68% of tenants pay application fees when applying for rentals. However many tenants and landlords don't understand what their purpose is.
A property management company will review applications carefully to find the very best tenants. Learning more about potential tenants and their backgrounds is essential for minimizing problems and ensuring that you choose a tenant who will pay reliably and take care of the property. An application fee can help with this.
In this guide, we'll tell you more about rental application fees and help you decide how much to charge as a landlord in Germantown, Maryland.
What Is a Rental Application Fee?
A rental application fee is a fee that's charged by a landlord when a potential tenant applies for a rental. An application fee is charged to help a landlord cover the costs needed to evaluate a prospective tenant. The application fee may help to cover various things including a credit report and criminal background check.
Screening tenants is an important part of renting a rental property, so doing a thorough job is essential. The application fee has a clear purpose and can help cover the costs that a landlord or property management company has when screening tenants.
How Much Can You Charge?
Remember that you shouldn't charge more than necessary for the application. Every state varies in what they allow landlords to charge tenants as an application fee.
In Maryland, no more than $25 can be kept by a landlord after charging an applicant. More than $25 can be charged, but anything over this amount needs to go to tenant screening expenses. Unspent money beyond this amount will need to be refunded to the applicant within 15 days after receiving it.
You'll need to think carefully about how to best screen your applicants. Be sure to use the application fee wisely.
Application Fees vs. Security Deposits
It's important to note that application fees aren't the same as security deposits. A security deposit is only charged to a tenant after their application for the property has been approved and they're ready to move in.
The landlord holds the security deposit and gives it back to the tenant once their lease ends and they move out. If a tenant damages the property, the landlord may withhold the security deposit to pay for the damages.
States also set limits for how much a landlord can hold as a security deposit as well. In Maryland, a landlord can't charge more than two months' rent as a security deposit.
Why a Property Management Company Charges an Application Fee
A property management company will take an application fee from an applicant for a reason. The application fee can help to cover the costs of screening tenants and help ensure that a landlord will have a reliable and trustworthy person in their property.
When charging an application fee, however, make sure that you consider the cost carefully. In Maryland, you'll need to charge less than $25 to ensure you're following the law.
Do you need property management in the Germantown, Maryland area? Get in touch with us today to learn more about how we can help.
