As mentioned in one of our recent articles , the United States District Court for the District of Massachusetts ruled that Equity Residential Management violated MGL 186 § 15B when it collected application fees, amenity fees, community fees and pet fees. SeePerry v. Equity Residential Management, LLC. In short, the Court ruled that landlords may only collect fees and/or deposits specifically listed under MGL 186 § 15B. Because that list does not include application fees, the Court ruled that it was illegal for Equity Residential Management to collect application fees.
In an apparent response to Perry v. Equity Residential Management, as well as other Massachusetts state court decisions on this issue, Massachusetts Senator Donald Humason recently sponsored Senate Bill 840, which would amend MGL 186 § 15B to allow landlords to collect an “application screening fee.” The proposed change to MGL 186 § 15B is similar to other states’ laws, like California. S.B. 840 provides that landlords may charge an “application screening fee” so long as the fee is not greater than the actual cost incurred by the landlord. That fee must not exceed $50 per applicant.
On May 12, 2015, the Massachusetts Legislature’s Joint Committee on the Judiciary will review the proposed Bill. Given that S.B. 840 would provide much needed relief and clarification for landlords, Strang Scott will continue to monitor its progress.
It is common practice in the property management business for landlords to charge certain move-in fees, such as an application fee or pet fee, prior to a tenant moving in. This practice, however, is illegal in Massachusetts.
Late last year, in Perry v. Equity Residential Management, LLC, the United States District Court for the District of Massachusetts ruled that Equity Residential Management violated MGL 186 § 15B when it collected from tenants an application fee, amenity fee, community fee and initial pet fee. Under MGL 186 § 15B, a landlord is only allowed to collect, as up-front charges to a tenant, (1) first month’s rent; (2) last month’s rent; (3) a security deposit equal to the first month’s rent; and (4) the purchase and installation cost for a key and lock. While MGL 186 § 15B does not explicitly forbid application fees, move-in fees or pet fees, it does state that “no lessor may require a tenant or prospective tenant to pay any amount in excess of” the four permissible charges mentioned in the statute. Noting this restrictive language, and analyzing similar Massachusetts case law, the Federal District Judge in Perry ruled that the collection of these fees violates both MGL 186 § 15B and Massachusetts’s Consumer Protection Act (MGL 93a). A violation of MGL 93a exposes a defendant to triple damages and attorney fees. Thus, something as small as a $50 application fee could expose a landlord to thousands of dollars in damages.
Many property management companies and landlords throughout the country charge additional fees as a matter of course. It is doubtful that any of them think twice about the practice. After all, these additional fees help defray costs and sometimes add additional revenue for landlords. Even so, the collection of application fees, move-in fees and pet fees is impermissible in Massachusetts and given the recent decision in Perry v. Equity Residential Management, LLC, it is likely that this will become a much larger, and expensive, issue for landlords in the near future.