Remember when you had to meet prospective rental applicants at the property with a stack of paper rental applications and pens in hand?
Your applicant completed each line and checked each box on the spot to hand back to you. Once they were done, you collected the rental application fee, that typically included the costs of a credit report, along with your time in investigating prior housing history and making sure your applicant had a real job.
Often this meant an actual phone call. Perhaps sending the rental application by fax. Not the scan and upload we do today, but a loud clanging fax that sounded like it was catapulting the papers off to who-knows-where.
The tenant screening process usually took several days to a whole week to complete.
Fast forward to today. You have an open house so that you can cut your showing time down. Several probable rental applicants show up. You provide them with a link to fill out a rental application online and potentially pay for the tenant screening reports. In minutes, you receive several reports for each rental application. Not just a credit check, either; you get criminal, eviction and employment reports.
No paper. No waiting.
There still begs a question: “How much can a landlord charge for a rental application fee?”
Rental Application Fee Laws by State
Each state has its own landlord-tenant laws covering issues like security deposit fee limits and rental application fees.
To make it easier for you, we’ve broken down each state’s application fee limits by state:
|State||Application Fee Limits|
|Alabama||No stated limitations|
|Alaska||No stated limitations|
|Arizona||No stated limitations|
|Arkansas||No stated limitations|
|California||Changes each year according to the CPI. 2019’s limitation is $50.94|
|Colorado||No stated limitations|
|Connecticut||No stated limitations|
|Delaware||The greater of either 10% of the monthly rent amount or $50|
|Florida||No stated limitations|
|Georgia||No stated limitations|
|Hawaii||No stated limitations|
|Idaho||No stated limitations|
|Illinois||No stated limitations|
|Indiana||No stated limitations|
|Iowa||No stated limitations|
|Kansas||No stated limitations|
|Kentucky||No stated limitations|
|Louisiana||No stated limitations|
|Maine||No stated limitations|
|Maryland||No stated limitations|
|Massachusetts||NO application fee is permitted to be charged by anyone except a licensed broker.|
|Michigan||No stated limitations|
|Minnesota||An applicant may not be charged more than the actual cost of the tenant screening. Minnesota has specific screening fee handling regulations.|
|Mississippi||No stated limitations|
|Missouri||No stated limitations|
|Montana||No stated limitations|
|Nebraska||No stated limitations|
|Nevada||No stated limitations|
|New Hampshire||No stated limitations|
|New Jersey||No stated limitations|
|New Mexico||No stated limitations|
|New York||Under the Statewide Housing Security & Tenant Protection Act of 2019, a “landlord, lessor, sub-lessor or grantor” is now forbidden from collecting an application fee greater than $20.00. Furthermore, if a potential applicant provides a copy of a background check or credit check conducted within the past thirty days” the fee must be waived.|
|North Carolina||No stated limitations|
|North Dakota||No stated limitations|
|Ohio||No stated limitations|
|Oklahoma||No stated limitations|
|Oregon||No stated limitations|
|Pennsylvania||No stated limitations|
|Rhode Island||No stated limitations|
|South Carolina||No stated limitations|
|South Dakota||No stated limitations|
|Tennessee||No stated limitations|
|Texas||No stated limitations|
|Utah||No stated limitations|
|Vermont||No stated limitations|
|Virginia||An application fee in Virginia shall not exceed $50, exclusive of any actual out-of-pocket expenses paid by the landlord to a third party performing background, credit, or other pre-occupancy checks on the applicant.|
|Washington||The application fee must not exceed the exact cost of conducting the tenant and background screening.|
|West Virginia||No stated limitations|
|Wisconsin||The application fee may not exceed $20 and the applicant must be provided a copy of the report|
|Wyoming||No stated limitations|
While the majority of the state’s laws impose no limitations, many do, and landlords need to be careful if they charge on top of the tenant screening fees. Even in states with no stated limitations on rental application fees, landlords must still keep the fees “reasonable” – a term defined by whatever judge hears your case if an applicant files a complaint against you.
Tips for Landlords Who Charge Rental Application Fees
The easiest way for landlords to protect themselves is simply to charge tenant screening fees directly to the applicant. Our tenant screening service offers this option, and you can simply check a box to choose which screening reports you want included along with your rental application.
But for landlords who do charge application fees directly to applicants, here are a few tips to keep you on the right side of your local landlord-tenant laws.
- Never look to make a profit on tenant screening. Let’s face it, renters are savvier today. Right at their disposal is information galore on tenants’ rights. Even though many states do not have declared limitations, many of them have an undertone of “fair and reasonable.” This means that charging an exorbitant fee may be challenged in court. Is that few bucks worth a possibility of a lawsuit with fines?
- Always stay in-the-know. Ignorance is never a worthy plea. Laws change often. And as fast as technology moves is as fast as a legal problem can arise. It only takes one complaint and one win to set a precedent. It cannot hurt to routinely look into the Fair Credit Reporting Act along with your State’s Landlord Tenant laws.
- Keep it straight across the board. The last headache any landlord wants to deal with is a landlord discrimination Most landlords don’t think of themselves as discriminating. But, so often, lawsuits are brought against a non-discriminating landlord for something miscommunicated or misconstrued. Make sure you treat every applicant and rental seeker the same. These days, you must even be careful of turning someone away over a criminal background, which is protected by HUD.
- Keep old applications on file in case you’re called to court! Hold onto your rental applications in a safe and secure environment. Some officials suggest holding them for ten years. Additionally, keep track of all correspondence between yourself and potential renters.
Do not let the rules and regulations, red-tape and hoops to jump through scare you from screening your tenants. Tenant screening is potentially the most important task that will protect you and your investment. It separates the landlord from a tenant eviction debacle that can cost thousands of dollars and a huge headache.
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Protect Yourself with Firm Tenant Screening Policies
I still hear the talk of newbie and expert landlords, alike, who go by instinct rather than facts. Danger, danger! There are professional tenants lurking who know more about how to landlord than a career landlord.
No need to be afraid. Just protect yourself with these tips and arm yourself with a good real estate attorney. Just in case. Better to ask an attorney a $200 question now than to spend thousands later defending yourself, right?
In summary, better to use an online tenant-screening service and let the applicant pay themselves for the cost of the report! Keep records. Treat everyone across the board exactly the same. Keep up on the changes not only in landlord tenant laws but also the FCRA, that is short for the Federal Credit Reporting Act. Never forego tenant screening, ever!♦
How do you handle rental application fees and covering tenant screening costs? Has it changed at all over the last 5-10 years? Share your experiences below!