Rental Application Fee

A rental application fee is money a landlord or their agent charges an applicant for a rental unit in order to run and process the application. What it buys is screening: a consumer credit report, an eviction and criminal records search, employment or income verification, and reference checks. It is ordinarily nonrefundable, which is the practical difference between it and a security deposit, and it gives the applicant no claim on the unit.

California supplies the statutory term of art. Civil Code 1950.6(i) defines an "application screening fee" as "any nonrefundable payment of money charged by a landlord or their agent to an applicant, the purpose of which is to purchase a consumer credit report and to validate, review, or otherwise process an application for the rent or lease of residential rental property." Most people and most listings call the same charge a rental application fee, and some call it a tenant screening fee; all three name one thing. This page uses the common name because it is what a reader searches for, and the statutory phrase where a provision is being quoted.

In California the fee is capped twice over, and the second cap is a mechanism rather than a number. Civil Code 1950.6(b) says the amount may not be greater than the landlord's actual out-of-pocket costs of gathering information about the applicant, including the cost of a tenant screening service or a consumer credit reporting service, plus "the reasonable value of time spent by the landlord or their agent in obtaining information on the applicant". Then it adds a hard ceiling: "In no case shall the amount of the application screening fee charged by the landlord or their agent be greater than thirty dollars ($30) per applicant", a figure that "may be adjusted annually by the landlord or their agent commensurate with an increase in the Consumer Price Index, beginning on January 1, 1998." The thirty dollars is therefore a 1997 base, not today's limit, and the statute does not state what today's limit is. A California applicant asked for a fee well above thirty dollars is not necessarily being overcharged; an applicant asked for a fee that plainly exceeds the cost of a report plus a modest amount of time may be.

Two duties are worth knowing because they are easy to enforce and rarely asserted. Under 1950.6(c)(1) a landlord "shall not charge an applicant an application screening fee when they know or should have known that no rental unit is available at that time or will be available within a reasonable period of time". And under 1950.6(c)(2), a landlord may charge the fee only if they offer one of two processes at the moment they collect it: either applications are considered in the order received against written screening criteria that are handed to the applicant with the form, with the first qualifying applicant approved and no fee charged until an application is actually considered; or the landlord returns the entire fee to every applicant not selected for tenancy, regardless of reason, within seven days of selecting someone or thirty days of submission, whichever comes first. The choice belongs to the landlord, but they must make one, and an applicant is entitled to ask which.

The receipt provisions are the ones a reader can act on immediately. The landlord must give the applicant a receipt itemizing the out-of-pocket expenses and the time spent (1950.6(d)). If no reference check is made and no consumer credit report is obtained, any part of the fee not used for the statute's purposes must be returned (1950.6(e)). And where a fee was paid, the landlord must give the applicant a copy of the consumer credit report within seven days of receiving it (1950.6(f)). Two structural points close the section: 1950.6(j) makes an "applicant" include "an entity or individual who agrees to act as a guarantor or cosignor on a rental agreement", so a guarantor is screened and charged in their own right, and 1950.6(k) confirms the fee is neither an "advance fee" under the real estate licensing law nor "security" under the security deposit statute, which keeps the two regimes apart. Subdivision (g) preserves a landlord's ability to accept a reusable screening report under Civil Code 1950.1, a separate California regime this page does not describe.

Outside California, whether anything caps the fee is a question about the jurisdiction. No federal law limits the amount, so the answer comes from state and sometimes city rules, and what those rules do varies: some cap the amount, some require a receipt or the return of unused amounts, some limit how many applicants may be charged at once, and some say nothing at all. The reliable general statement is that the first step in any specific question is to find out whether the jurisdiction has a rule, rather than to assume one way or the other.

Federal law does not cap the fee, and it does govern what happens next. A landlord who pulls a consumer report is doing so under the permissible purpose at 15 U.S.C. 1681b(a)(3)(F)(i), a legitimate business need in connection with a transaction the consumer initiated. If the application is then denied, or granted only on worse terms such as a larger deposit or a required guarantor, because of information in that report, the Fair Credit Reporting Act treats that as adverse action and 1681m(a) requires the landlord to tell the applicant, to identify the reporting agency, to state that the agency did not make the decision, and to notify the applicant of the right to a free copy of the report within 60 days and the right to dispute it. That notice is the fastest route to finding out whether a denial rested on a mistake.

The mechanics are the same everywhere. The applicant completes a form, authorizes a screening report and pays the fee. The landlord or a screening service pulls the report, checks references and income, and decides. If the applicant is approved they sign a lease and pay a deposit and the first period's rent, none of which the fee counts toward. If they are denied, the fee is gone unless a state rule or the landlord's chosen process returns it.

A hypothetical example of California's two processes, with made-up figures. A landlord in Los Angeles has one vacant unit and collects a $50 application screening fee from nine applicants, so $450 in total.

Suppose the landlord chose the process in Civil Code 1950.6(c)(2)(B), which returns the entire fee to every applicant not selected. The landlord picks a tenant on day 12. Within seven days of that selection the landlord must return the whole fee to the other eight: $50 × 8 = $400 goes back, and the landlord keeps $50.

Now suppose the landlord chose the first-qualified process in 1950.6(c)(2)(A) instead. Written screening criteria go out with each application form, applications are considered in the order received, the first applicant who meets the criteria is approved, and no fee is charged unless and until an application is actually considered. If all nine applications were considered, the landlord keeps all $450 and owes nothing back, because each fee paid for work that was done. The applicant's protection under that route is the written criteria and the order of consideration rather than a refund.

Either way the landlord owes each applicant an itemized receipt, and each applicant whose credit report was pulled is entitled to a copy of it within seven days.

Pros

• Charging for screening is what lets a landlord run a real check on strangers, which is also what protects other tenants in the building.
• Where a state regulates it, the fee comes with paperwork an applicant can use: an itemized receipt, written screening criteria, and a copy of the credit report.
• The California prohibition on charging when no unit is available removes the worst version of the practice, which is collecting fees for a waiting list.
• A denial based on a consumer report triggers a federal notice that names the reporting agency, which is how an applicant finds and fixes a bad record.

Cons

• It is nonrefundable by default and buys nothing but consideration, so an applicant searching in a tight market pays it repeatedly with nothing to show.
• Where no state or local rule applies, nothing ties the amount to the cost of the report it is nominally for.
• Screening a household means a fee per adult applicant, and California's statute extends "applicant" to a guarantor, so a co-signed application costs more again.
• The fee falls hardest on the applicants least likely to be approved, which is the opposite of how a cost that buys a chance should be distributed.
• Even where a state sets a ceiling, enforcing it means raising it with the landlord you are asking to rent to you.