Everything Tenants Need to Know About Rental Application Fees

This article discusses rental application fees for first-time renters, covering their purpose, state-by-state regulations, and tips for reducing costs. It distinguishes application fees from security deposits and introduces Portable Tenant Screening Reports (PTSR) as a cost-saving tool.

By
Vivian Tejada
|
Last Updated
March 11, 2024
Everything Tenants Need to Know About Rental Application Fees

Renting an apartment for the first time can be intimidating, especially when you’re blindsided by rental fees. In addition to the first month's rent, tenants often pay security deposits, pet deposits, administrative fees, and application fees. In most cases, these payments need to be made upfront which can easily overwhelm a first-time renter.

In this article, we'll focus on what renters need to know about rental application fees. We’ll cover what rental application fees are, why they’re necessary, and how they differ by state.

We'll also provide advice on how to minimize rental application fees and protect your interests as a tenant throughout the rental application process.

What is a rental application fee?

A rental application fee is collected by a landlord when a prospective tenant submits a tenant application for a rental unit. Most of the time, this fee is used to run tenant screening reports.

Since property owners can only obtain these reports through third-party companies, they charge tenants a rental application fee to cover the cost. The average rental application fee is usually $30-$75, per person. 

Why are rental application fees necessary?

In addition to obtaining tenant reports, an application fee also covers other administrative tasks used to cross-reference the information provided on a tenant’s application. Although property owners are not legally required to charge a rental application fee, it’s in their best interest to do so.

Without a rental application fee, many landlords are unable to conduct standard background checks on potential tenants or will have to pay for these checks out-of-pocket. If an unruly tenant slips through the cracks this can be a challenge not only for the property owner but for neighboring tenants as well.

In some cases, property owners will waive the rental application fee, such as when they are reconsidering a previous tenant. However, property owners should be careful when waiving the application fee.

Federal law requires everyone to have equal access to rental properties. Waiving a substantial amount of fees for one tenant over another may classify as preferential treatment.

If a landlord chooses not to conduct background checks on prospective tenants, they shouldn’t charge application fees. These fees are not intended to be a source of revenue for property owners. 

What is the difference between a rental application fee and a security deposit?

A rental application fee is charged to cover the cost of processing a rental application, including background and credit checks. It is typically non-refundable.

A security deposit, on the other hand, is a refundable payment held by the landlord to cover any damages or unpaid rent during the tenancy. The security deposit is usually returned to the tenant at the end of the lease, minus any deductions for damages beyond normal wear and tear.

What are rental application fees used for?

The purpose of a rental application fee is to help a property owner assess whether or not a rental applicant would make a good tenant. In addition to screening service costs, obtaining credit reports and background checks, landlords can use this fee to obtain eviction reports, income verification, and other information relevant to the applicant's tenancy.

Depending on the state, property owners may have to provide applicants with a detailed breakdown of how the rental application fee was applied. Most landlords have a standard tenant screening process. It can be helpful to share this process with tenants to confirm that the funds will be used appropriately.

Property owners usually screen tenants by performing the following checks:

  • Verification of the applicant's personal information
  • TransUnion, Equifax, and Experian credit checks
  • Income verification
  • Address history
  • Employment history
  • Eviction records
  • Criminal records

Are rental application fees refundable?

Rental application fees are generally non-refundable, as they cover the cost of processing the application as we previously discussed. However, the specific regulations governing these fees can vary significantly by state, including whether the fees are refundable under certain circumstances.

In some states, laws cap the amount landlords can charge for application fees to ensure they do not exceed the actual cost of screening the applicant. This is to prevent landlords from using application fees as an additional revenue stream rather than just covering the costs of the screening process.

For instance, states like California and New York have specific limits on how much can be charged, tying  exact fee amount ofthese fees to the actual costs incurred during the screening.

Moreover, in states with such regulations, if a landlord charges more in apartment application fees than the actual cost of screening, they are often required to provide a refund for the difference. Along with this refund, landlords may also need to provide an itemized statement detailing the costs of the screening processes, ensuring transparency in how the application fee was utilized.

This requirement is designed to protect applicants from being overcharged and to promote fairness and transparency in the rental application process.

What do state laws say about rental application fees?

Rental application fee laws differ by state. Most states don’t have any  or average feerestrictions while others prohibit rental application fees altogether. Here is a comprehensive list of laws governing rental application fees across the country:

  • Alabama – Application fees are allowed with no limits
  • Alaska – A landlord may ask for a nonrefundable application fee to place a prospective tenant on a waiting list. An application fee that covers the landlord's true screening service costs is legal.
  • Arizona – Application fees are allowed with no limits.
  • Arkansas – Application fees are allowed with no limits and they're non-refundable, even when a tenant is denied.
  • California – Application fees should not exceed the landlord's actual out-of-pocket costs for tenant screening activities. Fee limits change every year according to the Consumer Price Index (CPI) (CA CIV § 1950.6).
  • Colorado – Application fees must not exceed the landlord's actual processing costs, and landlords are required to refund any unused portion of the fee within 20 calendar days. Landlords should also be aware of the new law allowing tenants to submit Portable Tenant Screening Reports (PTSR), which can eliminate the need for multiple application fees.
  • Connecticut – Application fees are allowed with no limits.
  • Delaware – Application fees can be either 10% of what tenants pay in rent or $50, whichever value is greater according to DE Code § 7020.
  • Florida – Application fees are allowed with no limits. However, the state advises property owners not to charge more than the average out-of-pocket expense for screening tenants.
  • Georgia – Application fees are allowed with no limits and they are non-refundable.
  • Hawaii – Application fees are allowed with no limits and they are non-refundable.
  • Idaho – Application fees are allowed with no limits.
  • Illinois – Application fees are allowed with no limits and they are non-refundable.
  • Indiana – Application fees are allowed with no limits and they are non-refundable.
  • Iowa – Application fees are allowed with no limits and they are non-refundable.
  • Kansas – Application fees are allowed with no limits and they are non-refundable.
  • Kentucky – Application fees are allowed with no limits and they are non-refundable.
  • Louisiana – Application fees are allowed with no limits and they are non-refundable.
  • Maine – Application fees must reflect the actual cost of background and credit checks, with landlords prohibited from charging more than one screening fee per year to tenants. Governor Janet Mills' legislation aims to reduce the financial burden on renters, ensuring fees do not exceed the real costs of screening.
  • Maryland – Application fees are allowed with no limits and they are non-refundable.
  • Massachusetts – Property owners are not allowed to charge application fees. Only a licensed broker can charge an application fee according to MA G.L. c 186 § 15B(b).
  • Michigan – Application fees are allowed with no limits and they are non-refundable.
  • Minnesota – Applications fees are allowed but are restricted to the actual cost of screening the tenant. Any funds that remain unused must be refunded back to the applicant.
  • Mississippi – Application fees are allowed with no limits and they are non-refundable.
  • Missouri – Application fees are allowed with no limits and they are non-refundable.
  • Montana – Application fees are allowed with no limits and they are non-refundable.
  • Nebraska – Application fees are allowed with no limits and they are non-refundable.
  • Nevada – Application fees are allowed with no limits and they are non-refundable.
  • New Hampshire – Application fees are allowed with no limits and they are non-refundable.
  • New Jersey – Application fees are allowed with no limits and they are non-refundable.
  • New Mexico – Application fees are allowed with no limits and they are non-refundable.
  • New York – As of June 2019, application fees must not exceed $20. The fee must be waived if the applicant is able to provide a valid copy of their background check or credit check conducted within the past 30 days according to NY Real Prop. L. § 238-a.
  • North Carolina – Application fees are allowed with no limits and they are non-refundable.
  • North Dakota – Application fees are allowed with no limits and they are non-refundable.
  • Ohio – Application fees are allowed with no limits and they are non-refundable.
  • Oklahoma – Application fees are allowed with no limits and they are non-refundable.
  • Oregon – Application fees are allowed with no limits and they are non-refundable.
  • Pennsylvania – Application fees are allowed with no limits and they are non-refundable.
  • Rhode Island – Application fees are allowed with no limits and they are non-refundable.
  • South Carolina – Application fees are allowed with no limits and they are non-refundable.
  • South Dakota – Application fees are allowed with no limits and they are non-refundable.
  • Tennessee – Application fees are allowed with no limits and they are non-refundable.
  • Texas – Application fees are allowed with no limits and they are non-refundable.
  • Utah – Application fees are allowed with no limits and they are non-refundable.
  • Vermont – Application fees are not allowed.
  • Virginia – Application fees cannot exceed $50 and must be refunded within 20 days to the applicants whose application was denied according to VI Code § 55.1-1203.
  • Washington – Application fees cannot exceed the actual cost of screening the tenant and the property owner must provide the applicant with an itemized receipt displaying the cost of a background check according to RCW § 59.18.257.
  • West Virginia – Application fees are allowed with no limits and they are non-refundable.
  • Wisconsin – Application fees are limited to $20 and the property owner must provide the applicant with a copy of the background checks that were conducted according to ATCP § 134.05.
  • Wyoming – Application fees are allowed with no limits and they are non-refundable.

How can I minimize rental application fees?

You may not be able to avoid application fees completely, but there are ways you can reduce the overall cost of rental application fees. Consider the following tips when applying to rentals to save money on application fees:

Apply to smaller properties

Individual property owners may be more willing to negotiate with prospective tenants than large property management companies. Small-time real estate investors don't always fill their units the same way large-scale real estate investors do. This provides them with more flexibility in terms of how they accept and process rental applications. 

Apply to properties with fewer applicants

Before applying for an apartment, find out how many other prospective tenants have applied. In competitive housing markets such as New York and San Francisco, it’s not uncommon for property owners to receive hundreds of applications for a single unit.

Property owners usually prioritize early applicants with strong applications, so if you’re facing stiff competition and a nonrefundable application fee, consider looking elsewhere.

Watch out for scammers

Ask the property owner how much the application fee costs and what it will cover. If they propose an absorbent amount or change the price after you've already agreed to one, consider this a red flag. You should also check if the fee is refundable.

If it is, find out what is required for you to receive a refund. Tenants should never have to pay a fee to view a rental property and should be especially cautious of property owners who don’t at least check their credit. These individuals may be trying to attract tenants with poor credit because they plan to provide substandard housing.

Portable Tenant Screening Reports (PTSR)

A Portable Tenant Screening Report (PTSR) is a comprehensive document that a potential tenant can obtain once and then provide to multiple landlords when applying for rental properties. This report typically includes credit checks, rental history, employment verification, and criminal background checks.

The key advantage of a PTSR is that it reduces the need for multiple, individual screening fees each time the tenant applies for a new rental, making the application process more affordable and efficient for renters.

Colorado is one of the states that has embraced this tenant-friendly approach. Colorado law requires landlords to accept PTSRs from applicants, helping to streamline the application process and reduce redundant costs for tenants. This legislation is part of broader efforts to make housing more accessible and to lower the financial barriers associated with moving.

New York, while not specifically mandating PTSRs, has implemented regulations that align with the spirit of portable reports. The state caps application fees at $20 and allows applicants to provide a recent background or credit check in lieu of paying new screening fees, effectively reducing the financial burden on tenants seeking housing.

These states exemplify a growing recognition of the need to simplify the rental application process and support tenant mobility, with PTSRs playing an important role in achieving these goals.

Charging rental application fees with confidence

Although a rental application fee is not as significant an expense as the first month’s rent or a security deposit, the fee can still impact the rental application process. This is especially true if you are submitting applications to multiple rental units with little to no chance of getting these rental application fees refunded. 

It's also important for you to understand the local laws, governing rental application fees in your state, as well as what you can do to minimize the overall cost of rental application fees. Prospective tenants should be cautious of scammers who are unable to explain how the rental application fee will be used, as well as property owners who are minimally concerned with whether or not you'd make a good tenant.

By being selective with the properties you apply to, confirming the cost breakdown of rental application fees, and including smaller properties in your apartment search, you can secure a rental unit confidently and with minimal stress.

Rental application fees FAQS

How much are most application fees for apartments?

Most apartment application fees vary widely depending on the location and the landlord's specific costs for running background and credit checks. Typically, these fees can range from $25 to $75 per applicant. In some high-demand areas or cities with higher living costs, fees might be slightly higher.

These fees are meant to cover the cost of processing the application, including credit reports, rental history verification, and other screening processes. It's important for applicants to check the specific fee amounts and refund policies directly with the property management or landlord before applying.

Is a rental application fee legal in MA?

In Massachusetts, property owners themselves are not allowed to charge application fees directly to prospective tenants. However, a licensed real estate broker may charge an application fee for services related to the rental application process.

This regulation is designed to protect applicants from unnecessary charges and is outlined in Massachusetts General Laws, Chapter 186, Section 15B(b).

Disclaimer: The information provided in this article is for general informational purposes only and is not intended as legal or financial advice. Laws and regulations regarding rental application fees vary by state and are subject to change. Readers are encouraged to consult with a qualified legal or financial advisor for advice specific to their situation.

Important Note: This post is for informational and educational purposes only. It should not be taken as legal, accounting, or tax advice, nor should it be used as a substitute for such services. Always consult your own legal, accounting, or tax counsel before taking any action based on this information.

Vivian Tejada

Vivian is a freelance real estate writer based in Brooklyn, NYC providing SEO blogging services to real estate companies. Her work focuses on educating first-time real estate investors on investment strategy and explaining proptech tools to new customers.

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