When Jackie Smith and her husband moved to Bend from Southern California a year ago, they spent between $500 and $600 on application fees for rental homes they never heard back from before finding an eight-month lease in a $2,100-a-month condo with toilets that didn’t flush when they moved in and an oven that set off smoke detectors every time it turned on.
The Smiths had sold their house and two rental homes in California and needed a lease while their Bend house was under construction. By the time they signed the lease, they were desperate for a place after turning in applications and the accompanying $50 to $75 fees at several rental companies in town.
“They’d say ‘well, there’s 10 in front of you,’ ‘there’s five in front of you,’” Smith said.
“These places just take your money and take your application, and then, you never hear anything from them.”
What the Smiths experienced happens so often in Bend, that city officials want to look at how application fees are handled. No specific policy actions have been proposed, but city councilors expressed interest in regulating security deposits and creating a uniform processing system at their last council meeting.
The Smiths could tell them a lot. Jackie Smith, who works in insurance, and her husband, a commercial pilot, could afford the application fees, and initial move-in costs of about $4,000 between a security deposit, rent and a pet deposit. But the fees were a far cry from what she experienced as a rental property owner and tenant in California, where landlords charged maybe a $10 credit-check fee. She said she couldn’t stop thinking about young families trying to rent in Bend.
“I’m a little older now, and at least I have the resources, but I remember when I had young children and we were renting,” she said. “I just kept thinking about all the young people who don’t have the cash to put down.”
Smith’s experience is similar to what a lot of prospective tenants face, said Jack Rinn, a longtime property manager who works on tenant advocacy issues. Property management companies have an incentive to engage in fee-stacking because they earn money from fees while traditional landlords earn money from rent, he said.
“The abuses are just mammoth,” Rinn said. “One way you can get a feel for it is to go to Craigslist and just read the ads.”
State law allows landlords or property management companies to charge application fees to pay for the cost of screening applicants’ credit history, rental history and criminal records. Landlords and property managers aren’t supposed to profit from these checks, and they’re supposed to refund fees if they don’t conduct the screening or rent the unit before conducting the screening — but there’s no real method of policing that, Rinn said.
Tenants can recover improperly charged fees in small claims court, but that requires paying a $50 filing fee. And tenants are often scared to take any action against landlords because they don’t want to do anything that could endanger their chances of finding a home, Rinn said.
Companies also don’t have to run credit checks, he said. They can have tenants share one of the free credit reports they can access annually from the three major credit reporting bureaus, look at alternate methods of reliability like rent receipts from current landlords or just use an interview to learn more about prospective tenants, Rinn said.
If they do insist on running credit checks, companies could still avoid passing that cost onto tenants, Rinn said.
“It’s a cost of doing business,” he said. “Walmart has shoplifters.”
City staff will begin looking at how application fees and deposits work in Bend following a request from Councilor Nathan Boddie at Bend’s last city council meeting. Boddie said he’s not sure what, if any, policy action might come of it, but the city’s staff and Affordable Housing Advisory Committee should look into the issues.
“I think it’s worth hearing what’s going on in the community,” he said.
Other cities have passed ordinances capping security deposits and landlords to offer installment plans to pay security deposits.
Seattle was promptly sued by a landlords association after it passed an ordinance late last year that required security deposits and move-in fees cost no more than a month’s rent, capped pet deposits at no more than the first month’s rent and created installment plans for security deposits.
Landlords also sued the city of Seattle over a new law requiring that they rent the apartment to the first qualified tenant who applies, thus preventing landlords from continuing to accept application fees or choosing from multiple applicants. Neither lawsuit has been resolved.
Bend wouldn’t necessarily try to cap deposits, Boddie said, but the city should know whether high deposits are an issue.
A Bulletin review of available rental units posted to Craigslist showed that most advertisements that included deposit information charged more than a month’s rent.
A three-bedroom home near the Old Mill District posted to Craigslist on Friday evening, for instance, is requiring a $45 application fee, $1,895 rent and a $2,295 base security deposit, with the caveat that the deposit could increase depending on the tenant’s credit report and rental history. A two-bedroom apartment near Reed Market Road and the Bend Parkway, on the market after two weeks, charges $1,250 a month and a $1,450 deposit, as does a two-bedroom apartment downtown managed by the same company.
A $2,150-a-month three- bedroom home on Elgin and 16th streets posted to Craigslist Wednesday charged a $40 application fee and a $2,000 deposit, plus an additional $500 for each pet. And a three-bedroom home in southeast Bend charged a $40 application fee, $1,950 in rent and a $2,200 security deposit.
Landlords who opposed the Bend City Council’s December decision to require a 90-day no-cause eviction notice for tenants who lived in buildings for more than a year said that change would force them to charge higher deposits. In joining Boddie and Councilors Bruce Abernethy and Barb Campbell in agreeing to ask city staff to look at deposits and fees, Mayor Casey Roats said he expected the same landlords to be back at city council to explain that the 90-day notice caused their deposits to increase.
The 90-day notice has nothing to do with high deposits, Boddie said. Security deposits can be used to pay for damage tenants cause, and tenants who cause property damage can still be evicted for cause — meaning they don’t require a 90-day notice.
“I haven’t seen any negative impact from the 90-day notice,” he said. “If somebody’s damaging property, you don’t have to give them 90 days.”
Along with deposits, the city will look at rental application fees, which typically cost at least $35 per adult. Renters pay a separate fee with each application, which can pile up if they apply to multiple places.
There should be a way to do this more efficiently, Boddie said, maybe something similar to the Common App high school seniors can use to apply to more than 700 colleges or a centralized app processing system that matches tenants with properties the way some recruiting sites match applicants’ resumes to available jobs. Tenants would only have to pay one fee.
“We like to do innovative things in Bend,” Boddie said. “We may find that this doesn’t work, and that’s OK, but it doesn’t mean we shouldn’t look for solutions.”
Lawnae Hunter, owner of PLUS Property Management in Bend and Redmond, said statutorily limiting the amount landlords can charge for security deposits is a “really scary issue for tenants because it will limit our inventory.”
Hunter’s company typically charges slightly more than one month’s rent, so tenants don’t interpret their deposit as paying their last month’s rent. Landlords may charge more if tenants are living in a home that will be more expensive to repair, such as one with hardwood floors that would need to be refinished or an expensive in-unit washer and dryer, she said.
“I have a unit right now that a tenant did $28,000 worth of damage to,” she said. “They ripped the cabinet doors off the hinges. They put a chair through the sheetrock. The carpet was totally damaged.”
Property managers also typically lose money on applications, she said. PLUS Property Management charges $35 fees, but Hunter said she pays about $80 to process the applications — $30 for a credit report and two hours of staff time at about $25 an hour to call references.
“I laugh at people who think the application fee is a profit center,” she said.
Melody Luelling, president of the Central Oregon Rental Owners Association, said she charges $20 application fees at her properties but most property managers charge $35 to $45. Processing application fees takes time and effort, she said, and a centralized processing system like Boddie suggested might work if done right.
Luelling said she hasn’t heard many complaints about security deposits and was surprised the city would look at them. Landlords and tenants seem to understand that they’re based on several things, including the cost of rent, credit history and pets, she said.
Landlords are trying to work their way out of Bend’s housing crunch and provide more middle-income housing options, and city restrictions won’t help, she said.
“When you start having city council — and the state for that matter — start dictating what to do, it gets in the way,” she said.
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