Should You Collect Rental Application Fees?

Collecting rents is an important function as a landlord, but that process does not begin on the due date. It actually begins on the day that your tenant completes a rental application.

  • Friday, September 27, 2013

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Collecting rents is an important function as a landlord, but that process does not begin on the due date. It actually begins on the day that your tenant completes a rental application. The application process is the first step in verifying rental references, performing vital credit checks, and interviewing your prospective tenants. All of these steps are important to ensuring you find the most qualified tenants and ensuring the collection of timely rents in the future.

One question that many landlords have is whether they should collect rental application fees. There are actually many good reasons for doing so. Application fees refer specifically to the fee that you charge an applicant for the purpose of checking their rental application and performing necessary rental and background checks. This is a process that does require due diligence and therefore can take time. This can be a somewhat time-consuming process and you naturally deserve to be compensated for the time spent in checking the application.

Also sometimes known as screening fees, application fees not only compensate you for your efforts involved in screening an applicant, but can also provide a number of other benefits. One of those benefits is that such fees can often help to reduce the number of unqualified applicants who may apply for your unit. Applicants with a history of non-payment or bad credit who know that you are going to check their credit history will often not bother to complete an application. The same is also true for individuals with a history of violent behavior once they realize that you are going to check their court records.

In addition, the collection of rental application fees will send a clear message to your applicants from the first moment that you handle the operation of your rental business in a professional manner. From the beginning, this will serve to establish the tone that you are not a pushover. While you are providing your tenants with a service, you also expect them to maintain their end of the agreement.

When establishing your rental application fee policy, you will need to determine whether the fee will be refundable or non-refundable in the event that the tenant is rejected. You will also need to decide whether the fee will be applied toward the tenant's rent if you ultimately rent the unit to them. The amount of the fee will also need be determined. Keep in mind that you should not charge an application fee unless you actually have a unit to rent or expect that you will have one available within the foreseeable future. In addition, if you collect an application fee but do not ever actually screen the applicant, you will be required to refund the fee to the applicant within a reasonable period of time.

Collecting application fees is an important part of managing your rental property business. By using a product such as VerticalRent, you can streamline the collection of such fees for greater ease and convenience.

Disclaimer: The blog entry should not be construed as legal advice. These are guidelines that will help you as a landlord, property manager, or tenant screening provider. Local laws and regulations may differ in your area. Be sure to consult with an attorney before rejecting an applicant and ensure you are following fair housing laws. Published by your friends at VerticalRent.


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