Tenant Screening And Application Fee Limits

12:57 PM, May 12, 2020

Rental Application Fee Limits in Cincinnati

A good tenant is worth their weight in gold, and perhaps more importantly, a bad tenant can often cost you the same. It’s both headache inducing and expensive to spend time chasing rent, cleaning up after tenant damage, and, in the worst cases, filing an eviction. So separating bad tenants from good ones is a critical process for landlords and property managers. The most important tool in that process is your rental application and corresponding tenant screening reports.

But often, reports and information submitted by a tenant only go so far. A credit, criminal and eviction report never lies, but tenants certainly can. For this reason, many landlords spend time calling references, employers, and past landlords to confirm information and investigate temperament.

Time is money, and it is not only reasonable but sometimes necessary for landlords to charge an additional fee as part of their application. Which begs the question: how much is too much? What is the maximum amount a landlord can charge a potential renter for an application in Cincinnati?

When considering application fees, there are two things to keep in mind: your local laws and your market expectations.

Application Fee Limits in Cincinnati, Ohio

Landlord laws are governed on three levels: federal, state, and local. For Cincinnati landlords we’ve got good news – there are no national laws restricting application fees, there are no Ohio laws restricting application fees, and there are no Cincinnati laws restricting application fees. Landlords in Cincinnati can legally charge any amount they’d like for a potential tenant’s rental application.

It’s important to note, however, that this is something worth monitoring. In recent years, many states and cities have reviewed and revised their application fee laws in an effort to level the playing field for lower-income tenants in competitive markets. For example, in late 2019, New York City introduced a law limiting application fees to no more than $20, which is often not enough to cover the cost of your screening reports.

Cincinnati City Council is also doing its best to protect tenants. A new law took effect in the second quarter of 2020 to provide security deposit alternatives to tenants. These include a monthly premium for security deposit insurance, an installment plan to pay the full deposit overtime, or a deposit reduced by half. The law has no impact on applications or application fees, but if Cincinnati city government is paying close attention to tenant charges, landlords should be sure to pay close attention to the city government.

Adapt Your Fee to Your Market

In Cincinnati, while you are legally permitted to charge any amount you’d like for your rental application, it is not always a wise decision. If you charge a fee that is substantially higher than other landlords in your area, that fee may be the difference between a prospective tenant becoming your renter and someone else’s. An application fee is a barrier for tenants, afterall – recognize it as such.

Before deciding on the fee you’ll charge, get an understanding of the cost of the screening reports you’ll be purchasing. Next, connect with other area landlords and check out their online listings. Find out exactly what they’re charging for their application. And be sure to keep your view narrow. Cincinnati is a big rental market. The expectations of someone renting in Mt. Adams are quite different than someone renting in Cheviot.

Ways to Charge Your Screening Fee

If you’ve decided to charge a fee for your application, you’ll now need to decide how you want to assess it and communicate it to your applicants. Be sure to display your fee up front wherever your applicants apply. You don’t want to waste their time, and you certainly don’t want to waste your own.

Speaking of wasting time, an application fee can often serve as a way to pre-screen tenants. If they are unwilling to pay it, they may not be serious about renting your property. But if you find yourself in a part of town in which charging an application fee turns off potential renters, you lose that benefit. Fortunately, there are some alternative approaches you can take.

Local property management software startup Innago notes, “If you find yourself in a market in which renters are unwilling to pay a screening fee, begin offering to credit any accepted applicant’s security deposit or first month’s rent by the amount of the screening fee.” This protects you and the renter – if they’re serious and they know they meet your criteria, they’ll get the money back. If they’re not, you’ll be compensated for the time you spent vetting them.

Wrapping Up

Fortunately, for landlords in Cincinnati, there are no laws or regulations restricting their ability to determine a tenant screening fee that makes the most sense for their business. But always keep in mind that tenants in your rental area may not be interested in your properties if the application fee is too steep.

Screening your tenants is important to the health and growth of your real estate investment. Regardless of your decision regarding who pays what fee, be sure to screen your tenants and confirm the information they provide you. It will pay off in the long run!

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