Rental law: What fees a landlord may charge, and what to do with the funds.

Originally published on The Law Office of Andrew Lynn web site at http://wp.me/p4HBwE-2i


In the past few weeks I’ve seen a surprising number – at least half a dozen – of instances of Massachusetts landlords violating state law by either charging a prohibited fee, or failing to correctly account for a tenant’s security deposit. The rules here are firm but straightforward, so here is a short overview that I hope will prove informative to landlords and tenants alike.

As usual, this overview applies in Massachusetts only, and is for educational purposes, not legal advise. If you have any questions or want to know how the law would apply in any particular situation, please contact me directly at andrew@andrewlynnlaw.com or through one of the contact forms on this site.


Fees a landlord may charge

First: While processing a prospective tenant’s application, a landlord or a landlord’s agent may require a credit check, and may charge a reasonable fee to cover that expense. Even if the applicant’s real estate agent has already run a credit check, the landlord is not required to accept it and may require an additional check.

Second: Once an application is accepted, upon execution of a lease a landlord may charge:

1. First month’s rent.
2. Last month’s rent.
3. A reasonable fee to cover the actual cost of keys and changing locks.
4. A security deposit, which may not be more than one month’s rent.

Third: Each month the landlord may require payment of rent, except of course the first and last months if those rents have already been paid.

That’s it!

No other fees or deposits are allowed. There is no “rental deposit” permitted under Massachusetts law, nor is there a “pet deposit”. There is no facility fee, and fees for parking or gym use may only be charged if those are optional services that the tenant is free to not accept. If the landlord wants the tenant to pay for any of these things, they must be rolled into the monthly rent. Don’t try to get too clever on this either. For example, doubling the first or last month’s rent to cover extra expenses doesn’t work. The rent must be the same each month, with a few exceptions (such as offering free months as an incentive to sign a multiyear lease, which is something that some larger buildings have offered lately).

What to do with the funds

Note: This information is not complete: for example, the explanations of paperwork a landlord gives a tenant are an outline only, because the law includes redundancies and specific required language that would make this post excessively long.

1. The landlord may keep the first month’s rent.
2. The landlord must give the tenant a receipt for the last month’s rent and must deposit that rent in an interest-bearing account. The landlord must keep an accounting of the interest earned, and at the end of the lease (or the end of each year of the lease, if the lease is for more than one year) must send the interest to the tenant.
3. The landlord must use the lock and key fee, if any, to pay for locks and keys.
4. The landlord must deposit the security deposit into a separate, segregated, interest-bearing account, and provide the tenant a receipt. Again, the interest will go to the tenant.

Security deposit rules

The security deposit is only for repairing damage caused by the tenant, so if the landlord charges one the tenant must be given a statement of the initial condition of the apartment – and the tenant may also give the landlord a list of any damage that is present at the start of the lease, to avoid being charged for it later. If the landlord uses security deposit funds to pay for any repairs, the landlord must keep records of the work done and the amount paid.
Any security deposit funds not used to pay for repairs must be refunded to the tenant within 30 days of end of lease. That’s a firm requirement. Landlords: Don’t use security deposits to pay for cleaning, or for regular maintenance and upkeep, or to make up for any unpaid rent! If there is unpaid rent, feel free to write the tenant a bill but send the security deposit back anyway. If the tenant says “I don’t want to write a check, you can just keep my deposit instead,” you reply “Sorry but no, I can’t do that.”

Stay out of trouble

A majority of the landlord-tenant disputes I see relate to violations of these rules. Follow them strictly, and you will avoid a lot of expensive, time- and resource-consuming trouble.

AirBNB "squatters": A legal overview

First, apologies, because it’s been a while since I last wrote anything here. I went straight from a pretty involved project for a business client to my wedding to negotiating a surprise opportunity to buy a larger home to getting my current home ready for market, so I’ve been a bit busy. (If you happen to be looking for a 1BR with unbeatable location in Somerville, Massachusetts, send me a message.)

Note: The following is not “legal advice”, just an overview for educational purposes. The laws in this area vary by state and country, and it’s possible - as this example illustrates - to run into some serious problems by renting out a property without an understanding of rental laws in your jurisdiction, so if you are anticipating any legal problems arising from use of AirBNB or other methods of home “sharing” please contact a local lawyer.

AirBNB and the Law

AirBNB is fascinating for lawyers. For those unfamiliar with the company, it’s a web service that allows residential property holders to offer their apartments, vacation homes or even rooms in occupied homes for rent. The offeror is called a “host” and the renter a “guest”. Recently, AirBNB “hosts” who are property managers who have access to dozens or hundreds of apartments in large cities and offer them on a daily or weekly basis through AirBNB have been accused of running unlicensed hotels.

It’s an interesting study in the legal nature of business relationships in the “sharing economy” - similar to the “isn’t an Uber car just an unlicensed taxi?” debate. In most US jurisdictions, the law calls a person who’s paying a fee to use some real estate for a period of time either a tenant, subtenant or a hotel guest, depending on the terms of the rental and the nature of the owner’s business. One of the first steps in resolving a dispute over an AirBNB stay is deciding what the legal status of the host / guest relationship is.

AirBNB “tenant” becomes a “squatter”

I read an article this morning about an AirBNB host whose worst case scenario is playing out right now. The host used rented her Palm Springs, CA vacation home to a guest for a term of 44 days. According to the article, after 30 days the guest stopped paying, but is now refusing to leave.
If this had happened during, say, a one week rental, the host could have asked the police to help evict the guest. But under California law, somebody who rents a residence for 30 days or longer is a tenant and therefore entitled to the same legal protections as a person who leases an apartment. The host - now more appropriately called the landlord - must give a formal eviction notice and go to court to evict the tenant, and then recover back rent.

According to the article the unwanted tenant has “squatters rights” - but that’s not a correct use of that phrase. The legal term “squatter” in California law refers to somebody who takes possession of a vacant property, not somebody who overstays a lease without payment. Squatters rights are legal rights to such a property that a squatter can gain by occupying it for five years while doing his best imitation of a property owner and paying taxes on the property. If the true owner does not evict the squatter during the five year period, the squatter can claim ownership of the property. (Note that this is not how the law works in Massachusetts, where a squatter would have to occupy the property for 20 years under adverse possession law.)

Probably the most appropriate terminology to describe this AirBNB guest is “tenant at sufferance” - a tenant who has overstayed a lease without permission from the landlord. This is a fairly common scenario and one that has caused apartment building managers headaches for generations.

How does this work in Massachusetts?

In Massachusetts, according to a DPH opinion released in May, cities and towns may regulate AirBNB hosts as bed and breakfasts or lodging houses and require licensing. This means that you'll need to get in touch with the city clerk or licensing office in your city to find out whether there are any registration or taxation requirements for listing on AirBNB.

I Want to Host on AirBNB, So What Can I Do?

This section only addresses Massachusetts law, and is only a beginning. It’s not possible to examine all of the legal implications of home sharing businesses without writing a pretty large book on the subject. So if you have any questions, ask a lawyer who works in landlord / tenant law.

Hosting on AirBNB seems like an easy thing to do, but without preparation there are many ways to get into trouble. Would you lease your home to a tenant without a carefully drafted written lease, or open a hotel without reviewing the hotel licensing laws? Of course not - but many of the legal pitfalls for AirBNB hosts are the same.

Consider the host in Palm Springs. The problems she’s reporting go beyond a guest who won’t leave. According to her, the guest has also been running the air conditioning nonstop with the windows open and using much more than the normal amount of electricity, and is accusing the host of “negligent and malicious conduct” because the building has hard water. It’s not possible to avoid all potential problems, but being reasonably careful can decrease your risks.

First, make sure your own status is secure:

• If you’re a tenant, and you rent the home that you list AirBNB, you are offering your home for sublet. Many leases do not allow sublets, or require the landlord’s approval. It’s possible to get evicted from your apartment for listing it on AirBNB. So check your lease, and if necessary make arrangements with your landlord before you begin.
• Some condo associations and homeowner associations also have rules that may prohibit short-term rentals.
• Some cities and towns require registration or ban short-term rental entirely.
• If your home is mortgaged, your contract with your bank might not permit rental.
• Your homeowner’s or renter’s insurance might not protect you when you are renting your home.

Second, have a contract ready for AirBNB renters. Written contracts are a good idea in most business transactions. Review the AirBNB rules for when you must disclose to the renter that you require a written contract, and talk with a lawyer about what should go into the contract. Make sure your contract states that the rental is for “vacation or recreational purposes only”.

Third, limit your AirBNB rentals. The balance of legal protections shifts at 31 days and again at three months. If the rental is under 31 days, the host is exempt from most lead paint laws and evicting a nonpaying or otherwise problematic guest is relatively simple - though you might still need help from the courts, depending on the details of your situation. More than 30 days, and eviction requires 7 days’ written notice. More than three months and you have a tenant with full legal protections.