home Improvement

Rental Application Fees: Everything You Need to Know

The tenant-landlord relationship starts even before a landlord gives a tenant approval to move in. It begins the moment that a prospective renter looks at an apartment listing and thinks, “I’d like to live there.” At that point, they look for a rental application, and what they find there will go a long way toward determining what happens next. That’s why it’s so important for landlords to get the application process right.

One of the biggest issues is often rental application fees, since it’s hard to know whether they should be considered fair or foul. Read on for a landlord’s guide to what is and isn’t permissible regarding fees.

Rental

Fees versus deposits

Many renters expect to pay application fees. They may not like it, but they know it’s just part of the process like a security deposit or occasionally a broker’s fee. If you charge a modest fee that covers the cost of both a criminal background check and a credit report, then that’s all well and good. It’s even better, though, if you can put the application fee towards the security deposit when someone gets approved for the rental. If you can’t, consider offering refunds to any applicants who don’t get the place.

Don’t charge more than the cost of running the reports, though. Doing otherwise is unethical, and in many cases, it’s also illegal. In the state of Washington, landlords have to give applicants specific information before they submit an application. Landlords must tell potential tenants what kind of information they’re going to get from the screening, as well as what information might make the landlord decide against renting to the applicant. Such laws are designed to keep landlords from rejecting renters based on random gut feelings, especially if those “random feelings” just happen to violate the Fair Housing Act.

If you aren’t sure what a reasonable application fee is, then aim for something less than $50. Anything more than that will make people question whether or not you’re just trying to pocket extra money from them under the guise of a background check.

Can application fees be avoided?

If this is making your head spin, imagine how would-be renters feel when they have to pay $50 each to apply for three or four different properties. If you want to make things simpler for both sides, you can look for services that provide a free rental application to landlords. That means you don’t have to pay anything in order to run screening reports on people who apply to live on your property.

Everything is simpler when no money exchanges hands. If you aren’t charging people an application fee, then you don’t have to worry about violating any local or state laws regarding such fees. Apartment hunters are used to getting nickel-and-dimed by property managers, especially in an era where certain rental markets are competitive enough to give them panic attacks. If you can find a service that allows you to offer rental applications free of charge, then you’re telling people that you’re concerned about finding a tenant who’s a good fit rather than just finding a tenant with a large bank account.

One final word: don’t try to charge people for other things to make up for the fact that the application cost them nothing. Things like finder’s fees are dubious and unnecessary. You should also never charge someone money just for the privilege showing them an apartment. If taking people on a tour of the property bothers you that much, then being a landlord probably isn’t right for you.