LEGISLATION
FEE CAP Bill
By Drew Hamrick
T
his year’s legislative proposal that would
be most costly to our industry if adopted
is HB20-1141, which regulates the
computation and billing of late fees, use fees and
unmetered utilities.
Th is bill would cap late fees at 3% of past due
rent, prevent charging late fees until the payment
was 14 days late, prohibit billing utilities unless
those utilities are metered, prohibit all other fees
unless directly based on usage, and establish
punitive penalties including a $2,000 minimum
penalty, plus attorney fees and treble damages.
Th e portion of the bill that’s getting the most
attention is its requirement that late fees be
capped at 3%. Because this proposed change is so
straightforward to mathematically compute, its
impact is easy to see. Th ere are a lot of good
reasons why this low cap is a problem. It doesn’t
fully compensate for the cost of lateness,
encourages delinquency, sifts cost from
delinquent residents to prompt paying residents,
and increases the need for strict screening and
increased security deposits. Nevertheless, the cap
isn’t the most economically impactful element of
the bill. Industry averages for late fees are roughly
5% and there is a reasonable possibility, through
negotiations, the bill will be amended to get close
to that industry average.
Th e bigger impact comes from not being able
to charge any late fee at all for 14 days. Th e
industry average for the accrual of the late fee is 4
days and the signifi cant majority of delinquency
(if ever resolved) is resolved with 14 days.
Consequently, this moratorium would eff ectively
mean $0 late fees on most delinquency.
An additional massive economic impact
relates to the requirement that all utilities which
are not directly metered to the residents be built
into the rent. At fi rst blush, this change looks
like it would just mandate increasing rent to
off set decreased itemized utilities. However, by
doing so, a landlord would be required to
estimate all non-metered utilities for the life of
the lease and assume the entire risk of variances
40 | TRENDS JANUARY 2020
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