Nevada bill giving tenants more rights to reclaim security deposits draws flurry of landlord criticism

Landlords would be barred from charging fees for rental applications, would be restricted from adding certain extra fees beyond the base rent and would have to make a stronger case if they want to keep a tenant’s security deposit under a bill Sen. Julia Ratti (D-Sparks) presented on Wednesday.

SB218 comes on the heels of a previous tenants’ rights measure Ratti sponsored in 2019 — SB151 — that capped late fees landlords could charge. That stirred up a hornet’s nest of opposition from groups including the Nevada Association of REALTORS, and Ratti said it prompted some landlords to retaliate by eliminating grace periods for late payments and inventing new fees.

“The vast majority of landlords are good players, that they work with their tenants, that they're interested in maintaining a professional relationship, and that they don't take advantage of the power dynamic that they have — which is that they have control over somebody’s housing,” she told members of the Senate Judiciary Committee. But a subset of landlords “tried to figure out how they can fleece their tenants for money in other ways.”

Several landlord representatives who weighed in at the hearing said they were opposed to virtually every element of the bill.

“Many of SB218's proposed revisions will cause havoc when actually applied to real world landlord-tenant situations,” said Terry Moore, a lawyer who represents landlords and property managers who oversee some 25,000 housing units and argued the bill could leave landlords footing the bill for damages if it took too long to get a unit repaired. “Under no set of circumstances is such a draconian penalty fair or warranted under Nevada law.”

Ratti and her co-presenters from the Legal Aid Center of Southern Nevada framed the bill as a way to equalize a power imbalance, particularly around security deposits — something that several public commenters said they were resigned to never getting back from their landlords. The bill creates a rebuttable presumption that there was no damage to a unit beyond normal wear and tear and puts the burden of proof on the landlord to show the damage went beyond that standard.

It would head off situations such as one described by Robin Franklin of Nevada NOW, who said she knows someone who recently left a low-income apartment after a five-year tenancy and was charged $2,000 to cover the costs of new carpet, a fridge, a stove and weather stripping. If tenants can’t pay, the debt affects their credit and worsens their chances of getting another place, she said.

“It’s preposterous to think that a person with low income or no income would be able to pay $2,000 for an apartment that should be refurbished by the landlord themselves,” she said.

The bill and a proposed amendment would require landlords to return a security deposit within 21 days rather than the current 30, and would require a more formal assessment of the costs of repairs a landlord asserts are needed. Ratti said tenants need the money from the deposit back to make down payments on their next housing arrangement.

It would also prevent landlords from charging fees to apply to rent a housing unit. Landlords pushed back fiercely on that provision, saying the funds are needed to run credit and background checks on prospective tenants and pay for staff time to review applications.

But Ratti said landlords should view the process similar to the hiring process — applying increased vetting only to one or two finalists out of 50 applicants, rather than taking fees from 49 people who don’t have a chance. She said a limited number of background checks should be factored into the cost of doing business.

“This is one of the parts of the bill that I feel most passionate about because, again, in Northern Nevada right now, a tenant may need to try many, many times to get a unit because it is such a competitive market,” she said. “To have them paying a $50 fee, just for the privilege of applying — it's just not acceptable.”

The bill also prevents landlords from creating additional types of fees beyond what is allowed in statute. Legal aid attorneys say they have seen extreme instances when fees for a microwave, refrigerator and common space are added on top of the base rent, so tenants who saw a list price of $600 a month for rent actually owe $1,100 in rent.

Landlords would still be able to charge extra for amenities, such as use of a parking space, but would be required to reflect those charges as part of the base rent — a provision aimed at ensuring fees are not hidden.

“Is this saying that landlords cannot pass along their costs to tenants? No, it is absolutely not saying that,” said Jim Berchtold of the Legal Aid Center of Southern Nevada. “What would be required, however, is the landlord make a business decision about the costs that they wish to pass on to their tenants, they calculate those costs and they include those in the cost of rent.”

The bill also requires landlords offer a grace period of at least three days before charging late fees.

Groups representing landlords fought the measure on multiple fronts, arguing that the timelines for identifying deficiencies a tenant needs to correct to get back a security deposit are too short and that a provision capping a cleaning deposit at 15 percent of the regular rent payment is unrealistic for addressing the mess a tenant may have made.

One of the most frequent arguments during the hearing was that the bill would force landlords to pass along more costs to tenants, making rents unaffordable, and driving people out of the landlord business altogether, thus reducing the supply of affordable housing.

“We’ve already seen a mass exodus of landlords leaving the state as a result of some of the burdens and policies that have made the cost of doing business in the state of Nevada just too much to bear,” said Maggie O’Flaherty of the Manufactured Home Community Owners Association. “And this will only continue if we continue to present similar kinds of undue hardship on landlords.”

Ratti said she heard some of the same arguments against SB151 in 2019, “and we did not see a crumbling of the rental infrastructure.”

“I do believe some … landlords are going to get out of the business,” she said. “I think market forces have a lot to do with it — the property values are up significantly … but I don't think it's because of modest protections that we put in place to equalize the balance between tenants and landlords.”

The hearing was the first for the bill, and the committee did not vote on the measure. Ratti said she thinks there is still work to do on the measure and said she is open to doing that.

— This story was used with permission of The Nevada Independent. Go here for updates to this and other stories.