The (Hidden) Advantage of Application Fees

by Robert Cain

Identity photoApplication fees have the additional advantage of being “self-weeding” of bad tenants.

Tenants who know they will be rejected usually won’t apply to rent from you if they know they will lose their application fee.

If all the risk is on you, many times they will just go ahead and fill out a rental application, replete with lies, half-truths, and omissions. But if they have to risk their own money, they may just go on to the next landlord the one who won’t be so careful whom he rents to.If you do collect an application fee you are either legally or ethically (depending on whether your state has passed a law about it yet) required to do the following:

a. Tell them what you are going to check.

b. Inform them of their rights to dispute any information you uncover. (You don’t have to wait for the disputed information to be resolved, you can go ahead and rent to someone with no black marks on his or her credit report.)

Application photoc. Tell them the name of the screening service or credit reporting agency.

d. Even if you don’t charge an application fee, but you reject them as tenants because of information you received from a credit agency or tenant screening service, tell the applicant that you rejected him or her because of the information you received, and give him or her the name and address of the service or agency.

e. You need not tell applicants the specific results of the credit report or screening report, only that it caused you to reject them. They need to contact the agency for the specifics. You can, however, give them a copy of their “consumer report,” as defined in the Fair Credit Reporting Act.

f. Do not charge a fee unless you actually have a unit available to rent at that moment or expect one within a reasonable length of time.

g. If you charge an application fee, but never screen the applicant, give the money back “within a reasonable time.”

Write all this out as an agreement and receipt that they and you will sign when they pay you the application fee.

Copyright Cain Publications, Inc., used by permission.

Robert Cain is a nationally-recognized speaker and writer on property management and real estate issues. For a free sample copy of the Rental Property Reporter call 800-654-5456 or visit their web site at

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See our feature, Is Your Rental Application Falling Short?

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