Application fees cover the cost of running a credit, rental, and criminal background checks for potential tenants. These checks make sure that the potential tenant is well-suited to the property, financially and behavior-wise.
It can be a nuisance to both tenants and landlords, but they are a necessary charge when it comes to ensuring the deal between both parties. Yet understanding the reasons behind rental application fees, and how to deal with them, can help when it comes to this necessary process.
As long as you remain honest and fair, and abide by the law, online rental application fees are just one small step in the renting process. To avoid any complications, here’s all you need to know about rental application fees.
Application fees work as pre-screening tools
A good way to save time and hassle when it comes to pre-screening is through application fees, as they cover the cost of screening. The tenants with eviction or criminal activity on their records will likely not want to go through with the fees. But those with a clean background usually have no trouble with it, and so go through with the application quickly and smoothly.
Landlords need to be fair when it comes to price
Depending on your local and state rules, rental application fees should cover only the cost of running a credit and background check on the tenant. State laws prohibit using the amount received as profit, meaning no matter how much time and effort it takes, you can’t charge double the price for spent minutes.
Many states prohibit charging over the amount of running a screening test, which is usually less than $50. You might want to check your local state regulations before charging a specific amount. For instance, in California, the maximum screening fee amount is $35, while in Wisconsin, fees cannot exceed $20. Always be aware of the rules in your state to avoid any legal troubles.
Refunds are a given
Charging a tenant rental application fees, and then not following through with the actual credit and background check is considered fraud. Whether you never got to order the reports, or you decide on renting out property before the application and fees processed, giving a refund is mandatory. If you end up spending less on the application than assumed, then make sure that difference is refunded. Always let your tenant know the amount you will be charging them and always make sure they know that it can be refunded.
Landlords can accept credit reports
If a tenant brings in their recent credit reports and recent pay stubs, you as a landlord have the option of accepting those in place of running a credit.This all depends on whether you feel comfortable enough with it or not. However, don’t feel obligated to accept the replacements, as you are still able to request your own checks despite offered evidence.
Landlords can reject applications after background checks
Charging rental application fees ensure that potential tenants are not rejected for illegitimate reasons. Basing judgements on race, gender, religion, disability, ethnicity or familial status is considered unlawful, and unjust. By charging application fees, the reasons for rejection are made clear and include criminal history, rental history, credit history, income, inability to provide information on the application, and any form of law violation.
Typically, a credit check covers a period of seven to 10 years, giving you enough history to decide on whether the tenant is a good fit or not. If appropriate, follow up on any missing information or unclear details regarding the application in case of any inaccuracies.