[RPPTL LandTen] "Risk Mitigation Fee"

Mon Oct 28 11:00:39 PDT 2019

Without looking up any law, my concern would be disclosure.  We are all familiar with auto industry advertising with the undecipherable tv small print or unintelligible radio speak on auto sales and leasing adds.  The fine print places limitations on the great price in the ad.  Yet the industry standard in residential rentals seems to be an assumption that the advertised monthly rent is based on passing that rental’s application criteria including credit.  I don’t recall seeing any limitations on monthly rent shown on prop websites or third-party websites like rent.com (maybe I haven’t looked close enough).  That makes me think that there is some law or reg (case, statute, government agency, etc.) somewhere allowing advertising without disclosure of limitations on the advertised price and perhaps a particular statute or reg created duties for certain industries, like the auto industry.  Otherwise, given the prospect of lucrative class action filings, I don’t see why plaintiff attorneys wouldn’t have jumped on an alleged lack of disclosure on advertised monthly rents.

Mike

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From: landten-bounces at lists.flabarrpptl.org <landten-bounces at lists.flabarrpptl.org> On Behalf Of Jariel Bortnick
Sent: Monday, October 28, 2019 11:42 AM
To: RPPTL Landlord Tenant Committee <landten at lists.flabarrpptl.org>
Subject: Re: [RPPTL LandTen] "Risk Mitigation Fee"

Harry, the risk mitigation fee is being charged in multifamily as well.

Regards,

Jariel Bortnick

On Mon, Oct 28, 2019 at 11:41 AM Harry Heist <harry at evict.com<mailto:harry at evict.com>> wrote:
Hi James,

This is being done in single family management, not multifamily.

The name of the game now is to get as much money out of the owner and the tenant.

Having a tenant pay the property manager a “risk mitigation fee” adds up and increases their income.  The property manager is keeping this fee in almost all the cases I see.

Harry

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From: landten-bounces at lists.flabarrpptl.org<mailto:landten-bounces at lists.flabarrpptl.org> [mailto:landten-bounces at lists.flabarrpptl.org<mailto:landten-bounces at lists.flabarrpptl.org>] On Behalf Of James Glover
Sent: Friday, October 25, 2019 4:43 PM
To: landten at lists.flabarrpptl.org<mailto:landten at lists.flabarrpptl.org>
Subject: Re: [RPPTL LandTen] "Risk Mitigation Fee"

My thoughts from an apartment community perspective. Right away I'm thinking FHA and Fair Credit Reporting Act issues.

Practically speaking, the Tenants either meet qualifications or they don't. I don't know why you make a downward exception on your qualifying criteria just because a tenant offers you more money. You might as well throw your criteria in the garbage and just raise your rents for everyone. I know plenty of landlords that do just that, and get double market rents being the "felon friendly" apartments. My experience, once you make that departure upward or downward, you've changed the entire tenant mix for your community. You can't just make one-time exceptions per FHA, if you have one eviction tenant, then you rent to any eviction tenant.

Additionally, if you're giving different terms based on bad credit or credit score, you need to be extra diligent in giving written credit decision notices and justifying your decision criteria per the FCRA.

Can you charge the additional risk mitigation fee per this scheme? Probably, but the income isn't worth the headaches.

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James "Jimmy" Glover
General Counsel
Circle Property Management, Inc.
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---------- Forwarded message ---------
From: Harry Heist <harry at evict.com<mailto:harry at evict.com>>
Date: Fri, Oct 25, 2019 at 10:59 AM
Subject: [RPPTL LandTen] "Risk Mitigation Fee"
To: RPPTL Landlord Tenant Committee <landten at lists.flabarrpptl.org<mailto:landten at lists.flabarrpptl.org>>

It seems like each day property managers are coming up with fees that I believe will eventually cause a problem and be class action material.

They are spreading as these managers are on all of these Facebook groups, someone says they are doing it and then everyone thinks it is OK.

The latest one I have been seeing is a “Risk Mitigation Fee”.

This is a nonrefundable fee that the higher risk tenant (bad credit, bankruptcy, eviction etc) is being asked to pay as part of being approved.

Often this “fee” is being kept by the property manager, split with the owner or given to the owner.  More often than not, kept by the property manager.

Does anyone have any info on the legality of this?

In the money lending world, creditors are free to charge a higher interest rate to a higher risk person but this now????

Harry

LAW OFFICES OF
HEIST, WEISSE & WOLK P.A.
PH: 1 800 253 8428
FAX: 1 800 367 9038
"Serving the Property Management Professional"
Website:  www.evict.com<http://www.evict.com/>
Email: harry at evict.com<mailto:harry at evict.com>
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