A Guide to California Rental Application Fees

Most real estate agents and rental housing providers in California decide to charge a rental application fee when screening prospective tenants. This is a widely accepted practice that can help cover the direct costs associated with screening tenants. But the seemingly simple act of collecting rental application fees in California can be a big area of risk for you if you do not do things the correct way.

There are many really important regulations (mainly found in California Civil Code §1950.6) that govern the way in which you can safely collect screening fees as part of your screening process. Luckily, we have simplified these regulations within this article so you can easily understand what the rules are. As always, you should consult with an experienced landlord/tenant attorney when deciding on your screening fee policy. This is merely general information, not legal advice.

Why Charge a Rental Application Fee?

The point of a rental application fee in California is NOT to make a huge profit. This fee is only meant to cover your screening costs. Most application fees cost between $30.00 and $50.00 per applicant. Generally speaking, the screening fee you can charge is made up of two categories:

• “Out of pocket” costs associated with purchasing and accessing screening reports. This is the most common reason agents and landlords charge a fee. For example, your tenant screening provider charges $30.00 for you to access screening reports.
• Costs associated with the labor to collect, evaluate, and verify an applicant’s tenant screening package. Agents and landlords do not charge for this as part of the screening fee as often because it can be difficult to quantify. For example, you spend two hours collecting a completed application package, pulling screening reports, and checking references for an applicant. This component can be a little more ambiguous because, as we will see later, some of the California rental application fee regulations impose specific requirements on you.

Now we will take a look at the specific California regulations you must follow.

California Rental Application Fee Regulations

What is California Civil Code §1950.6?

The California Civil Code §1950.6 is one of the most important regulations of the residential application fees for California. To summarize this code section, it basically says that landlords and property managers were initially not allowed to charge a fee of more than $30.00 per application. Now, however, the law allows a landlord to increase the application fee annually according to what the consumer price index (CPI) is at that time. So, today the maximum fee for 2021 s $53.33.

Most owners set their application fees lower than the statutory maximum to be cautious and to avoid claims of unfair business practices. A property owner or agent must not keep a screening fee if there was no credit report run and no reference check performed.

What is the Maximum Allowable Screening Fee in California for 2021?

The maximum screening fee you can charge is $53.33 per applicant.

There Must be a Vacancy Available

Property owners and real estate professionals cannot charge an application screening fee if there is no current vacancy This law prevents owners / agents from charging unnecessary screening fees when you “should have known that no rental unit is available at that time or will be available within a reasonable period of time.” However, if the applicant agrees in writing to run the report even though there are no vacancies, an application screening fee can still be charged.

Married Applicants Must Pay the Same as Single Applicants

Many agents and landlords would charge married couples a discount to apply (such as $45.00 per couple instead of $30.00 per person). This may seem like a nice thing to do for applicants because you are giving them a break. However, please be aware that treating married applicants differently than single applicants could be considered a form of discrimination against single applicants. Be sure that you treat all applicants fairly and equally, even when it comes to the screening fees you charge.

Provide Application Fee Receipts

Applicants in California must receive an itemized receipt showing the screening fee and other costs included in the screening fee you charged.

Provide a Copy of Consumer Reports When Requested

Applicants who pay a screening fee and make a request are entitled to a copy of the screening reports you pulled. So, think twice before you refuse to provide applicants with a copy of the reports they paid for.

Refund Any Unused Portion of the Rental Application Fee

If you reject an applicant after you have collected an application screening fee, but before completing the screening process, then you need to return the portion of the application fee that was not used. For example, if you charged the screening fee, but never performed the screening process, then you must refund the applicant for that unused amount.

How Can You Collect Rental Application Fees?

How you collect rental application fees is usually up to you, but many people collect rental application fees in the form of a cashier’s check to be safe. Just be ready with an itemized receipt if you collect any screening fees.

Some online tenant screening services also allow applicants to pay the screening online directly so you do not have to process any payments yourself. For example, RentSpree (See: https://aagla.rentspree.com) allows applicants to pay online via credit, debit, or prepaid cards. This provides flexibility for the applicant while reducing the hassle for you to collect fees yourself. Better yet, RentSpree automatically sends applicants an itemized receipt for the screening reports so you do not have to worry about it and will verify tenants with lightning speed through RentSpree’s rental application screening process.

A Few Concluding Comments

Today’s California landlords and other real estate professionals cannot charge more than $53.33 to screen tenants during 2021. This fee must cover out-of-pocket expenses for tenant screening, such as screening reports. This fee can also include a reasonable amount for the time devoted to the screening process. If you charge a screening fee, then you must provide a copy of the screening reports if the applicant requests them. Also, you will need to present an itemized receipt. If you spend and amount less (after factoring in the cost of your time) than what was charged in the application fee, then you must refund the difference. You may not charge an application fee if there are no vacancies at the time. Knowing state regulations before you collect a California rental application fee will help you to avoid a costly legal issue.

RentSpree is the preferred, online tenant screening provider of the Apartment Association of Greater Los Angeles. With it, you can put together a completed application package in one simple step. This includes a completed rental application, credit report and score, criminal background check, and national eviction history. RentSpree can handle the entire screening process for you and it takes just two minutes to start screening!

Better yet, you can receive all reports back instantly at the property or at another time of your choosing. Visit https://aagla.rentspree.com to learn more.