Apartment application fees (or rental application fees) remain a confusing subject to both the tenant and the landlord. Tenants are reluctant to pay, as they do not understand the purpose of these fees. On the other hand, limits for apartment application fees are a grey area for most landlords.
An apartment application fee is paid to the landlord to process the rent application. A part of the fee services the administrative costs of running background checks on prospective tenants.
In California, most landlords and real estate companies charge an apartment application fee. Currently, the application fee is capped at $53.33. However, landlords will charge anywhere above $30.
This article explores pertinent aspects of apartment application fees in California that you need to know if looking for furnished rentals in the Bay Area or anywhere else in the state.
Why Charge an Apartment Application Fee?
Contrary to popular belief, an apartment application fee is not meant to enrich the landlord. In California, the fee is used to run background checks on prospective tenants.
As part of the background check, tenants are also subjected to a credit screening. Landlords use part of the apartment application fee to purchase screening reports from tenant screening services.
Screening reports are used by landlords to assess prospective tenants’ credit history. These reports will contain information such as loan repayment defaults, bankruptcy, evictions previous addresses, and identity information.
The apartment application fee will also cater to labor costs associated with the collection and verification of tenants' screening reports.
California Regulations on Apartment Application Fees
California Civil Code Section 1950.6 provides guidelines on the collection of apartment application fees by landlords and real estate agents. It mandates landlords to obtain information on the applicant that may include credit reports and background checks. This information may be sourced from the applicant or a credible third party.
Initially, the application fee was capped at $30, but this was later revised to include annual adjustments to reflect an increase in the Consumer Price Index. As of 2021, the maximum amount chargeable as an apartment application fee is $53.33. However, most landlords usually charge less to avoid going past the limit.
The amount charged should not exceed the actual out-of-pocket costs incurred during the collection of credit reports, including labor costs incurred by the landlord. The landlord or letting agency is barred from retaining the apartment application fee if they fail to do a credit and background check.
Below are several important guidelines on apartment application fees you may need to know.
Application Fees Are a Standard Rate
Some unscrupulous landlords and letting agencies have different rates for married couples and single persons. They would purport to offer discounts to married couples by not charging each person separately, but rather charging a substantially higher fee than they would a single person.
For instance, if the application fee for single persons was $35, for a married couple it would be $45. While this may look like a bargain, it is not. This act amounts to discrimination, which contravenes the California Civil Code on rental application fees.
There Must Be a Vacancy
The California Civil Code Section 1950.6 bars landlords and letting agencies from charging apartment application fees if they do not have a rental unit available at the said time or within a reasonable duration. However, they are permitted to charge a rental application fee if the applicant agrees to it in writing, even if there aren’t any vacancies.
Produce Application Fee Receipts
It is a requirement for landlords and letting agencies to provide applicants with a receipt for the application fee paid by the applicant. This receipt breaks down the out-of-pocket expenses and time spent by the landlord in obtaining screening reports and background checks on the applicant.
Refund Unused Sums of the Apartment Application Fee
Should a landlord fail to carry out a background check or obtain a screening report on the applicant, the California Civil Code Section 1950.6 requires them to refund the applicant any unused amount. This goes along to show that landlords and letting agencies cannot use the renter's application fee for self-benefit.
Provide a Copy of the Screening Report Upon Request
Applicants who pay the apartment application fee have the right to demand a copy of the screening report obtained by the landlord or the letting agency. This is a requirement under the California Civil Code Section 1950.6 and seeks to protect the applicant from unlawful restrictions to rental opportunities.
Conclusion
California is one of a few states that have robust regulations that clearly outline the practices surrounding apartment application fees. It elucidates the uses of the fee, the limits of the fee, and how landlords can promote transparency in the usage of the fee.
Through a series of checks, the California Civil Code 1950.6 on rent application fee seeks to safeguard the interest of the applicant and that of the landlord or letting agency.
