Are you a landlord looking to charge and manage rental application fees? Navigating the legalities can be tricky, but fear not! We’re here to simplify it for you.
Rental application fees serve to cover administrative costs like credit checks and checking references, and most states allow landlords to charge them. However, each state has its own rules governing the amount that can be charged and how the fees should be handled. These laws ensure that the money is used for its intended purpose, rather than becoming an extra income stream for landlords.
Compliance is crucial to maintaining a good standing and avoiding fines. While seasoned renters are usually familiar with these fees, newcomers or those relocating from different states may have questions. They might wonder about the additional costs on top of a security deposit.
As a landlord, it’s important to provide clear and accurate information about local laws, showing that you’re operating within the legal boundaries. In this comprehensive guide, we’ll walk you through the ins and outs of charging and managing rental application fees.
We’ll provide specific guidance and links tailored to all 50 states, making it easier for you to navigate the complex landscape of rental applications. So, let’s get started!
Rental application fees are necessary for ensuring that landlords identify appropriate tenants for their properties and get them moved in as quickly as possible. But laws surrounding the fees are strict, and landlords should ensure they’re being compliant. Find the essential information you need in the following sections.
Rental application fees are funds collected by landlords along with a rental application. The fee is typically used to cover the hard cost of processing the rental application such as the cost of running a background check.
In some cases, the fees will also cover the soft costs of running a background check. This could include paying for the administrative time spent reviewing and cross-checking the information in the application.
Landlords are not legally required to charge a rental application fee, but without one, they’ll be unable to conduct the standard checks on potential tenants or they’ll need to pay for these out of pocket.
The landlord may choose to waive the rental application fee in some cases — for example, that of a previous tenant. However, waiving is not advised in most circumstances as the law requires that everyone have equal access to rental properties, and this can be seen as preferential treatment.
Every state has specific laws that will be explored more thoroughly below, but generally speaking, every person who will be on the lease must pay a rental application fee. The reason is that background checks are made on an individual level and therefore must be paid for each applicant as well.
Some landlords may waive fees for the secondary renters, but this will often depend on the stated relationship between the applicants.
Background checks are not free to process, which is why landlords usually choose to collect a rental application fee or have the potential tenant pay for their background check directly.
The rental application fee should be paid when a potential tenant submits an application for a property. You can include details about the amount of the fee and how it can be paid on the application form, as well as a deadline for paying the fee. The form should also clearly state that the fee is non-refundable.
There should be no fees associated with viewing an apartment or other rental property. While a landlord may also incur costs to provide this service, this is considered part of the reasonable cost of doing business and can’t be passed to the viewer.
It can be useful to make details about the rental application fee and what kind of checks you conduct available to potential tenants before they apply. This can discourage those who aren’t serious applicants or who know their application will be rejected from applying. They’re unlikely to pay a fee for checks they know they will fail.
The average fee we see landlords charging is $30 per applicant. For this reason, we use it as the standard fee on our free rental application on our site.
The location and market of the property play the biggest factor in fluctuating application fees.
If the rental unit is in a very desirable neighborhood and warrants a higher rent, then in some cases it’s acceptable to charge more. We have seen $50-$200 charged per applicant.
However, before adopting the idea of market-based fees, you must first consider your local state regulations to be sure they don’t enforce specific guidelines for charging application fees.
You’ll also want to make sure you have an up-to-date and compliant rental application form.
As a landlord, you might be wondering what you should be charging for a rental application fee and how much you can charge depending on your specific market.
When it comes to finding the limit on application fees, it mainly comes down to the following two questions:
Below, we’ll provide a quick snapshot of the current regulations for all 50 states. How much landlords like you can charge for a rental application varies by state. Some states have very specific limits while others are more vague. It’s important that you know what your state requires.
The following is a complete list of rental application fee laws across the country.
You can click on each state name to read up on more specifics on tenant screening laws specific to that state.
Some states, like California, Virginia, Wisconsin, and Minnesota, have more specific laws and regulations regarding the collection of rental application fees by landlords. The laws are often similar and can be summarized with some specifics here:
Although it’s not free, a great resource for California landlords is the California Landlord’s Law Book.
Language regarding the Virginia rental application fee laws can be found on this Virginia Law website.
The most notable takeaway from the state of Virginia’s laws concerning application fees is if the applicant fails to rent the unit and the fee exceeds $35, the landlord must refund the fee within 20 days after the rejection. However the refund shall only be required to cover all sums in excess of actual expenses incurred. So if the landlord charged $30 for the fee, and can only itemize $20 for the background check, then the applicant would be due $10.
Language regarding the Wisconsin rental application fee laws can be found on page 8 of this Badger Law document.
The most notable takeaway for Wisconsin is that “the landlord can only charge the actual cost of obtaining a screening report, and never more than $20.”
This will depend on your state. In most states, a landlord does not have to refund the rental application fee, but in others, they may. Here are few states laws about refunds that a landlord must know about:
A common misconception is that you must charge only what you’re paying for their background check. While obviously this amount varies, there is nothing wrong with figuring in your time and effort as an expense.
So, if the tenant screening cost for an applicant is $25, it’s perfectly acceptable to charge $30, accounting for the additional $5 as a processing or administration fee.
In typical “it takes one to ruin it for the rest” fashion, landlords who charge an application fee under the premise that it will cover the cost of the background check but never intend to actually run the background check will find themselves in trouble. Application fees are not intended to be for-profit and should never be seen as a source of revenue.
Nothing screams fraud like charging for something that you don’t undertake. Being fair and honest about the screening process and the charges associated is best practice for any landlord.
Rental application fees can be used to cover the cost of screening to see if a person is a viable tenant for a property. The fees can be used for obtaining credit reports and reports on previous evictions, verifying income, and so on. You can also charge a reasonable administrative fee for someone’s time to request and review these reports, and to complete activities such as calling previous landlords for references.
Some states require that you provide the applicant with an itemized list of exactly how their money was spent. Many landlords will have a standard process for screening tenants and therefore have a standard cost breakdown to share. It can be useful to share this with tenants when requesting the fee to demonstrate that it will be used for the specified purpose.
The kinds of checks that landlords usually carry out to screen tenants include:
You can find a more detailed list of what is included in a RentPrep background check here.
You’ll need to refund the application fee if you decide to reject a tenant’s application before running any of the usual checks.
You may not be legally required to return a fee if an applicant changes their mind before you have run the checks, but it is a good idea to return the fee to avoid appearances that you’re using the fee as a source of income.
If you have already run the checks when someone withdraws their application, you are not obliged to refund the see.
Below are answers to some of the most frequently asked questions about rental application fees, sourced from both landlords and tenants.
New landlords and tenants searching for an apartment might not be aware of why rental application fees are the standard in the industry. These fees are intended to cover the cost of processing the rental application. Specifically, the fees are most often used to cover the cost of screening tenants through background checks and credit reports.
This means the fees are used to pay for credit checks, background checks, and associated costs of determining whether or not the prospective tenant is a good fit for the property.
Additionally, rental application fees have become the standard in the industry because they keep potential tenants from applying to properties they do not have any real interest in. Not only is the fee used to pay for the screening, but it also helps ensure that those applying to rent the property are serious about their interest.
Most rental application fees are between $35 and $75 per person, but the exact limit of what a rental application fee can or should cost depends on the area you are working in. As a landlord, you are responsible for researching your state and local guidelines about rental application fees to ensure your fees comply with the rules.
Overall, the rental application should only cost as much as it truly costs for you to process the application. Rental application fees are not a means of collecting extra revenue.
When you’re new to the industry, having tenants pay a fee just to apply to rent a property may seem bizarre. Remember, however, that you’ll receive multiple applications, and it takes both time and money to screen the potential tenants. Background checks cost money, and your time investment is worth something as well.
That said, landlords or property management companies should never be charging exorbitantly high rental application fees. In some markets where fees are not limited, landlords in high-traffic areas will use high fees to limit the number of applications they receive, but it is better to use other screening practices besides high fees.
A rental application fee is an administrative fee collected to cover the expenses associated with screening a tenant to ensure they’re a good fit for your property. It is a non-refundable fee.
A security deposit is an amount of money, usually equivalent to one month’s rent, that the tenant pays to the landlord and the landlord holds to cover any expenses, such as damages or unpaid rent, when the tenant vacates the property. Any money from the security deposit that is not used for these purposes should be refunded to the tenant at the end of their lease.
Rental application fees are non-refundable because they pay for a service that is required whether or not the applicant gets the apartment.
When a state law says that an application fee is refundable, it means the landlord must provide the applicant with evidence of how much they spent on processing their rental application and refund any money the prospective tenant paid that was not spent for this purpose. For example, if the landlord charged a $35 application fee and only spent $27 to complete the relevant checks, they must refund the applicant $8.
Landlords may wonder if they have to return a rental application fee if the potential tenant decides to withdraw their application. Unlike a security deposit that is usually returned, whether or not this is possible is determined by two factors: the landlord and the law.
On the law front, some cities or localities have rules that require refunds in specific cases depending on where the property is located. Make sure you are familiar with whether or not any such rules will apply in your case.
On the landlord front, it is ultimately up to you to determine if you want to give an applicant a refund. If you have not yet processed their application or paid for any screening services, it’s probably best to give a refund. The funds should be used for these services, so the money can be refunded if the screening hasn’t happened yet.
Landlords should not waive rental application fees in most cases. This is because it could be considered a violation of the Fair Housing Act to require one applicant to pay a fee while another does not have to pay that same fee.
It’s worthwhile for landlords to know that a potential tenant may have trouble affording the cost of applying to multiple rentals, and there may be some local housing organizations that can provide a stipend to cover the cost of application fees.
Applicants who believe their rental application fee has been mismanaged have the right to take legal action against the landlord. This can result in the landlord being liable to pay damages to the applicant and attorney fees too. There may be more serious penalties if this is determined to be a pattern of behavior.
Tenant screening can take anywhere from a few minutes to several days. Credit checks and criminal background checks usually only take a few minutes to run, but if you need to follow up on references and wait for people to get back to you, it can take several days.
Rental application fees are a standard tool in the industry in most states. The modest fee allows landlords to conduct the necessary checks to ensure that an applicant is a good fit for a property. But the fee should only be enough to cover this process and should never be treated as a source of income.
Remember the following when managing your rental application fees:
Treat the rental application fee as a reasonable charge designed only to help you cover the cost of providing the tenant screening and not as a source of income.
Landlord Tip: Always be sure to include the exact fee amount on the rental application that will be signed by the applicant. Unless state law prohibits it, mention that the fee is non-refundable. After all, you won’t be given a refund by the screening company if you deny that applicant.
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