Charging Extra Fees for Items or Services—What’s OK, What’s Not
You may believe you have a right to charge extra fees to rent-stabilized tenants for certain items or services. For example, you may want to charge your tenants a fee for paying rent late or for taking over use of the elevator when moving furniture into their apartments.
But the Division of Housing and Community Renewal (DHCR) doesn’t permit you to charge extra fees whenever you want to. It’s important to know which items or services you can charge fees for—and which ones you can’t. If you make a mistake, the DHCR could find you’ve collected a rent overcharge and order you to refund not only the overcharge but also triple damages.
Fees That Are Allowed
You may charge extra fees for the following items or services:
Late payment of rent. You may charge a late fee to a rent-stabilized tenant who pays the rent late. But you must meet two conditions:
- The tenant’s vacancy and renewal leases must give you the right to charge a late fee. There must be a clause in the original lease that authorizes the collection of a late fee.; and
- The amount of the fee must be reasonable. The DHCR has generally considered a late fee to be reasonable if it’s 5 percent of the monthly rent. In one case, the court found that the late fee charges of $310 per month claimed by the owner were excessive, disproportionate to the rent owed, and void [VP Village Park LLC v. Victor, August 2013].
Credit check. You can charge prospective tenants an application fee to cover the cost of a credit check and to process the application. In one case, a tenant complained to the DHCR that the owner had charged him a $50 credit check fee. The DHCR ruled that the Rent Stabilization Code doesn’t bar owners from passing the cost of credit checks along to prospective tenants. So this fee wasn’t a rent overcharge [Good Day Apartments, Inc.: DHCR Admin. Rev. Docket No. ML610035RO, October 2001].
Returned rent check. Returned checks or other bank charges are allowed if spelled out in the lease or rental agreement. To be enforceable, such fees must bear a reasonable relationship to the actual loss the owner would expect to suffer as a result of your returned check. In one case, the tenant complained of a rent overcharge. The owner had charged her $25 for the bank’s return of a rent check. The tenant’s lease allowed the owner to charge the late fee and the returned check fee [Gates: DHCR Adm. Rev. Docket No. MJ310021RT, April 2001].
Lease transfer fee. Say a tenant asks to transfer to a different apartment before the end of the lease and get a new lease for the apartment. The DHCR has ruled that if you grant the tenant’s request, you can charge the tenant a lease transfer fee. In that case, the owner had charged the tenant a $175 lease transfer fee. The tenant challenged this fee by filing a rent overcharge complaint with the DHCR. But the DHCR ruled that lease transfer fees aren’t rent—so charging such a fee didn’t amount to a rent overcharge [North Carolina Leasing Co.: DHCR Adm. Rev. Docket No. IH210100RO, July 1999].
Reasonable fee to process sublet request. You can charge a reasonable fee to process a tenant’s sublet request if the tenant’s lease allows for the fee and stipulates the expenses involved. In one scenario, a rent-stabilized tenant asked the owner for permission to sublet his apartment. The tenant’s lease said that if a sublet was granted, the tenant agreed to pay the owner a fee equal to one month’s rent, for bookkeeping and other expenses. The owner asked the DHCR if this lease clause was enforceable.
In an opinion letter by Michael Rosenblatt, dated Nov. 22, 2004, the DHCR pointed out that in another case, the court permitted an owner to charge $250 as a reasonable application fee when the tenant sublet his apartment. In that case, the owner required letters of reference, a credit check, a copy of the sublease, and an interview with the proposed subtenant. The case didn’t discuss bookkeeping expenses, and here, the tenant’s lease didn’t explain what the other expenses were. So in this scenario, if the owner charged the tenant a full month’s rent as a sublet fee, it could constitute a rent overcharge.
Fees That Aren’t Allowed
Don’t charge extra fees for the following items or services:
Broker’s fees. It’s illegal for owners to charge tenants fees for rent-stabilized units. Neither the owner nor the owner’s employee may collect a finder’s fee or brokerage commission in connection with a rent-stabilized lease. However, licensed brokers, salespersons, and apartment information vendors who are unrelated to the owner may collect a fee or commission from the tenant.
In one case, a rent-stabilized tenant complained of a rent overcharge because the owner collected a $950 brokerage fee when she moved into the apartment. The district rent administrator ruled for the tenant and ordered the owner to refund $2,850, including triple damages. The owner claimed that it had no connection to the broker. But the owner gave the tenant one receipt for the first month’s rent, security deposit, and broker’s fee “to WRR.” This was inconsistent with the owner’s claim that it had no relationship with the broker [153rd Realty Assoc.: DHCR Adm Rev. Docket No.YH6100506O, November 2010].
Pet registration fees. In an opinion letter dated Sept. 9, 2003, the DHCR said the Rent Stabilization Code didn’t permit any rent increase for pets. The owner had charged the rent-stabilized tenant an annual pet registration fee of $25 for each dog or cat. A tenant asked the DHCR if this constituted a rent overcharge. If the tenant’s lease allowed pets, or if the tenant had kept a pet openly for more than three months so that there was a waiver of any ‘‘no-pet’’ lease clause, a pet registration fee would be a rent increase.
Use of service elevator during move-in. An owner cannot charge a fee to rent-stabilized tenants for using the elevator when they moved into their apartments. The DHCR would consider such a fee to be an unlawful rent overcharge. In one case, a tenant complained of a reduction in services when the owner started charging tenants a fee for their use of the building’s service elevator.
The district rent administrator ruled for the tenant. This restriction on the tenants’ use of the service elevator was a reduction in required services. And the tenants’ leases discussed only use and notice requirements for the elevator. A fee for elevator use wasn’t mentioned [RFD 77th St., LLC: DHCR Adm. Rev. Docket No. OC410098RO, Nov. 2000].
Lobby door key, key deposit. You can’t charge tenants a key deposit even if you’re careful to return the deposit when they return their keys. In one case, an owner installed new mailboxes in its building and required all tenants to deposit $10 for a mailbox key. The owner said that the deposits would be refunded when tenants moved out. A rent-stabilized tenant asked the DHCR if this was allowed. In an opinion letter by Charles Goldstein dated Oct. 10, 2003, the DHCR said no. Under DHCR policy, owners can’t charge tenants a fee for a front door building key because this was a required service. Similarly, mailbox access was a required service, and landlord can’t ask tenants to pay a deposit for mailbox keys.
Roommate fee. You can’t charge a rent-stabilized tenant a fee for having an additional occupant in the apartment. In one case, a tenant sued the owner, claiming that the owner collected unlawful application and administrative fees when the tenant brought in a roommate. The owner asked the court to dismiss the case. The court ruled against the owner. Charging these fees posed an unlawful restriction on occupancy, in violation of the roommate law, Real Property Law Section 235-f [Decatrel v. Metro Loft Management LLC, Nov. 2010].
But note that you may be able to collect a rent increase from a rent-controlled tenant for having an additional occupant in the apartment. Section 2202.6 of the city’s Rent and Eviction Regulations (which applies to rent-controlled apartments) allows you to get a rent increase from a rent-controlled tenant if, since March 1, 1959, there has been an increase in the number of adult occupants in the apartment who aren’t members of the tenant’s immediate family.