MTO takes on Application Fees

Last updated: March 17, 2011 – 8:13 AM

MTO hotline counselors have been hearing that landlords have been charging applicants outrageous fees when applying for housing without providing any explanation for the basis of the fees or if they are refundable. These ambiguous fees can go towards background checks, credit checks, or simply be used as a holding fee to “guarantee” the next available room. We do not know how many landlords are asking for these large fees. However, we are aware that some applicants have paid several hundred dollars in mysterious application fees only to find out there is no vacancy in the building. Subsequently, these applicants are denied a refund.

Representative Barbara Flynn Currie is responsible for introducing HB 1607 ca. HB 1607 will require landlords and management companies to charge reasonable fees and provide a written itemized account of each fee. HB 1607 was passed by committee on March 16 by party vote. This bill will make it illegal for companies to charge prospective tenants fees when there are no rental units available and hold companies responsible for making a good faith effort to return any amount of an application fee that is not used. Management companies or landlords that violate this law would be liable to the applicant for the application fee, civil court filing costs, and reasonable attorney fees incurred. Metropolitan Tenants Organization would like to hear from you. Have you been charged an application that seemed high? If so, what was it for and did you rent the apartment? Your stories can be helpful in securing passage of this law.

All 10 Comments

  1. For those who have been active in pursuing the concerns about “move in fees” being, perhaps, nothing but disguised security deposits, can you tell us what is going on in this arena?

    Any efforts at State legislation on this topic?….I heard that the Sargent Shriver National Poverty Law Center is working on legislation in this area.

    Any lawsuits or class actions filed in regard to this topic? If so, who has filed them, against what entities or landlords, and what have the results been?

  2. Hi, I’m new to the renting process here in Chicago and I want to first thank you for this website, as it provides a wealth of information. I don’t know what a typical application fee is, but I paid $50 for an application fee and $250 for an administrative fee. I was told that the application fee is used to conduct a credit check, background check, etc. and the $250 replaces the security deposit. So when property managers do not charge a security deposit who pays for miscellaneous cleaning when the lease ends? Thanks

  3. Application fees are necessary to winnow out the chafe from the grain, so to speak. If applicants are not willing to submit to a credit and background check, for which I pay $30 (and I charge the prospective tenant $20 to defray part of the cost), then I’m not going to consider them as a serious applicant. If they’re not willing to pay $20, I can assume they’re not serious about renting my property, they don’t want me to see their credit report, and they are probably not a good risk. That’s the real purpose of the fee. So I don’t waste my time. I also hold a month security deposit and the last month’s rent up front with my tenants. That practice has come in handy when people have skipped out on leases and left me with a mess to clean up.

    1. Thanks for your comment, Cathy. We here at MTO certainly aren’t against application fees. We understand that credit checks and background checks cost money and that landlords shouldn’t have to bear the cost for each and every person that shows interest in a rental unit. This bill, however, is necessary because it protects renters from opportunistic landlords who not only charge excessive application fees, but charge renters when there aren’t any available units. We have heard, all too often, stories from renters who can attest to these unscrupulous business practices. This bill calls for an itemized account of how an application fee is being spent — a receipt, if you will. In your case, you have made it clear that you charge potential renters a reasonable $20 to go towards their credit check, but not all landlords will disclose this information, especially when they’re charging far more than their actual costs. This bill will also give renters the necessary legal recourse when they’ve been charged a fee by a landlord who doesn’t have any vacancies.

      1. Meron, i think this bill is absolutely needed… As a tenant, I have incurred outrageous costs for so called “credit reports”, which can be ordered online by anyone for less than $20-24.99 or maybe even less… However most landlords and management company’s are now charging each adult in a household approximately $35 or $40 or $50 per person for their credit checks… That is too much and only adds to the growing moving expense of a potential tenant. So HB1607 was passed back in March, I would like to know where I can obtain a copy and take with me when going apartment hunting… I am a serious and business minded person, but I also do not want to be taken advantage of, simply because a landlord has the upper hand… I think that this Bill will be very advantageous!

    2. I’m an serious applicant when i apply but being turned down because of a misdemeator that happened 10 years ago is just rediculous. I work for the railroad and now adays they do not want anyone who poses as danger to work for them. It is a federal govenment job. As for my credit, people make mistakes. they should’t be judged upon it. I have car loan that is in good standing and I still won’t get accepted. So therefore I say as a lawful applicant, that if somebody doesn’t get accepted that the small fee should be refunded or a lawyer should be involved.

      Danielle

    3. Cathy, but what about those who provide Credit Reports to you from all 3 major agencies (they are obviously not trying to hide their credit from you)…. And in 2011 no one is charging a fee that small anymore… If each potential landlord charges a person $35-$50 each for a credit check, then someone is getting the remaining money… Which is ultimately not apart of the amounts you are asking for in a “deposit” + “1st months rent” + “last month’s rent”…. These application fees or processing fees (as some landlords like to call it) is just an added expense to citizens… Especially when each application that is filled out will be reported to that persons credit bureaus also… It seems like a poor way to judge if someone is willing to pay rent for hundreds of dollars more… Since they are not quite obligated to you yet…

  4. Application fees became “popular” due to landlords refusing to use good business judgment and accounting methods when dealing with security deposits.

    In many if not most cases, in my view, “application fees” are just disguised security deposits, but are not refundable.

    The proposed legislation is very much needed, and more education of landlords is absolutely necessary so as to help landlords understand that security deposits make sense (to assure that apartments are returned in good condition and repair by tenants, normal wear and tear excepted) and that the business approach to them and easy accounting procedures are, in fact, trivial and very easy to deal with.

    I am on the board of directors of MTO and have, in the past, done extensive training of MTO volunteers on such issues; however, I also assist CIC in educating landlords and management companies and I tell them exactly how to avoid violation of the security deposit provisions of not only the Chicago Residential Landlord and Tenant Ordinance (“RLTO”) but under the laws of the State of Illinois as well. And, landlords need security deposits to protect against damage to their apartments.

    In deed, one suggestion I have is that landlords and management companies contact Taft West at the Community Investment Corporation and sign up for their very modestly priced but very thorough and complete training programs…where I also appear regularly and will provide a “solid method” (in my opinion), about the proper and easy handling of security deposits (among other items discussed). Taft can be called at 312-258-0070 Ext. 214.

    Paul Bernstein, Esq.
    paulbernstein@yahoo.com
    http://www.paulbernstein.net

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