Rental Application Fees: Everything You Need to Know

Do you want to collect a rental application fee? If so, you must be wondering, “How much should I charge for the rental application fee?” and “When should I charge it?”

You know navigating the rental market can be challenging thus, understanding rental application fees is a crucial aspect of this process. These fees, which you will impose on applicants, are designed to help you cover the costs of screening potential tenants. From background checks to credit assessments, these fees play a vital role in determining the suitability of applicants.

In this guide, we will explore various facets of rental application fees, including what they are, who pays them, and their intended purposes. We will also delve into the legal implications surrounding these fees, the average amounts charged, and how to set them fairly.

It is also essential to understand rental application fee laws, as these regulations vary significantly across different states. Knowing the specific laws in states like California, Delaware, New York, Oklahoma, and Virginia can help you navigate and comply with the legal framework governing these fees.

Additionally, we’ll address common questions and concerns, ensuring that you, as a landlord, have the knowledge to make informed decisions while fostering a transparent and trustworthy rental process. Whether you’re an experienced landlord or new to the rental market, this guide is designed to provide you with everything you need to know about rental application fees.

So, let’s get started.

What are Rental Application Fees?

Rental application fees are charges that landlords or property managers impose on prospective tenants when they apply to rent a property. These fees help cover the costs associated with processing the application, such as conducting background checks, credit checks, and administrative tasks. The fees can vary significantly based on location and the specific services included.

Legally, you are not allowed to charge a rental application fee. However, not charging one will make it difficult to conduct standard checks on potential tenants, and you will have to pay for these out of your own pocket.

In most cases, application fees are non-refundable as they cover the cost of processing applications. However, some state laws may require refunds if you are overcharging or not using the entire fee to process the application.

You can choose to waive the rental application fee in some cases, such as for a previous tenant. However, waiving the fee is not advised in most circumstances because the law requires everyone to have equal access to rental properties, and waiving the fee can be seen as preferential treatment.

Who Pays Rental Application Fees?

The prospective tenant mainly pays the rental application fee. It’s a standard practice designed to ensure that serious applicants are willing to invest in the application process. You can use these fees to offset tenant screening costs and administrative work.

As you know, the screening and background checks process is not free, which is why you can choose to collect a rental application fee or have the potential tenant pay for their background check directly.

What are Rental Application Fees Meant For?

Rental application fees are primarily meant to cover the costs of evaluating potential tenants. These fees often include a screening fee. This evaluation includes:

Background checks: You can use these application fees to verify the prospective tenant’s criminal history and rental history for your rental.

Credit checks: You can also use these fees to assess the applicant’s financial reliability.

Administrative costs: You can use these application fees to process the application and manage paperwork.

However, you have to provide applicants with a detailed breakdown of how the rental application fee was applied depending on the state laws. For a standard and reliable tenant screening process, you can perform the following checks:

• Applicant’s personal information verification
• Credit checks through TransUnion, Equifax, and Experian
• Income verification
• Rental history
• Employment history
• Eviction records
• Criminal records

When are Rental Application Fees Paid?

Rental application fees are usually paid at the time of application submission. Prospective tenants are generally required to submit the fee along with their application to ensure that they are serious about renting the property. However, you need to clearly mention in the form that the fee is non-refundable.

You should clearly communicate the payment process, including acceptable methods (such as online payments, checks, or cash) and the amount required. It’s essential to inform applicants that the fee covers the costs of screening and processing their application, but it does not guarantee approval. This transparency helps set the right expectations, and fosters trust with potential tenants.

What is the Average Rental Application Fee?

Geographic location and market condition can cause the average rental application fee to vary widely. Generally, application fees range from $25 to $75, but in some markets, they can be as high as $100 or more. It’s essential for you to research local norms to remain competitive and fair. 

How to Set the Rental Application Fee?

Here are some of the points to consider when setting the application fee:

1. Research Local Market Rates:
   • Investigate what other landlords in your area are charging. This helps ensure your fee is competitive while still covering your costs.
2. Consider Your Costs:
   • Calculate the actual expenses associated with processing applications, including:
     • Background checks
     • Credit checks
     • Administrative costs (time spent on paperwork, etc.)
   • Use these costs to inform your fee structure.
3. Evaluate Property Type:
   • Fees can vary depending on the type of rental (e.g., single-family homes vs. multi-unit apartments). Tailor your fee based on the complexity of the application process for different property types.
4. Stay Compliant with State Regulations:
   • Familiarize yourself with local and state laws regarding rental application fees. Some states have limits on how much you can charge or require fees to be refundable under certain conditions.
5. Communicate Clearly:
   • Clearly outline the fee in your rental listings and application forms. Explain what the fee covers (e.g., screening costs) to ensure transparency with applicants.
6. Be Prepared for Negotiation:
   • Some applicants can challenge the fee. Be ready to discuss your reasoning and the services included in the fee.

How Much Can a Landlord Charge For an Application Fee?

You must be wondering, “How much should you charge for the rental application fee?” Truthfully, there is no universal cap on application fees. For example: there is no limit on rental application fees in Oklahoma which is non-refundable. However, many states have regulations that limit landlords’ charges. 

Generally, you can charge an amount reflecting the actual screening costs. Though, it’s crucial to check local laws to ensure compliance and avoid penalties.

Until now, you must have realized that state laws vary regarding rental application fees. Thus, below, we have provided you with a quick brief of the current regulations of all 50 states. So that you can be sure of the rules your state governs and that you are not overcharging the fee.

What do State Laws Say About Rental Application Fees?

Rental application fees state regulations can vary significantly. Some states impose a maximum fee amount, while others require landlords to disclose how the fees will be used. Additionally, some states mandate that application fees are refundable if the application is denied. Thus, it would help if you familiarized yourself with your state’s regulations to ensure you comply. Here’s the list of all the 50 U.S. states with their rental application fee regulations:

Some Additional Considerations

Here are some additional points you need to consider for the rental application fee:

Non-Refundability: Clearly state whether the application fee is refundable or non-refundable. Many landlords keep the fee regardless of the application outcome but ensure this is communicated upfront.

Multiple Applications: If you have multiple applicants, consider whether to charge the same fee to each or adjust based on the number of applications you receive.

Documentation: Keep records of all application fees collected and the services rendered. This helps protect you in case of disputes or inquiries about the fee.

Contact OKC Home Realty Services if you have any queries or doubts regarding rental application fees.

Rental Application Fees FAQs