Are Application Fees for Apartments Legal? Complete Guide

Overview

“Are application fees for apartments legal?” is one of the most common questions landlords and property managers ask when setting up their rental processes. Application fees cover the cost of screening—credit checks, background checks, and administrative work—but regulations vary by state. In this guide, we’ll deep-dive into the legality, limits, and best practices for application fees so you can confidently stay compliant while protecting your bottom line.

We’ll explore:

• Definition and purpose of application fees
• Reasons landlords charge fees
• Federal versus state authority
• State-by-state breakdown of caps and bans
• Best practices for compliance and transparency
• How to calculate a fair fee
• Answers to the top landlord FAQs

What Are Application Fees?

A rental application fee is a one-time, non-refundable charge that an applicant pays when submitting a rental application. It typically covers:

• Credit Reports: Pulling credit scores from bureaus like Experian, TransUnion, and Equifax.
• Background Checks: Criminal, eviction, and public record searches.
• Administrative Time: Reviewing applications, verifying employment/income, and preparing lease documents.
• Vendor Fees: Third-party screening service charges.

If you charge more than your actual costs, many states require you to refund the difference—so accurate record-keeping is essential.

Why Charge Application Fees?

Charging application fees serves three main purposes for landlords and property managers:

1. Cost Recovery: Screening services and administrative tasks incur real expenses that would otherwise come out of your pocket.
2. Serious Applicants Only: A modest fee discourages non-committed prospects, reducing the number of frivolous applications.
3. Efficiency & Accuracy: Outsourcing to professional screening services speeds up tenant vetting and lowers human error.

Federal vs State Authority

There is no federal cap on application fees. Instead, each state sets its own rules, which can include:

• Fee Caps (e.g., California, New York)
• Refund Requirements for unused portions (e.g., Minnesota, Virginia)
• Complete Bans on application fees (e.g., Vermont)

Always check both state statutes and local ordinances—city or county rules may be stricter than state law.

State Regulations: Caps, Refunds & Bans

Here’s a closer look at the 11 states with notable restrictions (click the statute to view official text):

• California — Civ. Code §1950.6: Fee ≤ actual costs + reasonable time; adjusted annually by CPI.
• Colorado — HB19-1106 & HB23-1099: Fee ≤ actual processing costs; accept portable screening reports.
• Delaware — 11 Del. C. §5514(d): Fee ≤ greater of 10% of rent or $50.
• Maine — 14 M.R.S. §6030-H: Fee = actual screening costs only.
• Massachusetts — M.G.L. c. 186 §15B: Landlords prohibited; only licensed brokers may charge.
• Minnesota — Minn. Stat. §504B.173: Fee = actual cost; excess refunded.
• New York — R.P.L. §238-a: Fee ≤ $20; waived if applicant provides recent report.
• Vermont — 9 V.S.A. §4456a: Application fees banned.
• Virginia — Va. Code §55.1-1203: Fee ≤ $50 + third-party costs; refund excess within 20 days.
• Washington — RCW §59.18.257: Fee = exact screening cost; itemized receipt required.
• Wisconsin — ATCP §134.05: Fee ≤ $20; must provide copy of screening results.

All other states generally allow non-refundable fees with no cap—though local jurisdictions may impose additional rules.

Best Practices for Compliance

• Document Everything: Keep invoices and receipts for every screening cost.
• Transparent Lease Addenda: Clearly state fee amount, usage, and refund policy in writing.
• Accept Portable Reports: Where required (e.g., Colorado), honor tenant-provided screening.
• Staff Training: Ensure your team understands fee rules for each property location.
• Annual Review: Laws change—schedule a yearly legal compliance check.

Setting the Right Fee

To calculate a fair, compliant application fee:

1. Aggregate Costs: Sum third-party screening charges + estimated administrative time.
2. Local Benchmarking: Compare fees charged by other managers in your market.
3. Round for Simplicity: Choose a clean number (e.g., $35 or $50) within legal limits.
4. Explain Value: Outline exactly what the fee covers—prospective tenants appreciate transparency.

Frequently Asked Questions

Final Thoughts

Understanding the legality of application fees is crucial to running a compliant, professional rental business. By familiarizing yourself with state-specific rules, documenting your costs, and practicing transparency, you can confidently collect fees that cover your screening expenses without risking fines or tenant disputes.

For an even more streamlined process, consider using Simpli Management—our all-in-one platform automates application fee tracking, tenant screening, and compliance reporting, helping you save time and reduce errors.