In the last article, we discussed how landlords can require security deposits, and the rules that apply to accepting deposits (such as holding them in escrow). In this article, we want to add to that discussion with the topic of non-refundable fees.
Differences between Security Deposits and Non-Refundable fees
Security Deposits are amounts of money the Landlord requires to be paid up front in case the property is later damaged. There are laws in Oklahoma that require Landlords to hold security deposits in separate bank accounts.
However, Landlords may also charge non-refundable fees, and they regularly do. An example of which would be a fee for pets. The landlord may charge a range of fees, depending on how many pets, the size or type of pet, and other criteria. This could be in addition to or in replacement a related deposit.
For instance, a landlord could charge a non-refundable pet fee, and also a pet deposit. What is important here is the operative word “deposit.” Whenever the word “deposit” is used, it implies the funds are refundable, and also are maintained separately from other fees collected, such as rent.
Landlords in Oklahoma must hold Security Deposits in escrow account
Oklahoma law requires the landlord to actually maintain these funds in a separate, escrow account. That means that the Landlord or property manager should not place the funds for the tenants security deposit in the operating account, but in a completely separate bank account. In addition, it must be an account that is federally insured.
When it comes time to apply the deposited funds toward any damage at the end of the lease term, the landlord must prepare a written statement itemizing how the funds were used.
On the other hand, then you have nonrefundable fees.
Landlords may immediately convert Non-Refundable Fees into operating capital
A landlord may charge a nonrefundable fee related to the lease. Examples include move-in fees, pet fees, and other types of fees.
If the tenant is agreeable, the Landlord could charge a fee equivalent to the typical security deposit, but make it non-refundable. The key is whether the item is called a fee or a deposit. If the tenant is paying a deposit as a form of bond toward potential damage, then the rules about keeping it in escrow apply.
But if the landlord is merely charging a fee, and not describing it as a security deposit, then it is simply a matter of whether the tenant is willing to pay such a fee in order to get the lease.
Charging both a Security Deposit and a Non-Refundable Fee
The landlord may choose to charge both a security deposit and a nonrefundable fee. Depending on the value of the rental property, and any associated amenities, this may be very much appropriate.
For example, an upscale rental property with expensive amenities might be vulnerable to damage, and therefore a security deposit would be appropriate. In addition, however, the landlord may charge a non-refundable fee as well simply because there is a certain amount of wear and tear that cannot be undone. Even if the tenant causes no unusual damage, the simple “wear and tear” may be enough to justify a nonrefundable fee.
At the end of the day, it is a free market and the tenant and the landlord can decide. If the landlord charges too many fees, then tenants will lose interest in the property. The landlord can only charge what tenants are willing to pay.
Can Landlords legally charge Non-Refundable Fees to Tenants in Oklahoma?
The answer is yes. The most basic example is an application fee.
Generally, when a landlord or property manager puts a property on the market for rent, they will have certain criteria that provides who may rent the apartment. That criteria could include underwriting requirements, such as employment and income requirements. It could also include things like criminal history or credit reporting.
There is a decent amount of administrative work that goes into reviewing applications, and for that time and effort, property managers may charge a fee. Hence, this is why Application Fees are charged.
Landlords may choose to charge fees for having pets, that are separate and distinct from pet deposits. A pet deposit is an amount of money, held in escrow, for the purpose of reimbursing or compensating for damage caused by the pets. If there is no damage, then the pet deposit is refunded at the end of the lease term.
However, a Landlord may decide to charge a nonrefundable fee because of the wear and tear caused by the pet. The landlord may just not like pets and decide to charge extra fees. There is no such thing as “pet discrimination” unless the pet is actually a service animal.
Landlords can avoid problems with fees and deposits by having a well-written lease
It is easy to see how the differences between deposits and fees can be misunderstood. Especially by tenants who are expecting a refund of the money they paid. You do not want a tenant misinterpreting the fees that were charged. You especially do not want a judge misinterpreting these two things
The best way to avoid these problems is to have a written lease that clearly lays out these differences. Every item that is billed should clearly be identified as a deposit or as a nonrefundable fee. The lease should not contain phases like “nonrefundable deposit” as that can lead to further confusion.
In addition to using clear names for these items, the lease should also provide clear explanations, that further reinforce the type of fee or deposit being charged.
The more you can define and explain in the lease, the less explaining you will have to do later in court or to the tenant asking for a refund.
Contact the Landlord Lawyer if you need an Eviction in Oklahoma County
If you are a landlord in Oklahoma County and you find yourself needing to evict a tenant, you can call our office about your case. Complete this form and we will get back with you.
Our office only represents landlords, and we help landlords obtain swift, expedient evictions so they can get back to making money and running their properties.