Metro Apartment Manager, January 2006

Q: Gresham recently increased its business license fee so I’m now paying $25 per unit, which adds up to serious money since we have 60 units. We decided to pass that on to our tenants, so sent them a bill for the annual fee. A few objected that it didn’t seem fair. I explained that when taxes and utilities go up, we increase the rent. The only reason we billed this directly was that I don’t feel this kind of tax on landlords is fair, so wanted the tenants to know about it and to know they were paying it. One tenant is adamantly refusing to pay. I suppose I could take it out of his security deposit. Otherwise, am I correct that I need to use a 30-day for-cause notice?

A: You are right that the remedy for nonpayment of anything other than rent for the current month is a thirty-day notice. You are also right that you can take nonpayment of a fee out of the security deposit. The latter comes with caveats, however.

Security deposits can be withheld by a landlord for any physical damage to the premises and “to remedy the tenant’s defaults” under the rental agreement. That makes having a well-thought-out rental agreement important. I remember reading a rental agreement that neglected to require the tenant to return the premises clean — after the landlord had taken the tenant to court for not cleaning and therefore losing.

The law covering security deposits requires the landlord within 31 days after then end of the tenancy to account for any amount not returned to the former tenant within that time. The law doesn’t talk about claims made against the deposit during the tenancy but I know landlords routinely charge such little stuff to deposits and send tenants notice. Doing that has the benefit of not losing track of amounts owed you or arguing that the statute of limitations hasn’t run on that claim, but it has the disadvantage of reducing your security deposit which you may need some day.

If you decide not to take it from the deposit, what do you do? I have always been reluctant to go to court for an amount like $25. But it can be done. Actually, the usual result of the threat of filing an FED is to get the amount paid. Before you file, of course you need to send a for-cause notice for nonpayment of the fee.

Oregon is unusual among the states in having a statute that lists what a landlord can charge a tenant. ORS 90.140 lists nine different items: applicant screening charges, deposits to secure the execution of a rental agreement, security deposits, fees, rent, prepaid rent, utility or service charges, late charges, and damages.

The law covering fees discusses two different types: those charged one time, and those charged more often. A landlord can charge a one-time fee only if it “is related to and designated as being charged for a specific reasonably anticipated landlord expense.” Common examples are pet fees, cleaning fees, and lock change fees. I’ve also heard of move-in fees, lease processing fees, and wear-and-tear fees. I’m sure there are others, landlords being as inventive as they are. All relate to an expense of some sort, as the law requires.

Fees that are charged more than once fall into four categories: late charges, bounced checks, tampering with a smoke alarm, and other noncompliance fees. Note that all of these result from noncompliances. Each also comes with its own constraints. A whole section, ORS 90.260, deals with late charges. Bounced check charges are limited by other law, ORS 30.701, to $25. Another law, ORS 479.300, prohibits tampering with a smoke alarm or removing working batteries, and fees are allowed for breaking that law, as long as the lease provides such a fee. The only restriction on other noncompliance fees is that they be enumerated in the lease and they not be excessive. Interestingly, late fees, smoke alarm tampering fees, and other noncompliance fees must all be agreed to in a “written rental agreement.” But that requirement isn’t there for a bounced check fee, as long as the landlord “require the payment” of such a fee. I think, therefore, that requirement can be in other documents, such as rules.

All of that discussion is but prologue. You are trying to pass on to your tenant a fee that got charged to you. The municipality is charging you a fee; you want your tenant to reimburse you. I don’t know how to pass that cost on to your tenant other than by assessing a fee. Does Oregon law allow that?

We are in uncharted territory. You are allowed to charge a one-time fee, as long as it’s for an identifiable expense and your lease specifies it. Here, it appears, your lease didn’t specify a fee that reimburses you for something you have to pay to the municipality. It can be argued, therefore, that you can’t charge such a fee. On the other hand, if your rental agreement is month-to-month, you can change the terms with thirty days notice. So you could send a notice saying your are charging a fee, as long as you give at least thirty days to pay it.

So, can or should you charge your tenant a fee to reimburse you for a new or increased cost of doing business? You are allowed to charge such fees for your expenses, as long as you identify them in the rental agreement. With a month-to-month rental agreement, with thirty days notice you can put such terms into your agreement. So you could send a notice saying this is a thirty-day notice that you are changing the terms of the agreement by assessing a fee to reimburse you for that municipal charge.

But with a term tenancy, I think you’re stuck. That contract didn’t allow such a fee, so you can’t charge it until you renew the lease.

Only a lawyer — and those with term tenancies or who otherwise can’t change the terms of the rental agreement — will find the following interesting: ORS 90.140, which covers what a landlord can charge, says “A landlord may require or accept the following types of payments.” That sentence doesn’t include the word “only.” And the wording in that section is not preceded by something like “except as specifically provided otherwise in this chapter,” — wording frequently found in other sections. And indeed landlords can charge their tenants for other things. Physical damage and attorney fees are the first that come to mind. So could fees assessed by a municipality be included? One could argue so.

One final thought regarding fees. One common fee charged by landlords is a pet fee. Fees, remember, need to be “related to and designates as being charged for a reasonably anticipated landlord expense.” I’m not sure that charging a fee for the privilege of keeping a pet on the property meets that requirement. A fee for pet damage, or for pet wear and tear, or for — as one trade group’s form says — the landlord’s administrative costs to allow the pet comply at least with the letter of the law. But simply a “pet fee” doesn’t.

My usual reminder: each circumstance is unique, so your case will be different. Before you act, be certain about what you do. Don’t rely solely on this general advice; read the law and consult others as appropriate.

This entry was posted on Tuesday, January 31st, 2006 at 2:58 pm and is filed under noncompliance fees, pet fees, fees. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.