Tenants in Austin and elsewhere in Texas who are slow on their monthly rent might be about to feel some extra pressure to pay on time — higher late charges.
A bill pending in the state Legislature that’s backed by the Texas Apartment Association would allow landlords to charge initial late fees of up to 8 percent of monthly rent, after a 24-hour grace period, and then 2 percent fees every day thereafter. If the bill is approved, the fees could be written into new leases after Jan. 1, when it would take effect.
Currently, penalties for overdue rent are based upon a “reasonable estimate” of the damage incurred by the property owner because of the late payment, but there is no specific percentage or monetary guidelines and late charges thought to be excessive can be challenged in court.
State Rep. Travis Clardy, R-Nacogdoches, who is sponsoring the proposal, House Bill 1821, said in the wake of a recent public hearing that he’s already planning to amend it to trim the daily fee to 1 percent and to add a provision capping the duration at 15 days — although the 8 percent ceiling on initial charges will remain. Senate Bill 921, sponsored by state Sen. Charles Perry, R-Lubbock, is a companion bill pending in the Senate.
Clardy and other backers say the proposals merely clarify the existing law by eliminating its vague language and codifying industry practices. They also note that the 8 percent figure is a cap, meaning landlords would still be free to charge less.
But some tenant advocates say they fear the plan will give landlords cover to ramp up initial late fees to the maximum allowable, which they say would be higher than average now. They also oppose untethering the fees from what landlords, if challenged, are required to prove is a “reasonable estimate” of their actual damages.
“It’s very likely that we can expect (late) fees to rise to the limit of the maximum,” said Juliana Gonzales, executive director of the Austin Tenants’ Council, a nonprofit organization that helps mainly low-income renters with housing issues.
While there is no specific benchmark for late charges under the existing law, Gonzales said the initial fees in the leases of tenants her group has worked with generally range from about 2.5 percent to 5 percent, although they’re occasionally higher.
The average apartment in Austin is 883 square feet and rents for $1,224 per month, according to Capital Market Research, a real estate market research firm. An 8 percent initial late charge on such an apartment would work out to $97.92, while a 5 percent charge would work out to $61.20 — for a difference of $36.72.
Still, some apartment owners and landlord advocates who testified during the recent public hearing on HB 1821 said 8% initial fees aren’t out of the ordinary now, and they also disputed the notion that the pending bills would prompt a stampede to lift late fees to the maximum allowed. They said other business considerations and market forces would have to be weighed.
Mark Hurley, who owns apartments and single-family rental homes in San Antonio and also serves as secretary of the Texas Apartment Association, said he currently charges flat initial late fees of $65 and no subsequent daily fees, even though he could charge more. He said he refrains from doing so because he wants to avoid excessive turnover among his tenants, which can be costly.
“I don’t think everybody is going to come up to that 8 percent” if the bills become law, Hurley said. He said codifying what’s allowable into “a bright line standard” will clear up confusion for renters and landlords alike.
But some tenant groups are skeptical. Charlie Duncan, fair housing planner with the Texas Low Income Housing Information Service, an advocacy organization, likened the percentage caps that would be codified under the bill to speed limits.
“No matter what the limit is set at, people will push it — just look at how we drive,” Duncan said during the hearing. His group has yet to weigh in on the changes Clardy said he plans to make to his bill.