Are move-in fees something that a landlord should consider?
As an alternative to security deposits, in some rental markets, primarily metropolitan areas, some landlords use a rental policy of collecting a tenant move-in fee. A move-in fee is a non-refundable fee collected from the tenant for turnover costs associated with preparing a rental unit for a new tenant. Unit preparation costs may include general cleaning and painting. Collecting a move-in fee may provide a benefit to the landlord in time savings for administrative costs of deposits while tenants may benefit from not having to come up with a large security deposit amount at lease signing.
In general, move-in fees are not regulated by statutes and landlords are not held accountable for the use of move-in funds. Security deposits are regulated by state statutes and landlords are held accountable to specific duties and obligations. For independent landlords this difference may be a key factor in determining their rental policies regarding fees and deposits.
A move-in fee is a specified dollar amount that is not refundable to the tenant. The rental prospect/applicant/tenant should clearly understand that the move-in fee is non-refundable. A move-in fee is money that is paid directly to the landlord and is immediately available to the landlord to administer the funds as the landlord chooses.
For many tenants, the total dollar amount of move in costs can be quite high. There is a potential risk that the new tenant will over-extend his financial abilities to pay or under-estimate his ongoing costs of living including rent and utilities. The tenant may be able to pay his deposits but fall short when the next rent payment is due. Adequate tenant screening by the landlord and clear communication of rent policies to the new tenant may help to minimize potential risks. A move-in fee in lieu of a security deposit can often provide some relief to the new tenant for his signing costs while allowing the landlord to collect a set fee upfront to potentially offset a future expense caused by a tenant default.
Move-in fees may be assessed as a flat fee, for example, based upon the size of the rental unit, or as a calculated percentage of the monthly rental amount. A landlord may take into consideration the costs of a typical tenant turnover and set a move-in fee based upon that cost (within reason). Move-in fees that are less than a customary security deposit amount are usually more attractive to rental prospects and more easily budgeted by incoming tenants. A range of 1/3 to 1/2 of the monthly rental amount may be less a burden to the tenant than a one to two months’ rent amount collected as a security deposit.
There are key differences between move-in fees and security deposits:
- Security deposits by statute are refundable to tenants. Move-in fees are non-refundable.
- Security deposits are typically an amount ranging from one to two months’ rent. Move-in fees are typically one-half the monthly rent amount.
- Security deposits are regulated by state statutes with specific landlord obligations and requirements. Move-in fees are generally not regulated.