When renters are scouting for apartments, they often fail to notice how expensive rental application fees can get.
Some of the charges that they have to worry about include the application fees, the screening fee, the security deposit, and other administrative fees.
These are a lot of fees.
Thankfully for renters, there are some laws that dictate how much landlords charge.
In this guide, we will be going over all of the laws and regulations that surround rental application fees.
To begin, let's go over some of the most common application fees that a landlord can charge.
What are Rental Application Fees
Rental application fees are any fees that are associated with applying for an apartment or rental unit. Usually, the screening process, including a credit report from the prospective tenant, costs money. To cover these costs, landlords turn to application fees to cover things like credit reports, background checks, and an eviction report.
Depending on the number of reports that need to be pulled, the landlord can charge an application fee anywhere from $20 to $60. The average rental application fee is $25 but this can vary greatly. This may not seem like a lot for a renter to pay if they are interested in a rental property, but if they are applying to multiple properties, they may have to pay a lot more than that.
These prices especially go up if the renters are searching in cities that are larger or have a more competitive rental market. The other problem is that a renter can also face a collection of hidden fees when moving into an apartment.
Some of these fees include parking fees, move-in fees, renter's insurance fees, pet fees, and other fees. All of these fees can be upwards of $100 by themselves and, when put together, can amount to a lot of money.
Now that we know about what rental application fees are, let's go over some of the things that landlords should and shouldn't do when it comes to charging rental application fees.
Rental Application Tips for Landlords
When it comes to charging an application fee, it can be difficult to get it right the first time. To help with that, we have listed below some of the most important do's and don'ts for charging your prospective tenants.
Do Be Transparent and Upfront
The most important part of charging rental fees is for the tenant to know exactly what they are paying. By explaining to the tenant that they will be charged an application fee, or any other fee, they can plan out their expenses and effectively pay.
However, if no mention is made of any fees, the tenant can dispute the charges. And, the worst thing for property managers is to start off on the wrong foot with their tenants. For this reason, property managers should clearly explain any application fee, with the exact fee amount, and any other fees, like security deposits or screening service costs.
It is especially important to take this step when it is a nonrefundable application fee. So, to prevent any arguments or disputes, it is always a good idea to let your tenants know about anything they will be paying.
Do Run Tenant Screening Reports
Although this means more fees, it is always a good idea for landlords and property managers to run tenant screening reports. The screening process is the best way to guarantee that the tenant is reliable and that they do not have a risky renting history.
Screening reports also reveal whether the tenant has had an eviction history or not. This is important because landlords typically would not want a tenant that has had multiple evictions in the past.
Do Offer Refundable Application Fees
If the landlord rejects an application before running any sort of credit history report or background check, it is always a good idea to refund the application fee. Returning the application fee is a courtesy if the landlord did not actually use it and can save the landlord from potential problems with tenants. On the same note, landlords should never accept application fees from tenants that they are not seriously considering.
Don't Use Fees as a Source of Income
One of the worst business practices is using fees as a source of income. Not only is this a shady business practice, but it can also be against the law. This brings us to our next don't for rental application fees.
Don't Charge Fees Without First Checking Laws
Depending on where you live, there could be laws that limit the amount of fees that can be charged by landlords. Some states limit or prohibit rental application fees and are specific about a landlord's obligation when collecting these types of fees.
Below, we will be going over some of the different laws that exist in the United States.
Rental Application Fee Laws
Many states have laws that limit or prohibit rental application fees. However, many states also have laws that have no limits, or just some regulations.
Below, we have provided some of the most common laws surrounding rental application fees in the United States.
No statute means that there are no laws in the state's statute regarding rental application fees. The only state that has no regulations whatsoever on these fees is Alabama.
Other states have no limits on the fees that they can charge their tenants. This means that landlords in these states can charge any fee that they please. There is also no regulation as to whether the fee is refundable or not.
The states that have unregulated fees include:
One quick note is that some Colorado cities actually have laws that are stricter than state law. This means that the landlord must check with the city and local laws before charging the fees.
No Fees Allowed
Surprisingly, there are a few states that do not allow rental application fees to be charged. The two states that do not allow any kind of application fees are Vermont and Massachusetts. However, many other states are fighting to change their laws to prohibit application fees.
No Limits and Non-Refundable
Most states have no limits on application fees but also state that the fees are non-refundable. This means that the landlord can charge as much as they please and not be obligated to refund the tenant.
The states where this law exists include:
- New Hampshire
- New Jersey
- New Mexico
- North Carolina
- North Dakota
- Rhode Island
- South Carolina
- South Dakota
- West Virginia
Lastly, there are the states that have specific laws regarding rental application fee limits. These states include
- New York
For more details on these state laws, visit this site for a full rundown of all the limits and regulations.
Rental Application Fees FAQs
Below, we have included some frequently asked questions regarding application fees to clear up any confusion you might have.
Should tenants pay an application fee to view the property?
Typically, landlords will choose to not charge any application fee for potential tenants to view the property. The tenant should be able to choose between a self-guided tour, a virtual tour, or a tour guided by the landlord.
For landlords allowing the tenants to do self-guided tours, they will often ask for a picture of their driver's license or their credit card information. Also, it is important to take any other safety precautions when doing tours, like maintaining proper distance or wearing masks.
Should every tenant pay an application fee?
The answer to this question is typically that every tenant above the age of 18 should be charged an application fee. This is because the landlord will need to perform the screening process for each and every tenant, not just the main one. Better put, the application fees are not per rental unit but per lessee.