When you hear the word “fee” attached to anything, you’re probably less inclined to participate or be happy paying it. When it comes to rental application fees, we know that renters don’t want to pay for them and landlords dislike charging them. However, it is important to know the fees aren’t just a price-gouging tool used to collect money from renters, but rather they add value and security to the rental application process and cover the administrative and hard costs of screening a tenant.
Rental application fees can vary based on certain state laws, but ultimately the fees are in place to allow landlords to screen their tenants. Going through this process will save everyone time and money in the future. Keep reading to find out everything you need to know about rental application fees:
- Why Are Rental Application Fees Important?
- What is the Average Rental Application Fee?
- Do’s and Don’ts of Rental Application Fees
- Rental Application Fee Laws by State
- FAQs for Rental Application Fees
Why Are Rental Application Fees Important?
Rental application fees, at first, might seem like an unnecessary and greedy part of the landlording process – especially since moving can be costly for renters in many ways including buying new furniture, security deposits and traveling. Yet, just having tenants fill out a rental application form isn’t enough – there are more precautions landlords should be taking.
Although it might seem unnecessary at first, rental application fees actually protect landlords and all prospective tenants. The fees generally are used for tenant screening. Tenant screening is essential for landlords to know the criminal background, credit history and possible evictions of applicants. Landlords must ensure that their properties, other tenants and the general community around the rental are protected from a variety of situations. As a tenant, you want to make sure future neighbors or other tenants living on the property are responsible and trustworthy as well.
What do Rental Application Fees Include?
As previously mentioned, the rental application fee is usually always used for tenant screening which includes a background check, credit check and often an eviction report. These are highly important things for landlords to be aware of before they sign a lease with a tenant – they need to know of any red flags beforehand and trust that their tenants will be able to pay rent fully and on time each month. To receive a background and credit report, landlords must go through third-party services to get this information. Application fees will sometimes cover the administrative fees as well, but this can vary from state to state.
What is the Average Rental Application Fee?
Generally, most application fees are anywhere from $30 – $75 per applicant (with a national average in the mid forty dollar range), but there are a variety of factors that go into deciding the fee price. There are sometimes different levels of tenant screening that would cause the screening fee, and therefore the application fee, to cost a little more. For example, some just include background and credit reports while some might include both of those things plus past eviction reports.
Rental application fees minimum and maximum caps vary state-by-state. Most states have no limits or regulations on what a landlord can charge for an application fee, but some have strict rules. Make sure you check your state laws in advance so you are not unknowingly breaking any laws.
Do’s and Don’ts of Rental Application Fees
Landlords and tenants alike both have things they need to remember and be educated about when it comes to rental application fees. Like we said above, renters don’t like paying the fees and landlords don’t like charging them – but, because they are necessary, there is a proper way to go about the process.
Rental Application Fees for Renters
When you have to pay an application fee, you want to make sure you know all the details and your rights as a tenant before you pay – if the landlord is open and honest with you, then you should be as understanding as you can regarding the fee:
- Do know that landlords are entitled to charge a fee – they aren’t doing it just because, but to protect their business and renters
- Do ask if the rental application fees will be refunded – since this can vary state to state it is ideal to know this from the get-go so you aren’t surprised if you aren’t refunded
- Do clarify the price of the rental application fee – know exactly what you are paying and why you are paying it
- Don’t get scammed – fraudulent landlord activity is out there so make sure you are going through secure sources and people when applying to properties
Rental Application Fees for Landlords
There are several things landlords should remember when it comes to application fees to make sure you are running a professional and successful business:
- Do be upfront about rental application fees – being honest with potential tenants from the start is how you build a good and respectable relationship with one another
- Do include the exact fee amount in the application – if you say there is just a fee, tenants might feel it’s unfair that is was unclear what the exact price was
- Do specify if the fee is refundable or not – this is an essential point so applicants won’t ask for a refund if it’s nonrefundable and you don’t choose them to live in your property
- Don’t profit on rental application fees – use the fees for tenant screening because in the long run you will save more money by having responsible and trusting renters
- Don’t set a rental application fee without checking your state laws – every state has different laws regarding rental application fees, so it’s important to know yours
To avoid issues with the government, you should double-check your state and local laws about rental application fees – see below.
Rental Application Fee Laws by State
For most states rental application fees are allowed, however, in some they are illegal and in many, there are certain limits or maximums that must be followed. Not only are there state laws, but also local laws and regulations you need to research before you start the process.
Here are the states grouped by rental application fee laws – however, make sure you check official websites and also local statutes as well. Laws can and will change.
States that have no limits on how much landlords can charge for a rental application fee and they are non-refundable:
- Alabama (no statute)
- New Hampshire
- New Jersey
- New Mexico
- North Carolina
- North Dakota
- Rhode Island
- South Carolina
- South Dakota
- West Virginia
States that have laws governing application fees:
- Massachusetts – Application fees cannot be charged
- Vermont – Landlord can only charge actual screening costs
- New York – Limits the amount a landlord can charge (see recent legislation)
States with specific parameters:
- Alaska – According to the Alaska Landlord and Tenant Act, if the application fee covers the landlord’s actual costs for services, such as tenant screening, it is probably lawful; landlords can ask for a nonrefundable application fee to place a prospective tenant on a waiting list.
- Arizona – Landlords can charge application fees and there are no limits
- California – Landlords may charge approximately $50 (this number is adjusted annually by the Consumer Price Index) the screening portion of the application fee should not exceed the landlords out of pocket costs for screening.
- Colorado – No limits for how much landlords can charge for a rental application fee, but Colorado cities are known for having stricter laws than states
- Delaware – landlords can only charge the greater of 10% of one month’s rent or a $50 application fee (i.e. If rent was $1,200 per month the max application fee would be $120).
- Florida – There are no limits on the amount a landlord can charge, but they are advised to not charge more than an average out-of-pocket expense
- Minnesota – Landlords should not charge more than what a screening service costs – excess funds should be refunded to the applicant
- Virginia – Landlords can charge up to $50 for a fee that is only used for screening services, however, they can charge a separate application deposit that can be refunded to the tenant 20 days after they are denied a rental
- Washington – Application fees must be the exact cost of a background check and landlords have to provide receipts to tenants that show the cost of the check.
- Wisconsin – Landlords can’t charge more than $20 for an application fee and also have to give a copy of the background report to the tenant.
FAQs for Rental Application Fees
Are application fees refundable?
Sometimes. They can be refundable and non-refundable depending on your state laws – usually, landlords do not have to refund the application fee if they reject the tenants.
Are rental application fees legal?
Once again, this depends on your state – in certain states such as Massachusetts, application fees are illegal – double check to be safe.
Can co-applicants and roommates be charged as well?
Yes. A landlord can charge a rental application fee per tenant since they will need to run separate screening reports on each individual. Keep in mind the Fair Housing Act requires that you do not have different application processes or fees based on the protected class of an applicant.
Overall, rental application fees are an essential part of the rental process – without them, screening would not be possible and landlords would not feel safe and secure about their tenant decisions. This could lead to a myriad of problems in the future with the property and neighbors. Furthermore, make sure to check your specific state laws to know the rental application fee laws and rights you have both as a landlord and a tenant. If you want to learn more about rental application fees or have any questions, visit TurboTenant.
DISCLAIMER: TurboTenant, Inc does not provide legal advice. This material has been prepared for informational purposes only. All users are advised to check all applicable local, state and federal laws and consult legal counsel should questions arise.