My son applied for an apartment rental (Richmond, Va.) with two roommates. The three of them applied, plus three parents as guarantors. The application fee was $50 each for a total of $300. I just received this email:
I wanted to reach out and let you know that your application was approved, however, another application that was submitted during the application processing period was selected for this apartment. Your application is transferable to another one of our properties without having to go through the screening process again.
The application was specific to a particular apartment, not a generic application to qualify broadly for any of their properties.
I called and complained that the application process did not disclose that an approved application did not guarantee that we would get the apartment. Apparently they accepted many applications for the same apartment. I also noted that their process was not transparent and for all I knew, they could collect a large number of applications to fatten up the fees knowing that many approved applications would not be given the apartment.
At this point it became evident that the woman who sent the email and talked to me on the phone was basically following orders and could not answer for the company’s policies. So I gave up talking to her.
But is there anything shady or illegal about this?
Under the Virginia Residential Landlord and Tenant Act (§ 55-248.4), an application fee is nonrefundable and cannot be more than $50.00. If the housing unit is subject to regulation by the Department of Housing and Urban Development, the nonrefundable application fee cannot be more than $32. These fees may include background, credit, or other pre-occupancy checks on the applicant by the landlord or managing agent.
Under Colorado law, the entire amount of the fee must be used to cover the landlord’s expenses related to the application. So, if performing a credit and background check costs $50, then a fee of $50 is legal. It cannot be a profit center. Additionally, the same fee must be charged to all applicants.
It looks like Virginia law allows up to a $50 non-refundable fee, so that’s what they charged.
It looks like this is the “curse of knowledge”. They know that “approved” just means you pass a credit and background check, not that you’re offered the apartment. Nobody else knows that, though…
When renting my single unit, I have an application fee to cover the credit check, but I don’t charge it until I’ve made the prospective tenant a preliminary offer. “If your credit and background check is good, you can have the apartment; I’ll need $20. Please let me know if there is some reason you think you will fail, and then you can save yourself $20.”
My legitimate reason guess is that it is because they do a credit or background check on each person. The shady reason is obvious.
The fee is supposed to offset the costs of running credit/background checks on applicants. In this case, because both the applicant and the applicant’s parents are going to be liable for damages, they run a check on everyone.
There’s a plausible non-shady explanation here.
If you get 10 applications and it takes a few days to run checks on everyone, you don’t want to process them sequentially. You send out all the credit/background check requests (which you have to pay for, which you pass on to the applicants) and then you either accept the first one who applies that comes back with a good record, or the first one to come back with a good record.
I don’t know if it really takes a few days to run the check. If it actually takes 10 minutes on a webpage, then this starts to veer into 100% shady. Although probably the law setting fees was written when it might have taken a few days.
A Guarantor’s financials are relevant, since they’re agreeing to secondary liability for the debt. Same if you co-sign for somebody’s car purchase or mortgage.
Yes, for my current tenants I did the credit check on one of the guarantors, because the college sophomores renting the place are paying for it with their parents’ money anyway. The joint and several liability clause means I can go after any of the guarantors for the full amount if they don’t pay, so I let them decide amongst themselves whose credit I would check.
I didn’t have a problem with guarantors paying the fee. My beef is being told, “You were approved–but we’re giving the apartment to someone else.” Which implies that they process several applications in parallel instead of FIFO. Which suggests to me a nice way to collect application fees.
It is a hell of a coincidence that their cost just happens to be the legal maximum.
Definitely shady. When things are arranged such that passing over an application to rent an apartment allows the landlord to pocket $300 (less direct costs that for a savvy landlord are probably less than a third of that), don’t be too surprised if many such applications are unsuccessful.
It’s easy to imagine that an attractive 3BR apartment in a good location might attract a half-dozen rental applications, with perhaps 20 total credit checks possible. Could represent $600+ profit.
Bear in mind that the cost of each credit check declines significantly when you do a whole bunch, and that it’s probably easy to claim the cost is high.
I would think mostly not “Landlord” as such. Whatever the applicants pay, I doubt that the Landlord see any of it. Around here the letting fee charged by the Agent eats a big chunk of the first months rent.
In home sales (vs. rental), in a hot seller’s market, buyers have to come in pre-approved (for a mortgage) in order to be taken seriously. Even then, sellers often have their pick of offers and can choose to sell to “who wrote the sweetest letter” or “who we just clicked with.”
In a hot landlord’s (vs. renter’s) market, an application process and credit check is the only way to prequalify a prospective renter.
Which doesn’t stop them from getting multiple applications, and doesn’t stop them from being able to choose between them.
I can’t speak to the internal labor costs of processing these applications, or to the hard costs of running those credit checks, but – just like mechanics often add a “shop fee” to cover rags, WD-40, etc., etc., – it’s not entirely unreasonable for the landlord to try to pass along these costs.
But I do understand why this would leave a bad taste in your mouth.
I’m in Washington state. When prospective tenants apply for one of our units, we have them pay a third-party credit/background-check company directly, $35 each I think. We don’t touch that money and that’s fine with us.
Back when we were managing my mother-in-law’s building, we did collect the application fee ourselves. The fee was more than the cost of the background and eviction check at the time, we kept the difference as effectively payment for the work and time we spent on showing the place and legwork on backgrounds, income confirmation, etc.
In both cases, we wouldn’t take applications and fees from people who weren’t going to pass muster. This would be things like too little income or an eviction history. No reason to waste their money.
I applied for an apartment in a large complex in Fresno. The apartment manager said the background check only cost $15 and that’s what she charged me. Then she got on the InterWebz, poked in a few details, and ran the check right then-and-there on the spot. She even printed out a copy of the report for me. (I got the apartment.)
These reports come from information aggregators who collect information from lots of sources.
Another story: I wrote a check ($35 IIRC) to a landlord for a background check in Los Angeles. He didn’t like what he saw and didn’t rent the apartment to me. He didn’t return the check, but he never deposited or cashed it either.
Just last week, my son asked me to co-sign for a place in Madison, WI. I had to pay the $50, as did he. I don’t recall paying a fee for his previous places (in CA and IN) and normally, I just co-signed his application, but last week, I had to do my own. In this recent one, the $100 ($50 each) would go to his deposit, if he took the place (we were approved).
He and his GF decided on another place so we’re both out $50.
I run a 150-condo complex in FL, so different laws and not exactly comparable to the OP. But perhaps in the ballpark.
For would-be tenants and would-be buyers we charge a non-refundable $70 fee. Which pays for our credit check, background check, recording fees, and a bunch of other admin crap our property management firm charges us for to handle each buy or lease transaction. Does it line up to the penny with our hard OOP costs? No. But in our ~$1.3M/year budget with 10 or 15 of these checks per year, are we raking in the loot stealing from innocent renter wannabe’s? Hell no.
An apartment complex is different because of their inherently higher turnover. But the idea that they’re making meaningful profit on fees for tenants who don’t sign leases is silly; that bespeaks a total misunderstanding of the scale involved in running a real business versus a household.
I of course have no problem with paying $50 for an app fee, as long as I get the apartment if I’m approved. You did 10-15 a year? They did probably half that many in a week on a single unit, if not more. It’s not an apartment complex, it’s a management company for independently-owned flats around town.
I’d say it’s sort of shady and certainly ripe for abuse. Boise just recently passed an ordinance limiting how much can be charged and what it can be used for and a receipt must be provided also, because of that abuse. Landlords were charging hundreds, allegedly, sometimes for places that weren’t actually available. So, fees capped at $30 per applicant, must be used for background/credit reports, no soft fees such as “labor” or the like. Also, if a fee is charged, the criteria by which applicants are judged must be disclosed upfront at the time of collection of said fees in writing and I think they have to be refunded if not used for background and credit checks
In my apartment, I’ve turned over and over the balance, and I cannot figure any way in hell the owners are making any money, and I wouldn’t accept my building as a gift. So, I suspect their only margin of profit is alll these phony fees and penalties.
Also, the first few words – The minute anyone says they are “reaching out to me”, I know I’m cooked. Reaching out is a euphemism for Gotcha.