Jamie Sternberg, Esq.
California residential application fees are governed by California Civil Code §1950.6. The full text of that code section is attached to this article. A discussion of the law is below.
Maximum Application Screening Fees. When Civil Code §1950.6 was first enacted, owners and managers could not charge more than $30.00 per applicant for an application fee. The law allows the landlord to increase the $30.00 charge annually according to the consumer price index (CPI). In 2018, the maximum statutory amount is $49.12.
To avoid unfair business practice claims, conservative property owners and managers set their application fees at the lesser of the statutory maximum or their actual screening costs. An application screening fee should not be charged if the property owner or manager does not incur any screening costs (i.e. when no credit report is run or if the owner or manager did not perform a personal reference check or other processing).
Application Screening Fees When No Unit is Available. Unless the applicant agrees in writing, owners and managers cannot charge an application screening fee at all if they do not have a current vacancy or do not anticipate vacancies becoming available within a reasonable period of time. Civil Code §1950.6(c). The intent of the law is to prohibit any owner or manager from charging application screening fees when there are no units currently available to rent. But, if the applicant agrees in writing to have the report run when there are no current vacancies or no vacancies available within a reasonable period of time, an application screening fee may be charged. Otherwise, alternatives are to run credit reports and process the application at the landlord’s expense or wait to charge the fee and process the application when the applicant is at the top of the waiting list.
Charging Application Fees for Husband and Wife. Treating married couples differently than single persons is discriminatory in California. Each adult applicant should complete a rental application and should be charged the same fee. The monetary limit is per person regardless of the relationship between the parties.
Information to Include on the Receipt for the Application Fee. The applicant must be given an itemized receipt showing the actual charge for the credit report and the “soft costs” for the time and expense incurred by the owner/ manager for obtaining, processing and verifying the application (i.e. including past rental history, current employment, bank accounts, etc.). Civil Code §1950.6(d) and (f). If the total cost is less than the fee collected, the remaining sum should be returned to the applicant. Many application forms and some holding deposit agreements contain a receipt for the application fee, so often the application fee receipt is provided on either the application form or the holding deposit agreement form.
If an Application Screening Fee is Received but the Application is Denied before Completing the Entire Application Screening Process. Return the portion of the application screening fee not used. Civil Code §1950.6(e). Note: If it is a company’s practice to stop the screening process at the point at which disqualifying information is obtained, this policy should be applied equally and ideally should be in writing. To avoid a potential fair housing violation, always go through the same screening process for every applicant.
If the Resident Requests a Copy of the Consumer Credit Report. If requested, the landlord must provide the applicant with a copy of the applicant’s consumer credit report. Civil Code §1950.6(f).
Kimball, Tirey & St. John LLP is a full service real estate law firm representing residential and commercial property owners and managers. This article is for general information purposes only. Laws may have changed since this article was published. Before acting, be sure to receive legal advice from our office. If you have questions, please contact your local KTS office. For contact information, please visit our website: www.kts-law.com. For past Legal Alerts, Questions & Answers, and Legal Articles, please consult the resource section of our website.
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