Rental Application Fees: California Laws
Experienced landlords know they need to screen applicants in terms of their ability to pay rent on a timely basis, and know they are not allowing someone onto their property with a criminal background that could potentially impact other tenants. California Law places certain limitations on the fees that can be charged prospective tenants to run these background checks to be certain the information the applicant has provided on the rental application is honest.
Most experienced landlords also agree that charging a legitimate fee to cover the costs of a background check is the quickest way to get rid of people wasting your time. People who know they have bad credit, have a record of eviction, or God forbid are convicted sex offenders won’t waste their money running this check if they know this is going to surface. And there really is no alternative for the landlord to know these facts without running a background check – which costs money.
People don’t like being charged an application fee. One way that landlords can help mitigate that is to make clear the cost of the application fee will be deducted from their first month’s rent if they pass the background check and they are accepted as tenants.
California Civil Code § 1950.6. is the law which governs fees for rental applications and background checks and specifies what landlords must do when accepting these fees.
Landlords are limited as to how much they can charge for these checks. These fees are updated each year by the Consumer Price Index or CPI. California landlords and other real estate professionals like property management firms cannot charge more than $50.94 in 2019. This amount will in all likelihood increase each year with increases in the cost of living.
Average costs of application fees usually run between about $30 to $50. Better to charge a little below top price to avoid any potential charges you were profiting off them.
This fee must cover the “Actual out-of-pocket costs” of obtaining the credit report, plus “the reasonable value of time spent” by the landlord checking references and background information on the prospective tenant.
This is not someplace where a landlord can make a big profit, and may not be charged for simply viewing the property. Landlords must provide an itemized receipt and refund any unused amount of the fee.
The landlord must provide a copy of the Consumer Credit Report to the applicant upon request. If a landlord doesn’t receive the credit report or check references on the applicant, the entire application fee must be refunded. If the landlord rents to another applicant before running this check, the fee must be refunded.
However, a prospective tenant is not entitled to a refund simply because the applicant did not receive the rental.
Although it may seem harmless to many landlords to charge a combined reduced rate for a husband and wife, under California Law, that is considered discriminatory to non-married people and must be avoided.
No application fee may be paid if no current vacancy exists without the express written permission of the applicant, or if a vacancy is not expected to open within a reasonable period of time.
Certain online landlord sites like Cozy.com or RentSpree.com allow applicants to pay online with a credit card providing flexibility for the prospective tenant while saving the landlord the hassle of collecting the fee. These sites also send the applicant an itemized receipt so the landlord doesn’t have to do that.
Any experienced landlord will tell you, you simply cannot take prospective tenants word for what they present on a rental application. You have to externally confirm any facts with an independent check, which costs money the applicant should be willing to pay if what they presented in the application is legitimate. The costs of eviction if it comes to that is way too expensive and one of the most costly mistakes a landlord can make. Not collecting a tenant application fee can run into major expenses for the landlord to check multiple tenants. But California landlords must know what is and is not allowable regarding collecting application fees and what they must provide the tenant applicant to avoid lawsuits.
At Fast Eviction Service, help on any of the issues discussed in this article is simply a click or phone call away. Email firstname.lastname@example.org or call our office at (800) 686-8686 to discuss your questions for a free evaluation of your case.
Tenant Screening Tips
How do you avoid all the hassles and make sure you do not rent out your property to difficult tenants? The answer lies in implementing a proper screening procedure, which should be capable enough of identifying all difficult tenants and prevent you from hiring them. Read More...
Advanced Screening Tips
If you’ve been around long enough as a landlord, it’s almost a sure bet you’ve had at least one terrible experience with a tenant. Is there a way to really know what you might possibly be getting into? We have come up with a short list of some items some landlords regularly overlook when going through the tenant screening process. Read More...
Filed under: Rent