More than one-third of American households rent their homes. With that much demand, predatory lease agreements are an unfortunate and common reality. Predatory rental contracts can range from outright scams to leases with unfair or borderline-illegal provisions. Unscrupulous landlords prey especially on people in desperate situations or those who are simply unaware of their rights. Before signing any lease agreement, it's important to know the red flags that may indicate a contract is predatory. Here are five of them.
- Approximately 36% of the nation’s households are renters.
- Predatory leases are common, and an estimated 5.2 million renters lose money to scams.
- Even when a lease isn't an outright scam, it may have unfair or unfavorable terms.
- Before signing a lease, know your rights and take time to review the agreement carefully.
- Consult with a local tenants' rights organization if you need assistance.
What Is a Predatory Lease Agreement?
A predatory lease is an unfair or illegal rental contract that takes advantage of the renter. Sometimes, predatory leases are outright scams designed to cheat tenants out of their money or belongings. In other instances, predatory leases are legal and valid agreements but with terms that are unfair to the renter. These agreements take advantage of the fact that many renters do not know their rights or how to protect themselves when leasing a property.
Predatory landlords frequently prey on individuals who are vulnerable, young, or don't have other housing options. College students, low-income individuals, and immigrants are common targets.
5 Red Flags of a Predatory Lease Agreement
When reviewing a lease, look for the following clues that the lease is predatory or fraudulent:
1. It requires an unusually large deposit
When you move into a new apartment, the landlord will typically require you to pay a security deposit. The deposit can range from a few hundred dollars to several months' rent. Some predatory lease agreements will require tenants to pay thousands of dollars upfront, putting a significant financial burden on the applicant—along with the risk that they may never get that money back.
Depending on where you live, there may be restrictions on how much a landlord can charge you as a security deposit. In Pennsylvania, for example, the maximum is two months' rent during the first year of the lease and no more than one month's rent after that.
Even if you live in a state that doesn't put a cap on security deposits, the industry standard is usually one to two months' rent. If a landlord asks for more than that, consider it a red flag.
2. The landlord pressures you to sign
Some landlords will pressure you to sign the lease quickly. They may encourage you to skip reading it by claiming they have another appointment. Or they may tell you that you have to sign right away because they have other people interested in the property.
If that sounds like it might be happening to you, don't let yourself be rushed. Don't sign any agreement without taking all the time you need to review it carefully and ask questions. Make sure you understand and are completely comfortable with the lease's terms before signing.
3. There's no way to get out of the lease
Though you might intend to stay in your new home for years, things can change. You could lose your job, need to care for a loved one, or relocate for a new position. Whatever the circumstances, there may be times when you need to break a lease.
Depending on your location and the terms of your lease agreement, you could be on the hook for rent through the end of your lease term. In some states, the landlord can continue to charge you rent until they find and approve a new tenant, and that process can take months.
When reviewing the lease, look for an addendum about breaking a lease. You often have the option of paying two months' rent to get out of it. If there isn't clear language about early termination of the lease, you run the risk of being stuck paying rent even if you no longer live on the property.
4. The landlord requests postdated checks
Postdated checks can ensure that you will continue to pay your rent. However, predatory landlords may require you to provide multiple postdated checks or payment cards before moving into the property. This practice allows predatory landlords to withdraw money from your account without your permission after you've already moved out of the property.
If they cash the checks before you expect them to, you could be on the hook for account overdraft fees and other costs in addition to the money they've withdrawn.
5. The landlord tacks on added fees
Some predatory lease agreements will list fees that aren't standard but that new renters may not think to question. For example, some landlords may charge:
- Convenience fees. Fees for paying your rent by credit card, which can add 1.5% to 3% to your rental cost.
- Move-in fees. This one-time fee is supposed to cover any damages that may occur to the unit when you're moving into it.
- Telecom fees. The landlord charges a set fee for phone or Internet services, even if the tenant uses another provider.
These kinds of fees, though not necessarily illegal or even unreasonable, can add substantially to your cost. So make sure you review the agreement, consider how much they'll add to your monthly rent, and challenge any you believe to be unwarranted.
Where to Go for Help as a Tenant
If you are a renter looking for a new home—or are stuck in a predatory rental contract—it's a good idea to consult with your local tenants' rights organization for assistance. It can help you understand your rights as a renter and advocate on your behalf with your landlord.
How Long Is a Typical Apartment Lease?
Apartment leases often run for one year. But it's also possible to get a shorter- or longer-term lease in some instances.
Can My Landlord Raise My Rent During the Term of the Lease?
Your landlord generally can't raise your rent while your lease is in effect unless the terms of the lease allow for it. Your landlord can, however, raise your rent if you renew your lease after it ends. Depending on where you live, your landlord may be required by law to provide written notice of any rent increase well in advance.
Will I Get My Security Deposit Back?
Most states have laws governing security deposits, including how soon after a tenant moves out that the landlord must return it (typically within several weeks). Generally, however, landlords can subtract a portion of the security deposit to cover unpaid rent or serious damage to the property (not normal wear and tear).
The Bottom Line
Predatory lease agreements—from the outright illegal to the egregiously unfair—are an unfortunate fact of life in the rental market. Unethical landlords can spring them on renters who have few other choices or simply don't know any better. Before leasing an apartment or other home, renters should read any agreement carefully, be alert to possible red flags, and ask questions until they're satisfied with the answers. A local tenants' rights organization can also be of assistance.