HUD Clarifies Non-Rent Fees in HUD-Assisted Housing

April 12, 2024

Make sure your staff knows which non-rent fees are allowable and which aren’t.

 

 

Make sure your staff knows which non-rent fees are allowable and which aren’t.

 

 

Owners and managers face the challenge of interpreting and adhering to the regulations and guidelines established by HUD. Among the challenges of complying with HUD rules is gaining an understanding of non-rent fees at HUD-assisted sites. When properly implemented, these fees can contribute to the sustainability and success of HUD-assisted sites. But it's important to distinguish between allowable and non-allowable non-rent fees to ensure compliance with HUD regulations.

This year, the Biden administration and HUD have made efforts to promote housing stability for renters. In January, the White House published a Blueprint for a Renters Bill of Rights, which contained dozens of federal agency commitments to create a fairer rental market. And, most recently, HUD released resources clarifying HUD policies and laws that prohibit certain non-rent fees in its Multifamily, Public Housing, and Housing Choice Voucher/Project-Based Voucher programs. These new resources make clear that certain fees, such as application and screening fees in Public Housing and Multifamily subsidized programs, are prohibited, and help ensure that tenants aren’t charged or penalized for impermissible fees.

We’ll go over HUD’s existing policy governing fees that subsidized Multifamily Housing programs can levy on tenants. HUD’s recently issued guidance covering these fees has been established and doesn’t reflect a change in federal law, regulation, or policy. The guidance only addresses fees permitted by HUD and doesn’t encompass any state or local laws that may permit or prohibit non-rent fees.

Permissible Fees

HUD regulations permit owners and managers to charge certain non-rent fees to tenants in HUD-assisted sites. Examples of allowable non-rent fees include:

Pet deposit. An owner of housing specifically designed for occupancy by the elderly and persons with disabilities may require tenants to pay a refundable pet deposit [HUD Handbook 4350.3, par. 6-24(C)]. The pet deposit applies only to tenants who own or keep cats or dogs in their units [HUD Handbook 4350.3, par. 6-24(A)]. The HUD Handbook outlines the maximum amount of the pet deposit that may be charged by an owner on a per-unit basis [Handbook 4350.3, Fig. 6-8].

An owner may use the pet deposit only to pay reasonable expenses directly attributable to the pet’s presence on the property, including (but not limited to) the cost of repairs and replacements to, and fumigation of, the unit and the cost of animal care facilities [HUD Handbook 4350.3, par. 6-24(D)]. Owners must return the unused portion of a pet deposit to the tenant within a reasonable time after the tenant moves from the property or no longer owns or keeps a pet in the unit [HUD Handbook 4350.3, par. 6-24(E)].

Security deposit. Owners may collect a security deposit at the time of initial lease execution [HUD Handbook 4350.3, par. 6-15(A)]. However, the owner must collect a refundable security deposit at the time of the initial lease execution for the following programs:

  • Section 8 New Construction with an AHAP executed on or after Nov. 5, 1979;
  • Section 8 Substantial Rehabilitation with an AHAP executed on or after Feb. 20, 1980;
  • Section 8 State Agency with an AHAP executed on or after Feb. 29, 1980;
  • Section 202/8;
  • Section 202 PAC;
  • Section 202 PRAC; and
  • Section 811 PRAC [HUD Handbook 4350.3, par. 6-15(C)].

The owner may collect the security deposit on an installment basis [HUD Handbook 4350.3, par. 6-15(H)]. And the amount of the security deposit established at move-in doesn’t change when a tenant’s rent changes. The HUD Handbook outlines the security deposit amount that may be collected for each program [Handbook 4350.3, Fig. 6-7]. When a tenant transfers to a new unit, an owner may transfer the security deposit, or charge a new deposit and refund the deposit for the old unit [HUD Handbook 4350.3, par. 6-16]. The amount of the security deposit to be collected is dependent upon:

  • The type of housing program;
  • The date the AHAP or HAP contract for the unit was signed; and
  • The amount of the total tenant payment or tenant rent.

Returned checks. Owners may impose a fee on the second time, and each additional time thereafter, a check is not honored for payment [HUD Handbook 4350.3, par. 6-25(B)(1)]. The owner may bill a tenant only for the amount the bank charges for processing the returned check.

HUD field offices or a contract administrator (CA) may authorize an owner to impose additional charges, if such charges are consistent with local management practices and are permitted under state and local laws. However, owners of Section 202/8, Section 202 PAC, Section 202 PRAC, and Section 811 PRAC projects may never charge fees for checks returned for insufficient funds [HUD Handbook 4350.3, par. 6-25(B)(3).

Damages and repairs. Whenever damage is caused by carelessness, misuse, or neglect by the tenant, household member, or visitor, the tenant is obligated to reimburse the owner within 30 days of receiving a bill from the owner [HUD Handbook 4350.3, par. 6-25(C)(1)]. The owner’s bill is limited to actual and reasonable costs incurred by the owner for repairing the damages [HUD Handbook 4350.3, par. 6-25(C)(3)].

Also, an owner may deduct accrued, unpaid damage charges from the tenant’s security deposit at the time of move-out, if such a deduction is permitted under state and local laws [HUD Handbook 4350.3, par. 6-25(C)(2)].

Keys and lockouts. An owner may charge tenants for answering lock-out calls and providing extra keys [HUD Handbook 4350.3, par. 6-25(D)(1)]. At the time of move-out, the owner may charge the tenant for unreturned keys [HUD Handbook 4350.3, par. 6-25(D)(2)].

Late payment of rent. Owners may charge a late fee if the tenant has been given at least five calendar days as a grace period to pay the rent. The rent must be received by the fifth day, not postmarked on that day. On the sixth day, the owner may charge a fee not to exceed $5 for the period of the first through fifth day that the rent isn’t paid. After that, the owner may charge a fee of $1 per day for each additional day the rent remains unpaid for the month [HUD Handbook 4350.3, par. 6-23(C)]. HUD field offices or CAs may approve a higher initial late fee if:

  • It’s permitted under state and local laws;
  • It’s consistent with local management practices; and
  • The total late charge assessed for the month doesn’t exceed $30 [HUD Handbook 4350.3, par. 6-23(D)].

Also, an owner may deduct accrued, unpaid late charges from the security deposit at the time of move-out if such a deduction is permitted under state and local laws [HUD Handbook 4350.3, par. 6-23(E)]. An owner may not evict a tenant for failure to pay late charges [HUD Handbook 4350.3, par. 6-23(F)].

It’s important to note that owners of Section 202/8, Section 202 PAC, Section 202 PRAC, and Section 811 PRAC projects may never charge late rent payment fees [HUD Handbook 4350.3, par. 6-23(B)].

Meals fee. Owners of sites for the elderly or persons with disabilities for which HUD approved a mandatory meals program before April 1, 1987, may charge a HUD-approved meals fee. Income collected from such charges must be used solely to offset costs associated with purchasing, preparing, and serving meals. The tenants pay the fees and the fees are not rent [HUD Handbook 4350.3, par. 6-22(A)].

Meeting space for tenant organizations. An owner may charge a reasonable fee, approved by HUD, as may normally be imposed for using such facilities in accordance with procedures prescribed by HUD for the use of meeting space [HUD Notice H 2014-12].

Other charges. You may require tenants to pay other charges if HUD or your CA has approved the charges, and the schedule of charges is either listed in the lease agreement or has been distributed to all tenants in accordance with the modification of the lease requirements and procedures listed in paragraph 6-12(D) of Handbook 4350.3 [HUD Handbook 4350.4, par. 6-25(D)].

Prohibited Fees

Owners and managers are not allowed to charge tenants and applicants the following non-rent fees:

Application fees. Owners must not require applicants to pay application fees or other costs associated with accepting and processing applications. These costs are considered project expenses [HUD Handbook 4350.3, par. 6-20(A)].

Charges at initial occupancy. Owners may not collect any money from tenants at initial occupancy other than rent and the maximum HUD-allowed security deposit unless they receive HUD approval to do otherwise [HUD Handbook 4350.3, par. 6-21].

Screening fees. Owners may not charge applicants for costs associated with screening applicants, including screening for criminal history or verifying income and eligibility. Hence, owners must not require applicants to pay credit report charges, charges for home visits, charges to obtain police reports, or other costs associated with the above functions. These costs are considered project expenses [HUD Handbook 4350.3, par. 6-20].

Assistance animals. Owners may not require an applicant or tenant to pay a fee or a security deposit as a condition of allowing the applicant or tenant to keep an assistance animal. However, if an assistance animal causes damage to the unit or common areas of the dwelling, the owner may charge the individual for the cost of repairing the damage if the owner regularly charges tenants for any damage they cause to the premises [HUD Handbook 4350.3, par. 2-44(E)].

Attorney, legal costs. Owners must not include a lease provision that the tenant agrees to pay all attorney and other legal costs if the owner brings legal action against the tenant, even if the tenant prevails in the action [HUD Handbook 4350.3, par. 6-5(C)(6)(h)]. However, as a party to a lawsuit, a tenant may be obligated to pay attorney’s fees or other costs if the tenant loses the suit.

Owners may accept payment of court filing, attorney, and sheriff fees from tenants who wish to avoid or settle an eviction suit provided it’s permitted under state and local laws, and the fees appear reasonable and don’t exceed the actual costs incurred [HUD Handbook 4350.3, par. 6-25(E)].

Bad behavior fees. Owners may not charge tenants for bad behavior, such as foul language, noise, or failure to supervise children [HUD Handbook 4350.3, par. 6-25(D)(2)].

Facilities and services. Owners may not charge tenants separately for equipment and services included in the rent [HUD Handbook 4350.1, par. 7-42]. Owners may charge tenants for other services or facilities such as cable TV or use of community space in the project only if all of the following conditions are met:

  • The services, facilities, and charges have been included in Part C of the most recently approved Rent Schedule.
  • A schedule of those charges has been posted or distributed to the tenants.
  • Use of those facilities or services is optional on the part of the tenant. If not previously authorized, the charges must be approved by HUD before implementation.

Also, owners may charge for parking only in unsubsidized projects where HUD previously approved it. They may also charge for car heaters in cold climates where parking spaces are equipped with them.

Infestation treatment. An owner may not charge a tenant for the cost of extermination, unless the owner can demonstrate that the infestation was caused by carelessness or neglect on the part of the tenant [HUD Notice H 2012-5]. Owners’ requests for tenants to pay the costs of infestation treatment must be in accordance with the provision for tenant payment of damages or noncompliance as required in the HUD Model Lease for Subsidized Programs.

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