Application fee legalities?

Question

Trying to find out what the law(s) are regarding application fees?
	
	So far we've been doing $20/adult with a max of $40 for a application fee for bagkround checks and whatnot. Usually only someone who was willing to pony up the cash seriously would do it, we'd check them and all was well. However i've picked up several nicer properties and have 6-8 parties per property willing to pay application fees to try and get a chance at the property. I don't know how to handle it, because I don't want to run into legal problems with taking and not refunding fees after we've run the check on them.

Darrin Carey · Answer

There are really no problems with application fees in Ohio at the state level. You simply need to be consistent with every single applicant. We do $30 per adult; our cost is about that.

We process apps one at a time until someone meets our criteria. Trying to choose the "best" applicant opens up potential fair housing issues, even though you don't intend them.

What if the "second best" applicant also happens to be a protected class? All they need to do is accuse you of discrimination, true or not, and you are in a world of hurt.

Brandon Schlichter · Answer

@Jeremy Davis you're just a Stone's throw away.

I worry about the discrimination aspect, however my plan/goal is to create transparent guidelines for our judging criteria that will help insure quality tenants (kind of leaning towards a points based system).

Jeremy Davis · Answer

@Brandon Schlichter im right up the road from you here in canal winchester, and ill tell you what we do. we only accept one application at a time. if people want to be on a waiting list we add the name and after we check the ONE application we currently have if he/she is declined we move to the next name on the list until we find a qualified applicant.

Brandon Schlichter · Answer

I'm not aware of any special items within the municipalities we work in, and it would just be Ohio in general, which I do believe allows non-refundable fees. I however do want clairification. Guess it's time to find a good atty.

Kimberly T. · Answer

If you get multiple apps with app fees, you have the option to run the credit/background/etc. checks on all of the apps, and then select the "best" candidate.  You should decide, and put in writing, what "best" means to you.  It may be the candidate with the most total income, or highest credit score, or whatever.  Maybe you decide that credit score is first priority, then income.  Then let's say you get the top 2 apps with credit scores almost identical (say, within 20 points of each other), then you could go with the one with the higher income of those 2 apps.  Whatever process you decide will lead you to the "best" candidate should be put in writing so you can't be accused of discrimination later.

You are not required by law to process them in the order they are received and then take the first qualified applicant (meaning the first applicant who meets your minimum qualifications).  However, you should have a time period in which you will accept and then check apps.  For example, you could say "I'm taking apps for the first 24 hours, and then will check all the apps I received in that period and select the most qualified app."  You should also put this time frame in writing.

As always, these are generic rules, and I don't know the specific laws of your state/city, so you should verify what's allowed/required locally.

Derek Smith · Answer

This is simply based off what I've understood in the readings I've done...

In some states you may not charge more than what the out of pocket costs for the application would be. Meaning if to run a background/credit/reference it costs you $20, you may not charge $40 to make a profit. Check if this applies to your state.

Also, unless you have it in writing that you'll refund the application fee, I don't see why you cannot process all the tenants and then select the best candidate.

On the other side, if you take too long to complete the app you may be asked by the renters to refund the fee due to them finding another place since you were to slow to move.

Any other thoughts on this?

Application fee legalities?

Most Popular Reply