A guide to California rental application fees

If you’re a landlord or real estate agent navigating the rental market in California, you need to understand the nuances of rental application fees. Comprehending the legalities, best practices, and considerations surrounding these fees ensures compliance and transparency throughout the application process. After all, rental application fees are a common part of the process, designed to cover the costs of background and credit checks and processing paperwork when you screen potential tenants. 

But when it comes to screening tenants, collecting California rental applications can be risky— especially if you aren’t aware of the important regulations that govern the way in which you can safely collect screening fees. 

Luckily, we’ve simplified these regulations for you so you can easily understand how to handle rental application fees in accordance with California law. 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.

Understanding rental application fees

Rental application fees are charges imposed on prospective tenants to cover the costs associated with processing their applications. In California, these fees typically range from $30 to $50 per applicant, although they can vary based on location and specific screening requirements. For example, the application fee for an apartment may be higher in areas with a higher cost of living or competitive rental markets, reflecting increased administrative costs and demand. Additionally, differences in property size, screening criteria, and local regulations can influence the amount charged to cover processing expenses.

The screening fee you can charge is made up of two categories. “Out-of-pocket" expenses which consist of all the costs associated with purchasing and accessing screening reports. And, the costs associated with the labor to collect, evaluate, and verify an applicant’s tenant screening package. This aspect is less frequently included in the screening fee because it's challenging to quantify. 

Legal framework in California

California law governs rental application fees to prevent abuse and ensure fairness in the rental process. According to California Civil Code Section §1950.6, landlords and agents are allowed to charge prospective tenants an application fee, but the fee must be reasonably related to the landlord's actual costs for screening applicants. This means that the fee should accurately reflect the expenses incurred in verifying an applicant's rental history, conducting background checks, and assessing their financial suitability. 

According to the California Civil Code Section §1950.6, landlords and property managers are not allowed to charge more than $30 per application fee but they can adjust that fee annually as long as it aligns with the Consumer Price Index. Nevertheless, most owners set their application fees lower than the statutory maximum to be cautious and to avoid claims of unfair business practices.

Landlords and agents must also provide applicants with an itemized receipt or invoice detailing the specific costs associated with processing their application. This transparency helps maintain trust and compliance with legal standards.

6 California rental application fee regulations to know about

Here’s what you need to know about California application laws to effectively screen tenants in the Golden State.

1. Maximum allowable screening fee for 2024

For screening fees, California landlords can charge up to $62.02 per applicant.

2. There must be a vacancy available

Under California Civil Code §1950.6, property owners and real estate agents are prohibited from charging an application screening fee if there is no current vacancy. This regulation aims to prevent the collection of unnecessary fees when it is evident that no rental unit is available immediately or within a reasonable future timeframe.

In specific circumstances, applicants can still agree in writing to undergo screening even when there are no vacancies, allowing landlords or agents to charge an application screening fee.

3. Married applicants must pay the same as single applicants

Some agents and landlords might offer married couples a reduced fee, such as charging $45 per couple instead of $30 per person. While this might appear generous to couples, it's important to recognize that treating married applicants differently from single applicants could potentially be viewed as discriminatory against single individuals. It's crucial to ensure fairness and equality in how you apply screening fees to all applicants, regardless of their marital status.

4. Provide application fee receipts

In California, landlords and property managers are required by Civil Code §1950.6(d) and (f) to provide applicants with an itemized receipt detailing the application fee and any additional costs. This receipt must clearly outline what the fee covers, such as expenses for background checks, credit reports, and administrative processing. Providing an itemized receipt allows applicants to understand exactly what they are paying for and ensures compliance with legal requirements. This also helps build trust between landlords and tenants by demonstrating accountability and clarity in financial transactions related to rental applications.

5. Provide a copy of consumer reports when requested

In California, applicants who have paid a screening fee are entitled to receive a copy of the tenant screening reports that were obtained as part of their application process, as outlined in the state's tenant screening laws. According to these regulations, landlords and property managers must fulfill requests from applicants to receive copies of these reports within 60 days. 

6. Refund any unused portion of the rental application fee

According to a recent study by RentCafe, landlords and agents receive an average of 24 applications for each available rental unit in a highly sought after market like San Diego. However, a new statewide bill is soon expected to emerge that would offer additional protection for renters. Landlords will be required to refund both the application fee and security deposit for applicants who they don’t select. 

Best practices for landlords and agents

To streamline the rental application process and maintain compliance with California law, we recommend adopting the following best practices:

Set a reasonable fee

Determine a fair and reasonable application fee that reflects your actual screening costs. Charging excessive fees could turn off potential tenants or even damage your reputation as a landlord or property manager.

Be transparent

Clearly communicate the application fee amount and what it covers to prospective tenants before they submit their application. Offer an itemized receipt or invoice detailing the breakdown of costs upon request to avoid questions about what those fees are covering.

Adhere to legal limits

Ensure that your application fee does not exceed the limit permitted by California law. One of the best ways to stay up to date is to make it a point at the start of every year to research any changes to legal requirements or new restrictions regarding applications and adjust accordingly. 

Document everything

Keep detailed records of all communication, receipts, and documents related to rental applications and any money that changes hands. This documentation can serve as evidence of compliance with legal requirements and help resolve any disputes that may arise.

The bottom line: Compliance is key

Failure to comply with California laws governing application fees can lead to unwanted legal consequences. If these requirements are not met, you may be subject to penalties or fines imposed by regulatory authorities. Non-compliance could also result in legal disputes with tenants, which could potentially lead to litigation, or worse, damage your reputation. 

Collecting rental application fees is easier than ever

Traditionally, landlords and real estate agents collect rental application fees in the form of a cashier’s check because it is secure and guarantees funds are readily available and cannot be reversed like personal checks. But, online rent payment services can be just as reliable, secure, and easier for applicants and landlords alike. 

RentSpree, for example, allows you to collect rental application fees online safely and securely. Better yet, RentSpree automatically sends applicants an itemized receipt for the screening reports so you don’t have to worry about that either. And, for landlords, real estate agents, and property managers, RentSpree is free for landlords to use. Learn more here.