The proper and improper use of the rental application fee is our topic. In the previous article, we talked about the rental application fee. We continue with examples of the proper and improper uses of this fee.
No Law
Interestingly, no law exists limiting how many times a management or real estate company can show the same apartment; charge an application fee and never rent it.
If you think about it none could exist. Any provision to do so would work against renting the apartment. Sort of a Catch-22. Nonetheless, used in the worse way the charging of an application fee can be a business in itself.
Here’s how it could work
- List the apartment
- Show the apartment to prospective tenants
- Engage the prospect in conversation. Find out why they chose this apartment.
- Charge a rental application fee. If you are bold charge credit report and background check fees. Non-refundable of course.
- Find a reason to reject the applicant. You could use something you learned in conversation with the person.
- Show the apartment a few more times.
- Stop showing the apartment. Remove the listing.
- Wait a month or so.
- Re-start the scam.
Examples: Proper and improper use of the rental application fee
An apartment listing states that dogs are okay. The apartment lists as pet-friendly. No weight restriction stated.
You respond to the ad. While talking with the person representing the apartment you state that you have a large dog.
The apartment is exactly what you have been looking for. You see other renters with dogs. You want the apartment.
The Fees
Now comes the fees. There is a mandatory rental application fee. A credit report fee and background check fee, all non-refundable.
Since this is the perfect building for you and your pet you agree. A few days later you are told that the owner has rejected you for the apartment. You ask why. You are told that the building owner is okay with dogs under 40 pounds. Your dog is over 40 pounds.
The Fake Outrage
You get a heartfelt apology and faked outrage from the rep. He’s “upset” that the weight restriction had not been disclosed to him earlier.
In the meantime, the apartment has been shown to other prospects. They too like the apartment. And like you have paid the fees requested. They will not get the apartment either.
It’s Back
In a few days, they remove the listing. Time passes, the listing reappears. The con game begins again. This is not speculation, it happens and it’s hard to catch.
Short Circuit The Scam
In this scenario, our unsuspecting victim could have stopped the con in its tracks.
First, do not agree to any fees until you check out the rental independently.
Here’s how. Return to building on your own. Find a tenant of the building and ask your question. In this case, the question is “Does the owner accept large dogs”
Ask the Rep…Really?
You could ask this of the person showing the apartment. Don’t be surprised if you get an answer like, “I will have to check that for you. But in the meantime, we should start work on your application today. You don’t want someone else to snatch up this great apartment.”
Know the lie when you hear it
Owners have concerns about pets in their building. There are always worries about the damage they can do. Most owners prefer small dogs to large ones. Informing the people showing the property of this is top of the owner’s list.
The person representing the apartment knows full well the pet policy.
Rental Application Fee: Improper Use
The Scam in Action
This is a true story. A Crimes in Real Estate type of story.
After showing my customer an apartment a tenant living in the building approached me. She said that the apartment had been empty for a year. It had been shown repeatedly but never rented. She stated that the agent uses the apartment to charge fees. How she knew this I don’t know. Nonetheless, I decided to check this out for myself.
History of the Apartment
I decided to check the apartment’s listing history. Like clockwork, the con man listed the apartment. Removed the listing then re-listed it. The apartment never stayed on the market for more than a few weeks. On the advice from the broker, I was working for, we bypassed this apartment.
Note The apartment required fees totaling about $150.00. This unknown woman saved my customer from a scam.
Again Due Diligence
This is why you must do your due diligence when working with a company that charges an application fee. For the scam artist as long as the apartment is available it can generate money. Once rented the cash cow is dead.
All is not lost. There are reputable companies that do charge fees. They are not thieves. Their goal is to rent apartments, not collect fees.
Rental Application Fee: Proper Use
Fees, Keys, Apartment
Another true story, this is not a test.
Long ago, I located an apartment for a customer in a managed building. We saw the apartment, he liked it. The management company began its verification process. Yes, it was that simple.
Lots of info, low fee
They requested a boatload of information. Verification of income, references, bank statements, etc. Oh, there was a low application fee. There were no fees for credit or background reports. The review process took weeks. During that time the apartment continued to be shown.
Approval
Finally, word came, my customer was accepted for the apartment. Days later we went to the closing. The closing completed, the keys were given to my customer and I got paid.
Oh did I mention that once the management company decided to accept him for the apartment they stopped showing it? It was then that they requested a small holding fee. The fee–rental binder– was applied to his rent.
This rental process was time-consuming. At times it seemed that we should find a different place. My customer said no.
Both parties had a chance to walk away should they choose. No contract was in play. The amount of money at stake was minimal. In the end, it turned out well.
My Latest Experience
As I write this I am looking for a room rental for a customer. I found one in a building that has a rental management company. They requested his credit score–not credit report. As well as an approximate yearly income. This before we can see the apartment. No mention of an application fee.
It seems only fair. They want to know if he can make the rent before showing the room. The cost to my customer so far: Zero. I don’t know how this will turn out but so far not bad.
You have the power
No one holds a gun to your head and says, “Sign the paper and give me your money.” When approaching a real estate company if they ask for money upfront take a pause. Ask yourself, I what world do you pay to become a customer? Consider your options. Walk away or pay.
Who has the goods?
Management companies usually do not request an upfront application fee. They wait until after you have seen the apartment. That’s the difference here.
- A real estate company may not have anything for you to see. But may ask for a fee just to start the search.
- The management company has the apartment, no searching needed. You see it, you like it. The paperwork begins.
Note: I do not prefer one over the other. I have worked with both when seeking apartments for my customers. Whoever has the apartment my customer wants is who we deal with.
Paying the Fee
What to do If you decide to pay a rental application fee.
- Make sure to get in writing what the money is for.
- Have all other expenses such as credit report etc spelled out and itemized.
- Is there an escape clause should you change your mind?
- What happens if the company does not locate an apartment.
- Make sure there is no restriction on how many companies you can work with.
- If you are dealing with a real estate company: How much is the Broker’s fee? Contrary to popular opinion it is not always equal to the rent.
- Remember: Non-refundable means non-refundable. Proceed carefully.
This is not a complete list of things to consider. I bet you came up with things I did not site.
Disclaimer: I am not a lawyer and nothing stated here is legal advice. This article applies to the five boroughs of New York. All information deemed accurate but not guaranteed. Always check the real estate laws in your part of the country.
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