Application Fee Credit and Criminal Background checks

[James Kirby]

Hello Everyone,

      I am new to investment properties and I am currently in the process of closing on my first multi-unit property. I have been doing a lot of research on everything over the past several months and have a quick question on the Application Fees. I feel as though a lot of my time can be consumed by having the prospective tenants filling out applications and then having me screen the application (contacting previous landlords, employer, personal references, etc.) and only charging them for the credit and criminal background check. The question's that I have are:

1. Is it legal to charge them a $10 application fee (to cover a portion of my time) plus have them pay for their credit and criminal background check if they pass my screening ($40 through SmartMove)? (I can't find anything about the legality of application fees in Utah)

2. Does that sound harsh or uncalled for?

3. I have read other posts where all or part of the application fees have been given back to approved tenants that accept and sign the lease agreement. Is this something that you would do? If so, why? and how much would you recommend crediting back?

Thank you in advance for your time.

[Frank Chin]

I have never in nearly 40 years of doing rentals, charge application fees, and don't plan to start. The reasons are:

1.) I do open houses, one at most two, and usually have 20 to 40 showing up for each. Time wasters? Yes, too thirds of them are, and on more than one occasion, they helped me rent the place quickly. How? Renters, especially people relocating want to get it done quickly, and when they see a big crowd, asks, what are my chances? I quickly do a verbal assessment, i.e salary, credit, etc. and have them fill out the application. Many occasions, it would say be, May 3, and the renter says I want it by June 1, or July 1, and I would look around the room, say, I think it'll be long gone by then. They nod in agreement saying "you're right". So usually, they would go for May 15, or the same week. They have no idea some of the other lookers are time wasters.

2.) Not collecting any fees gives me flexibility to choose tenants. Early on, I find tenants wanting to pay something, hold the place, then all the hell breaks loose when I want to return it because another renter got chosen. Imagine the riots if I kept the money. More than once, they threaten to come to my house and beat me up. Others threaten to sue for discrimination because they were there first, so why else would I collect anything. So every one is told that the decision would be made in a day or two, and if they didn't hear anything, give us a call.

3. Financially speaking, I'm way ahead renting out the place in two weeks or within a week, particularly with monthly rents of $2,500. I at most spent $150.00 in fees checking out a few applicants, with a combined credit, eviction, and criminal check running $30.00/person. I'm ahead $1,250 renting a place out half a month sooner, and I'm not going to jeopardize it for being to cheap covering $60.00 in fees to run reports on two people, or $90.00 for three.

So, all in all, not charging fees worked well for me. Besides, not all landlords charge fees in NYC where I am. And time wasters, come one, come all.