Multifamily Industry Says It is Being Demonized About Service Fees

The White House and federal agencies have placed greater emphasis on protecting consumers, including renters, from so-called junk fees, which has spurred some legislation that takes aim at apartment operators.

A law in Colorado went into effect in August that prevents landlords from charging more than $10 or 2% for services that it has paid for through a third-party company, according to an industry panel at the National Multifamily Housing Council’s OpTech Conference this week in Las Vegas.

“This is another effort to demonize apartment owners,” Minh Ta, The Carlyle Group, said, adding concerns that this type of legislation could spread.

Sarah Rahman, NMHC, said, “We need to be educating legislators about the unique ways that multifamily operates and how these are service fees and not ‘junk’ fees.”

One example is when communities offer bulk Wi-Fi services to their residents, a technology system that improves connectivity. Apartment owners pay about $1,500 per unit for such service, the panel said, meaning it would take years for them to recoup their investment.

This law has deterred apartment owners from investing in such services, they said.

“From every survey we see about renter preferences, Wi-Fi is king, so not offering strong signals can hurt occupancy,” Lauren Maluso, Davis Craig, PLLC, said.

Maluso said many operators’ immediate reaction is that they could simply raise the rent to cover these services, “but it’s more complicated than that,” she said.

For existing leases, fees cannot be changed in the legal language. Also, tax collection is not allowed on Internet service and is for leases, which adds complication.

Simply raising the rents could flag rent control concerns, Minh said, and some states, such as California, have rent hike caps.

Maluso said at this point, “You could ask five lawyers how to address this law and get five different answers, so there is not one solution. At some point, property owners will take legal action to protect their investments and preserve their owners’ rights.”