Weaponized Regulation: Why the FTC's Lawsuit Against Greystar Should Worry Every Property Manager
Inside the FTC and Colorado AG’s misguided crusade—and the real steps you need to take to protect your business.
Many of you may have seen the lawsuit filed by the FTC (Federal Trade Commission) and the Attorney General of Colorado, Phil Weiser, a rabidly anti-landlord and anti-property manager politician who is now running for governor (everyone in Colorado should do everything you can to shoot down that candidacy if you want your PM businesses to survive). The lawsuit makes a wide range of allegations against Greystar, one of the biggest players in the multifamily PM space. While I think the lawsuit is absurd, it does present us with some good information about what we all need to do to avoid these kinds of frivolous lawsuits in the future, so it’s worth a deep dive. And to be clear, I am not going to hold back on my thoughts of these regulators and the Colorado AG. I despise these people. I think they’re opportunistic nanny-state scum who make everything more complicated and more expensive for both businesses and consumers in this country. So prepare yourself for some less than friendly commentary about these people in the following article. And as a long-time Democrat, I think I’m well within my rights to criticize a member of my own party like Phil Weiser who makes us all look bad. This isn’t about politics. It’s about business and what’s best for both business and consumers.
The Allegations
Let’s start off with a quick summary of what is alleged against Greystar:
Deceptive trade practices - the lawsuit claims that Greystar is being “deceptive” by listing the rent price on advertisements and not including the ancillary fees that will be charged on top of the rent
Hidden fees - the suit alleges that Greystar imposes a variety of mandatory fees that are “hidden” by “only” listing them in the lease and not in advertisements
Bait-and-switch tactics - the allegation here is that a “low” rent price is advertised to bait consumers, but then they’re screwed over at the very end of the process when additional fees are only disclosed in the lease
Confusing disclosures - while claiming that many times fees weren’t disclosed at all until the very end of the process, the suit alleges that when fees were disclosed sooner, it was done in a confusing and incomplete way, and that tenants had to add up their fees themselves instead of the math already having been done for them
Ill-gotten gains - the suit claims that Greystar profited directly from this “deception” to the tune of over $100 million between four states from 2019-2022
The laws cited as part of the complaint are the FTC Act, the Gramm-Leach-Bliley Act, and the Colorado Consumer Protection Act. The plaintiffs want civil penalties and a permanent injunction to stop the “deceptive practices.”
So, with that litany of allegations all laid out, let’s look at each allegation in detail, and then we’ll talk about the steps you can take to avoid having this sort of nonsense litigation filed against you.
DISCLAIMER: I am not an attorney, I’ve just spent way too much time around them and have quite a few on retainer. DO NOT consider this article to be legal advice. Discuss any business practices with your attorneys before proceeding with anything you glean from this article.
Deceptive Trade Practices
To be clear, every time I use the word “deceptive” in this article, I disagree with it. I’m merely quoting the out of the control, counterproductive, populist opportunists who love to throw that word around to justify their anti-business crusades.
The main allegation here is that listing only the base rent in advertisements and not including all of the ancillary fees is an intentionally deceptive practice that harms consumers. One might want to ask these social justice warriors why they pick on landlords and property managers and not airlines and car rental companies who also don’t include the ancillary fees in the main advertised price, but then that would be using common sense, and we all know that common sense takes no part in these kinds of populist crusades.
This is, by far, the weakest of the complainant’s arguments. Not only is this same standard not applied to other businesses, but there is nothing at all deceptive about advertising rent as rent and listing fees separately. The plaintiff will have a hard time showing a judge or jury why such a different and more onerous standard must be applied to landlords and not every other business in the country.
For an example of what happens when overzealous regulators try to impose this sort of standard on an industry, let’s look at a 2024 rule from the DOT (Department of Transportation) that basically tried to pull the same nonsense on the airlines, requiring them to display all mandatory fees at the time the base fare is displayed in search results.
On an appeal to the Fifth Circuit Court of Appeals, the court threw out the new rule in January of this year. The court’s ruling was largely on a technicality, stating that the DOT has the authority to regulate the airline industry, but that the DOT did not go through a proper process for changing the regulations and giving the airlines and consumers time to comment on the proposed changes before developing a final rule. Right now, the proposed rule appears to be dead. The DOT has taken no further action to issue a new proposed rule. This could be because a new administration has come in since the ruling was made, but since the new administration basically has the same populist stance on such things as the last administration did, I doubt that’s the case. More likely, the DOT realizes that they’re going to have a hard time justifying the rule if they have to actually accept public comment on it. For an example of this, look at what happened last year when the FTC tried to issue a broad “junk fees” regulation that covered all sorts of industries, including SFR rentals. After issuing their proposed rule, the agency was inundated with negative comments and arguments against the rule by the NAA, NARPM, the NMHC, the NRHC, etc. In the end, the FTC caved and issued a very limited rule that applied mainly to Airbnb and Ticketmaster, specifically excluding SFR. It seems obvious to me that the FTC already fought this battle and lost, and now they’re trying to get a second bite of the apple in a different court district by using litigation instead of regulation.
Hidden Fees
This is the best argument that the plaintiffs have, even though I still consider it absurd. The basic argument is that not only were the ancillary fees not included in the advertised rent, but that they weren’t disclosed at all except for being “buried” in a 60 page lease.
This is the best argument that they have because it seems to indicate that Greystar was actively trying to hide the fees and surprise consumers with them. I don’t know if this was actually the case. I tend not to ascribe malice when simple oversight is more likely. Companies like Greystar are immense (more than $78 billion in assets under management with 20,000 employees), so it’s not hard to imagine how lots of things can slip through the cracks in such an enormous operation. A less rabid Attorney General might look at the situation and assume that one department implemented fees without enough communications with another department that would be tasked with adding them to marketing descriptions or application documents, but no, this AG is on a crusade against people who provide housing. So, he’s just going to assume malice and evil intent.
But, setting aside the despicable motives of certain politicians, I do agree that it’s a problem if it’s actually true that fees are not disclosed until after application fees have already been paid and a lease is sitting in your inbox for signature. But the way to resolve this is to give Greystar the opportunity to correct that practice and disclose earlier in the process rather than seeking out a personal vendetta against them through litigation.
Bait-and-Switch
This claim simply strains credulity. The argument here is that Greystar intentionally used a base rent price to lure consumers in and then screwed them over by only disclosing ancillary fees in the 60 page lease later, essentially engaging in “bait-and-switch” tactics. But this argument falls flat on its face when we look at what the standards are that courts use to determine whether a business is guilty of the practice. Let’s look at those elements that courts say are needed to establish a bait-and-switch pattern:
The “bait” product or service is never actually available or is so limited in quantity that virtually no one can actually get it
The business had to have an actual intent to deceive the public
After luring the consumer in with the fake advertised product, the salespeople then steer them towards more expensive products or services
Ultimately, the consumer never had a chance to get what was advertised and ends up either with nothing or with a radically more expensive offering instead
So, when thinking of these standards, does the rent advertised by Greystar fit the test? Of course not! First, there is no fake “bait.” The advertised rental price actually is the real rent price, and you really can rent the property for exactly that price. Any ancillary fees are not for the rent of the property. They’re for additional services such as valet trash, utilities, pest control, etc. If I buy my house from a builder, I don’t say that they’ve engaged in “bait-and-switch” because the purchase price of the house doesn’t include 30 years of pest control treatments. Only a mentally deficient child could think that pest control is part of the rent unless the advertisements go out of their way to specifically say that pest control is included in the rent. This argument from the FTC and the Colorado AG is sophomoric at best.
Furthermore, there is no “steering” taking place. The leasing agent is still renting you exactly the same apartment that was advertised at exactly the rent price that was advertised. You aren’t showing up to the apartment complex and then being told that there are no 1-bedroom apartments, even though they were advertised, and you can only rent a far more expensive 3-bedroom apartment. That would be bait-and-switch (if it was done intentionally). But this? This is just honest advertising with additional services added on. If you don’t like the additional services, then rent from someone else. This isn’t hard, people.
Confusing Disclosures
This entire argument is the most objectionable of the whole thing to me, because it relies upon paternalistic values. Essentially the argument is that consumers are a bunch of morons who can’t read and do math on their own. And while I have no doubt that elitist social justice warriors actually believe such nonsense, that certainly doesn’t make it so.
The argument here is that even when Greystar released “fee guides,” it still required tenants to to add up the additional fees themselves instead of the math being done for them. Imagine being such a condescending ass that you believe you’re so much better than the citizens that you represent and only you can do math and they can’t do it on their own. Where do these kinds of holier-than-thou attitudes even come from? How can you have such a derisive attitude towards the people you are literally in office to represent? It really does say a lot about these people.
Ill-Gotten Gains
I have no reason to doubt the claim that Greystar benefited financially from the fees that were charged. I mean, that’s what fees are for. Companies have to make money somehow. That said, with the complainants being so off base on everything else, it’s hard telling whether even this is accurate. Since Weiser is such a paternalistic elitist towards consumers, maybe I should have the same attitude towards him and assume that he can’t do the math correctly, either.
In any case, whether the amount claimed is accurate or not, there is nothing at all wrong with a business making money on ancillary fees. It isn’t deceptive, it isn’t a violation of any statute, and it isn’t in conflict with any actual regulations or case law. The only time it becomes a problem is if it’s done in an intentionally deceptive way. So if Greystar did indeed collect $100 million in ancillary fees in those states during that time frame, I applaud them for it. They engaged in exactly the same business that airlines, banks, hotels, resorts, rental car companies, universities, restaurants, etc. engage in. But since those businesses aren’t called “landlords,” there just aren’t paternalistic, holier-than-thou eggheads going after them all the time.
What You Should Do
So, even though this is all patently absurd, we should still probably take some guidance as to what we should all do to avoid becoming the next target of unscrupulous politicians like Weiser. Even if you aren’t in Colorado, remember that this lawsuit is also coming from the FTC, a federal agency, so we’re all potentially at risk.
While the suit implies some broader demands to include ancillary fees in the rent price, that isn’t the focus of the litigation, and I doubt they would have even bothered filing this garbage if that was their only argument. Instead, most of their argument rests on the timing and the method of the disclosures. So let’s look at both of those.
When it comes to timing, the earlier the better for mandatory fees that everyone must pay. So, for example, if you have an RBP (Resident Benefits Package) that every tenant is automatically enrolled in, that should ideally be disclosed at least in the header of your application before any money is paid, and possibly in the advertisements themselves. I’m not a huge fan of putting a list of fees in advertisements, because I think it clutters up the marketing description, and consumers don’t like long descriptions, so I think it actually discourages people from actually reading them. People see a wall of text and just ignore it, while they’re more likely to read a shorter marketing description of the actual property. But if you’re in a more risky state (such as Colorado), then you should probably start putting mandatory fees right in the marketing description just to protect yourself from the Weisers of the world. It’s worse for consumers, but hey, politicians and regulators don’t actually care about consumers, they just pretend to.
For the non-mandatory fees, such as pet fees, risk mitigation fees, and other fees that are situational, list them in the header of your application. That way they’re still disclosed before any money has changed hands. The specific applicant won’t know whether a specific fee will apply to them or not in some cases, or the exact amount of that fee if it’s based on something like credit score or PetScreening score, but at least they’ll know the possible range ahead of time.
Next, when it comes to the method of disclosure, these government nannies apparently don’t like people having to do their own math or having to actually read the contracts that they sign, so I guess the safe thing is to do it for them. We’ve long done this at my own PM company, and we’ve even built out some automation that does the math for our team so that they don’t have to waste time and risk errors in doing it themselves. Upon a tenant’s application being approved, the exact amount that they’ll have to pay the first month to move in and each subsequent month during the term of the lease are provided to them with a full fee breakdown on what we call a “Move In Amount Notice.” The applicant has already paid an application fee at this point, because we of course have to run their credit and screen their pets before we can determine what additional fees they may have, but before they’ve signed a lease or paid any sort of deposit, they know the exact amount that they’ll need to pay. It’s incredibly difficult for any regulator or other goody-two-shoes to make a cogent argument that we haven’t adequately disclosed things to consumers. I recommend doing the same in your business. We do the same at the time of lease renewal, by the way.
I also think there’s something to be said here for the length of your lease. Greystar, like most large multifamily PM companies, uses the NAA (National Apartment Association) “Click & Lease” platform. I know this lease is considered the gold standard of the MF industry, but I’m not a fan. The leases do tend to end up being around 40-60 pages as alleged in the lawsuit, and it’s just one addendum after another stacked on top of each other. I wrote an entire article about not using templated leases a few weeks ago that is worth reading on this topic if you haven’t already, but my advice is to put together your own custom lease rather than trying to make the NAA lease work for you. And try to make that lease of a more manageable length if you can. Think something like a dozen pages in 10 point font. When you get rid of all of the extraneous language that doesn’t apply to your operation that is littered throughout these template leases, it’s not hard to keep your lease to a more manageable level that it’s a lot harder to argue is “confusing” for consumers. A lease is effectively a contract of adhesion, as virtually no property manager will agree to negotiate lease terms with each tenant, so to avoid it being legally actionable, you need to make sure that the contract can be understood by a normal person. Legalese is unavoidable, of course (precisely because of overzealous regulators and courts), but a few provisions of legalese is a lot better than 40 pages of it. The goal is to make sure that consumers can understand your lease and that none of its provisions are unconscionable.
This Won’t End
While this lawsuit is against Greystar in particular and focuses on a few specific states where they do business, this is not a one-time thing. These overzealous government nannies will not stop trying to make our lives more difficult in this business, because they believe that painting landlords and property managers as evil endears them to the population. It’s a weird theory, though, because despite the rhetoric of a housing affordability crisis, 66% or two-thirds of Americans live in homes that they own rather than rent. Even in the state with the lowest homeownership rate, New York, it is still a majority at 53%. Even California, frequently trotted out as the prime example of housing affordability problems, has a 55% homeownership rate. So these politicians and regulators are pandering to a minority of the population. Nevertheless, that is their strategy, and I don’t see it changing. They’re firmly entrenched in this populist ethos that government must look out for consumers who are too stupid to look out for themselves and that landlords are evil doers constantly seeking to harm consumers. Rather than hoping for it to go away, we need to safeguard our businesses by putting up protective barriers such as disclosures. And, even better, contribute to NARPM PAC so we can fight against this nonsense on the front end.1
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Debate Me
Disagree with my take here? Have a different perspective? There’s nothing I love more than a good debate or even just an intelligent conversation. If you’d like to jump on a podcast recording with me to discuss this topic, please let me know!
My views expressed here are mine and mine alone, and do not represent the views of NARPM or any other industry trade organizations. They’re far more polite and diplomatic than I have any intention of being towards these people.