Whether you're a new landlord or a seasoned professional, it can be difficult to find the right tenants to rent your properties to. Owning and managing a property is a huge investment, so it's important to make sure that any potential renters are a good fit for your property.
Screening potential tenants costs money, which is why landlords will often charge application fees. Rules about these fees vary from state to state, so it's important to know all the facts.
Keep reading to find out everything you need to know about rental application fees.
What Are Rental Application Fees?
Rental application fees are fees that landlords collect along with the rental application. These fees cover the cost of background and credit checks for applicants.
The rental application fee covers the direct cost of tenant screening. It will sometimes include an extra fee for the time spent reviewing an application.
How Much Can Landlords Charge for Application Fees?
The amount a landlord can charge for application fees varies from state to state. It's important to have a good understanding of the rules in your state.
In California, there are several regulations on rental application fees including:
- Landlords can charge a maximum screening fee of $35 per applicant
- Married applicants must pay the same as single applicants
- The fee must be used for actual out-of-pocket costs for obtaining a background check and the reasonable value of time spent
- Landlords must refund the amount of the difference if they spend less on the background check than what was charged
- Landlords must provide the applicants an itemized receipt for the charges
- A fee can't be charged if there are no units available at the time the application is received
While laws provide specific regulations for application fees, as a general rule landlords should not use these fees to make a profit. Additionally, landlords should be careful to not charge too much for application fees, since that could scare off potential applicants.
Are Rental Application Fees Refundable?
Whether a rental application fee is refundable differs from state to state. In most states, landlords are not required to refund application fees, but in some states, you may have to.
In California, if a landlord spends less on a background check than what was charged, they must issue a refund for the difference.
Best Practices for Collecting Fees
While state laws determine how much can be charged for application fees, there are several best practices that should be followed as well. You should disclose to applicants that you will be charging a fee, make sure that they know the exact amount you're charging, and mention whether or not it's non-refundable.
If you're still unsure of how to navigate collecting application fees, Blue Line Property Management is here to help. Our experienced management team will give you all the hands-on support you need. To learn more, schedule a free consultation today!