Do Your Rental Application Fees Cross the Line?

by Chris on November 28, 2011

Most landlords are allowed to charge a rental applicant for the cost of tenant background checks and other leasing expenses. However, there are prohibitions against charging an applicant for more than that.

It’s good to review your policies to avoid disputes over illegal fees.

Here is a list of do’s and don’ts:

DO charge a tenant for the cost of tenant screening reports, and any actual costs you will incur in leasing to them, unless your local laws say you cannot.

DO run the tenant background check before you allow the tenant to sign a lease agreement.

DO explain to the applicant the purpose of the fee, and deliver a receipt for the money.

DO return the application fee if you don’t run the tenant background check.

DO screen all adult occupants.  Make sure each proposed occupant fills out the rental application and consents to the tenant background check.  Charge a fee for screening each applicant.  However, if one applicant does not qualify, there may be no need to run the other reports, and the remaining application fees should be returned.

DO accept a check as payment for the application fees. Take note of the information provided, including the banking info, and compare it to information provided in the rental application. Some landlords prefer to accept cash because they feel they can run the tenant screening reports faster without fear that the check will bounce. However, that fear is overshadowed by the value of the check as a tool in tenant screening. Besides, if you are afraid the check will bounce, you will need to delay renting to that applicant until you verify their income.

Because application fees are regulated in many states,  it is a good idea to avoid these problem areas:

DON’T charge a flat fee simply for the privilege of applying for the rental. You can usually charge for the tenant screening reports, and any actual expenses that coincide with the leasing.

DON’T charge multiple applicants the fee if are going to rent to only one of them. It is safer to collect application fee checks from two or three applicants who are under consideration, then deposit each check at the time you screen the applicant. If you reject the first applicant, then deposit the check from the next applicant, and so on.

DON’T keep the application fee if you don’t run tenant screening reports. In some states, this constitutes fraud.

This post is provided by Tenant Verification Service, Inc., helping landlords reduce the risks of renting with fraud prevention tools that include Tenant Screening, Tenant Background Checks, (U.S. and Canada), as well as Criminal Background Checks, and Eviction Reports (U.S. only).

Click Here to Receive Landlord Credit Reports.

Disclaimer: The information provided in this post in not intended to be construed as legal advice, nor should it be considered a substitute for obtaining individual legal counsel or consulting your local, state, federal or provincial tenancy laws.

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