • Smoking in a clearly designated nonsmoking unit or area of the premises. 

You may charge a $250 noncompliance fee as early as 24 hours after the effective date of the written warning notice for violating this prohibition, and repeated fees for every 24-hour period during which the tenant continues to violate this provision.

  •  Keeping on the premises an unauthorized pet capable of causing damage to persons or property, as described in ORS 90.405

You may charge a $250 noncompliance fee as early as 48 hours after the effective date of the written warning notice if the tenant fails to remove the unauthorized pet, and repeated fees for every 48-hour period during which the animal remains on the premises.  

Interestingly, the statute does not provide timelines for how long tenants have to cure the other listed violations, so do what’s reasonable.

GETTING PAID

  • Notify the tenant that they owe a fee 

Send a bill to the tenant each time they incur a fee, stating the violation, the fee they owe, the fee they will owe upon future violations, and how long they have to pay. The length of time a tenant has to pay a fee after notification can be defined in the rental agreement; if not defined, 30 days seems reasonable.

  • Collect the fee or terminate 

If the tenant does not voluntarily pay a bill for a lawfully charged fee, you may send a Notice of Termination with Cause - ORHA form #VT5, providing a final opportunity to remit the funds or the tenancy terminates. If the tenant neither pays nor moves, you may evict them on that basis.

PENALTIES AND OTHER CONSIDERATIONS

  • Landlord penalty for violation

If a landlord charges a tenant a fee in violation of this section, the tenant may recover twice the actual damages of the tenant or $300, whichever is greater (90.302). This penalty applies to all fees except for municipal fees or utilities pass-through, in which case the landlord penalty is one months’ rent or twice the tenant’s actual damages (90.315).

Concerns about proof, documentation
You must take care to ensure that you have and retain proper documentation and proof of the violation prior to issuing a warning notice or assessing a fee. If a tenant disagrees with your assessment, the conflict could end up in court, where legitimate evidence will be required.

This column offers general suggestions only, and is no substitute for professional legal counsel. Please consult an attorney for advice related to your specific situation.

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The Oregon Rental Housing Association (ORHA) is a non-profit educational landlord association -- ORHA Board Members, Mentors, Staff, and/or other related ORHA affiliates do not give legal advice. Please be advised that any information provided  is no substitute for professional legal counsel and any advice or guidance given does not constitute legal advice.  Please consult an attorney for legal advice related to your specific situation.

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