FTC Proposes New Rule for Rental Housing Fees

In the latest rulemaking activity from the U.S. Federal Trade Commission (FTC), the agency announced last week it has issued an Advance Notice of Proposed Rulemaking (ANPRM) regarding rental housing fees. The proposed rule, which will be open to public comment for 30 days, would impose new requirements on landlords, property management companies and other rental housing providers regarding the disclosure and assessment of fees charged to prospective and current tenants.

Background

The FTC’s proposed rulemaking is part of the agency’s broader initiative to combat so-called junk fees, i.e., charges that are hidden, misleading or that otherwise inflate the true cost of goods and services, particularly in the rental housing industry.  

Summary of the ANPRM

• Disclosure Requirements. The proposed rule would require rental housing providers to clearly and conspicuously disclose the total cost of rent and all mandatory fees to prospective tenants before they are required to pay any nonrefundable fees or sign a lease. 
• Prohibition on Hidden Fees. The proposed rule would prohibit rental housing providers from charging fees that are not disclosed in advance or that are misrepresented as to their nature, purpose or amount. Fees that are deceptive in their description or that do not correspond to a legitimate service provided to the tenant would be subject to enforcement action under the rule.
• Limits on Certain Fee Practices. The proposed rule may also address specific fee categories that may be particularly problematic in the FTC’s view, including excessive application fees, duplicative administrative charges and fees for services that primarily benefit the landlord rather than the tenant. The FTC has indicated that it is considering whether to impose substantive limits on such fees or to require that they be reasonably related to the cost of the service provided.

Key Takeaways

If adopted, the proposed rule would represent a significant new federal regulatory framework governing fee practices in the rental housing sector, an area that has historically been regulated primarily at the state and local level (whose regulations would still apply in conjunction with the new federal rule), which would have significant compliance ramifications for rental housing providers and other stakeholders. We will continue monitoring for updates and encourage affected companies to reach out for guidance.