Tenant refuses to pay rental application processing fees

23 Replies

I have a situation where a prospective tenant applied for one of my rental properties using the TAR(Texas) 'Residential Lease Application' form. I processed the application without collecting any fees upfront, I paid for tenant screening service from my pocket. I thought I will collect it later along with the deposit. But the tenant had a change of mind and went with a different property. And now refuses to pay the $100 application fee( $50 per app, 2 applications). He says that I did not ask him for the fee earlier, so he concludes he does not have to pay .  On page 3 of the application form, under FEES, the box 1 is checked which states '$50 to be applied to the security deposit upon execution of a lease or returned to Applicant if a lease is not executed'. Since the applicant withdrew after I had already spent money on his tenant screening, isn't he supposed to pay ?

Any ideas how I could make them pay this fee of $100 ? Could I threaten him with hiring a collection agency who can report to credit bureau ?   Thanks much for your advice.

Originally posted by @Sal M. :

I have a situation where a prospective tenant applied for one of my rental properties using the TAR(Texas) 'Residential Lease Application' form. I processed the application without collecting any fees upfront, I paid for tenant screening service from my pocket. I thought I will collect it later along with the deposit. But the tenant had a change of mind and went with a different property. And now refuses to pay the $100 application fee( $50 per app, 2 applications). He says that I did not ask him for the fee earlier, so he concludes he does not have to pay .  On page 3 of the application form, under FEES, the box 1 is checked which states '$50 to be applied to the security deposit upon execution of a lease or returned to Applicant if a lease is not executed'. Since the applicant withdrew after I had already spent money on his tenant screening, isn't he supposed to pay ?

Any ideas how I could make them pay this fee of $100 ? Could I threaten him with hiring a collection agency who can report to credit bureau ?   Thanks much for your advice.

 This is NOT the highest and best use of your time. Take your ego out of it.

Good luck.

That is good advice. I posted here so I can learn how to accurately interpret the meaning of that statement in the application form. Does it mean that the application fee will be collected later along with the security deposit ? Like to determine if I am right or wrong. Also learn how to prevent such issues in the future. The only reason I did not collect the application fee upfront is because this is a high end SFR , with a monthly rent in the 4k range and there are very few applications. And I am dealing with educated professionals in the 250K range for annual income.

Any fees that you fail to collect prior to rendering a service carry a risk of not getting paid. The income class of the person you are dealing with doesn’t matter. The potential applicant is correct that you should have asked for the money up front despite the fact that you have something in the application about a fee. If you failed to ask for the money up front you will eat it 10 times out of 10.

I don't spend any time on processing an application until I have cash on the barrel head in the form of a non-refundable binder.  If you continue with your process, this will not be the last time this happens to you.

If it says “returned to Applicant if a lease is not executed,” it seems like you would need to turn around and give it right back to him. I’d drop it and collect fees at the time of the app in the future.

Originally posted by @Sal M. :

I have a situation where a prospective tenant applied for one of my rental properties using the TAR(Texas) 'Residential Lease Application' form. I processed the application without collecting any fees upfront, I paid for tenant screening service from my pocket. I thought I will collect it later along with the deposit. But the tenant had a change of mind and went with a different property. And now refuses to pay the $100 application fee( $50 per app, 2 applications). He says that I did not ask him for the fee earlier, so he concludes he does not have to pay .  On page 3 of the application form, under FEES, the box 1 is checked which states '$50 to be applied to the security deposit upon execution of a lease or returned to Applicant if a lease is not executed'. Since the applicant withdrew after I had already spent money on his tenant screening, isn't he supposed to pay ?

Any ideas how I could make them pay this fee of $100 ? Could I threaten him with hiring a collection agency who can report to credit bureau ?   Thanks much for your advice.

 I can only provide advice for future applications: Cozy and smartmove both can be configured to require tenant pay fees for running their credit/background via credit card before any reports are generated for landlord. That takes out the pain of collecting fees or needing to submit any refunds since its a third party service that tenant pays direct, though report will get sent directly to you upon them paying. If they want their application processed, they need to pay the service via my generated link. Otherwise I move on to next applicant.

Consider this a learning lesson for you. If you want the potential tenant to pay the fee, do not process the application until they pay the fee. If they do not pay the fee then do not accept or process the application. I would not bother with chasing after a tenant after you accept the application and complete a background check.

Originally posted by @Lora P. :

If it says “returned to Applicant if a lease is not executed,” it seems like you would need to turn around and give it right back to him. I’d drop it and collect fees at the time of the app in the future.

 That's the verbiage from the standard application as defined by TAR(Texas association of realtors), I asked a local realtor and she explained it as ; if the landlord rejects the prospective tenant then fee is refunded, if tenant withdraws his application then fees is not refunded. I don't like that verbiage, but realtors use it since its part of the standard forms set.

Don't get ahead of yourself when you have an application come in and assume they will be a tenant. You might find the background/credit check is terrible and have to deny them. They might change their mind. All kinds of things.

The applicant always pays the application fee up front, and you can not start the background/credit check until it is paid. Until then, I consider the application incomplete.

Think of this as a $100 lesson.

There are also plenty of online background/credit check services where you can set up the request to the applicant and they pay right there online, so nothing out of your pocket. They just pay the service themselves, and the report comes to you to make your decision.

I'm with @Jeff Bridges

I used both cozy and smartmove for Tenants to pay themselves. 

Before I ask the tenants to pay, I usually go through their application quickly to scan for red flags. Then I text and tell them verbally the fees are NON REFUNDABLE. 

Once they pay, and it looks ok. Then I move to their references, employment verification, landlord references etc.

Originally posted by @Sal M. :
Originally posted by @Lora P.:

If it says “returned to Applicant if a lease is not executed,” it seems like you would need to turn around and give it right back to him. I’d drop it and collect fees at the time of the app in the future.

 That's the verbiage from the standard application as defined by TAR(Texas association of realtors), I asked a local realtor and she explained it as ; if the landlord rejects the prospective tenant then fee is refunded, if tenant withdraws his application then fees is not refunded. I don't like that verbiage, but realtors use it since its part of the standard forms set.

Hmmm. I get why you would use that, but I have to admit that it still sounds bizarre to me. At least in my eyes, whether you reject an applicant or they withdraw, a lease is not executed in either case.

@Sal M.

If the check box is not clear then why don't you just not check it and attach an addendum with the statement: "A $50 non-refundable screening fee per applicant collected prior to processing." This way you can collect the money and use it to screen the applicants. I use an addendum in my rental application too and I put anything that cannot be clearly stated on there all the time. 

KH

I’m not understanding why you would refund an application fee if you reject the applicant. The purpose of the fee is not only to make sure the applicant is serious but also to pay for processing costs. It takes money to screen tenants and time to fully process an application correctly.

We only refund application fees if we have not processed the application at all. Basically when we have more than one applicant and we approve an application before them (we are first come first serve). That’s really it.

I’d take the hit and learn from it. Threatening him will probably get you into more trouble then help.

Consider this a $100 lesson and move on.

Don't ever start an application until you have the money, a complete application (no blanks), and all supporting documentation (proof of income, picture ID, etc.)

If you have more than one person applying together (husband/wife, friends, etc.) then you don't start ANY of the applications until ALL applicants have provided you with everything.

You should also have a statement that application fees are non-refundable under any circumstance.

@chris 

@Chris T. Im just curious, Im using Cozy for the first time with some tenants. How do you scan the application before requiring the deposit .i want to avoid making tenants pay unless they are going to really be in the running for the apartment. undefined

Originally posted by @Susan Clark :

@chris 

@Chris T. Im just curious, Im using Cozy for the first time with some tenants. How do you scan the application before requiring the deposit .i want to avoid making tenants pay unless they are going to really be in the running for the apartment. undefined

 I look at court records first to see if the applicants have any eviction or criminal records. If it's clear, then I google their information.

Then I use whitepages to check for things on their applications. And finally I try to look at their social media for any red flags.

I will also probe them to explain things on their application, and see how responsive they're. 

Ask next time, think if someone did that to you. Would you pay the application fee in that situation? NOPE.

If I review an application and it looks good on paper, I ask the tenant if they want to proceed with background checks at their cost. I then give them 24 hours to complete. I do nothing else until that is completed. No reason to waste any of your time or money on anything else until they show they pass criminal/credit/eviction checks. I would eventually ask them to complete that anyway.