To Refund or Not to Refund-application fee

18 Replies

Hi everyone! We bought the BP’s tenant application for Ohio and we’ve run across a couple of questions regarding whether or not we should refund the $40 application fee. First question, why do the documents say the application fee will be refunded anyway? We’ve never heard of this. The stipulations (again provided by the BP’s Ohio forms), say it’ll be refunded unless they are accepted as tenants or if they lied/misrepresented facts on the application. We provided our qualification standards very clearly in the ad, but the form didn’t ask for a credit score or any of our other standards on the application (though now we’re changing it), and only gave space to checkmark evictions or bankruptcy and to explain any criminal history. They said no to those questions and left the criminal/background “explanation” section blank. We have a two applicants (husband and wife) and he has a criminal record, but he meets the income and credit minimums. She has a clean record but doesn’t meet the credit standards. Again these are our landlord standards and they are not listed on the application we got from BP. They left the criminal/background section blank. So do we consider this a misrepresentation of facts? Do we have grounds to not refund their application fee since it wasn’t disclosed? And why would we have to refund their application fee anyway? We can’t find any legal reason why it would need to be returned in Ohio’s landlord/tenant laws. What are your thoughts? Thanks! Alyssa

I give back app fees if the app has not been run. If it has been run I do not refund. You might want to draft a letter specifying that the app fee is not refundable if run. My list has requirements for credit, evictions, criminal records, etc. BTW-I charge $75 fee.  Your post is why I do not like boiler plate forms. It may not leave options. I have them sign my requirements list along with the app. 

I make it very clear upfront that a incomplete application will not be processed and will likely be rejected. If a section was left blank that then became a relevant point I would reject the application and not refund the fee. They wasted your time.

The point of spending the application fee by processing the application is that you are proceeding based on the belief they will pass based on the einformation the applicant has provided. To get to that point and have the applicants fail to pass means they have mislead you. They do not deserve to get the fee back.

@Thomas S. Our question stems from the documents provided by BiggerPockets. We assumed they would not be receiving it back, but we were thrown off by BP providing that statement in their applications.
Any Ohio investors (we’re from Dayton) ever heard of this?
Do you think leaving the criminal “explanation” section blank is misrepresenting facts and thus doesn’t require a refund? We’re going to fix this for future applications just need to sort this out for now.

We don't refund them if run either.  We also don't use bigger pockets forms though.  We have in the past refunded them if we rent to them, but have since stopped doing that as well.  

I would use the fact that they did not fill out the section completely as a reason to reject the application.  Again if any money was spent in running the app, then no refund given for us.

@Alyssa ODell Im from Dayton as well. My application fees are non-refundable unless it is not processed. You can always modify the documents to fit your business model.
Originally posted by @Alyssa ODell :
Do you think leaving the criminal “explanation” section blank is misrepresenting facts and thus doesn’t require a refund?

We’re going to fix this for future applications just need to sort this out for now.

I wouldn't consider leaving it blank "misrepresenting facts".  Sounds like he just didn't answer the question (as opposed to answering it untruthfully), and as @Thomas S. pointed out the application should not have been processed unless it was completed.  My application states in bold/highlighted text right at the top "ALL SECTIONS MUST BE COMPLETED AND BE LEGIBLE".  They later have to sign/acknowledge that the application fee is non-refundable AND that any false, misleading, or omitted information on the application will immediately disqualify them. 

I don't process incomplete application.  I don't even accept them.  When they're handed to me, I look them over and scan them to at least make sure they're filled out.  If they're not, I hand them right back.

To answer your question about whether or not you need to refund the application fee in this case, I'm not familiar with Ohio law but my guess is you probably would not have had to refund the application fee except that in this case your own application says you will "unless they're accepted as tenants or if they lied/misrepresented facts on the application".  So far, you haven't made a case that they lied/misrepresented facts, so in my mind unless you accept them as tenants you should refund the application fee because that's what your own application says you will do. 

@Kyle J. Thanks for the input. Our application does say that everything must be filled out. The section explaining criminal history wouldn’t be completed if someone didn’t have any though. So we just assumed they didn’t have a record because they didn’t explain anything. The alternative (and the learning point for us) is that either it’s filled with information or it has N/A written in it. We’ll ensure we enforce it this way in the future. We’re going to edit the documents as well now.

@Alyssa ODell ,

I have not seen the BP form, but like others, if I run the credit report, I do not refund an application fee. I clearly spell out on the application form that the application fee is not refundable. You should spell out that any misrepresentation will result in not being considered.  I do believe a blank section is misrepresenting when there is a criminal history. I would look for someone else.

BTW, here is the link to the Ohio Revised Code governing Landlord and Tenant responsibilities http://codes.ohio.gov/orc/5321

Mark

Why are you rejecting the applicants?  Do you require all married couples to have each spouse independently qualify?  Would you reject a family where one of the parents stays home and makes no income?  Was the criminal history drug manufacture or distribution related?  A violent crime? How long ago?  

What is the likelihood that your applicants are going to complain to legal aid that you didn't refund their application fee when your application said you would?  Would legal aid refer the matter to fair housing?  Is it worth $40 to find out?

We are in CT and run all applications through our website and charge a $32 fee per applicant. In the instructions on the page preceding the application we explicitly tell them that their application will not be processed until we receive all of the requested documents along with a completed application. 

Processing an application for us consists on running a complete national credit, criminal, eviction check. Once that happens there is no refunding of any money. 

The only time we refund application money is when people apply for an apartment that has already been filled and they do not wish to be considered for any of our other vacancies. 

In general before people apply they always know the landlords minimum requirements before they choose to apply. If they choose to apply when they know most likely they will be rejected because they do not meet the minimums then that's on them. Believe it or not this happens a decent amount. 

Originally posted by @Michael Gefvert :

Why are you rejecting the applicants?  Do you require all married couples to have each spouse independently qualify?  Would you reject a family where one of the parents stays home and makes no income?  Was the criminal history drug manufacture or distribution related?  A violent crime? How long ago?  

What is the likelihood that your applicants are going to complain to legal aid that you didn't refund their application fee when your application said you would?  Would legal aid refer the matter to fair housing?  Is it worth $40 to find out?

Hi Michael, thanks for your response. 

To answer your question, we are denying them because she does not meet our credit standards and there were surprises on his criminal check...he was found guilty of aggravated menacing/concealment of a weapon and DUI from a single event a couple years ago. He also has two counts of GTA and a B&E, but those were from many years ago. We’re new landlords so just trying to make sure we’re doing things correctly. 

They also have a chapter 13 bankruptcy listed that dismissed and closed in 2012 (didn’t fulfill the bankruptcy conditions to have the debt discharged? I don’t know).  On the application they said they have had no bankruptcies in the last 7 years. They filed in 2010 and it closed in 2012, not sure if that fits the bill or not.  Either way, her credit had all sorts of reports of delinquencies  

Again we’re not experienced in the business yet, but the combination of all of these things doesn’t make us want them to be our tenants. And with our standards we applied in the beginning we feel this is justified. Your thoughts? 

@Alyssa ODell I do not collect an application fee. they pay directly to the website doing the background check so they realize there are no refunds. but, I process apps in the order i receive them and do not have them do background check until previous apps are processed.

I am the odd (wo)man out here. I do not charge applications fees. I believe them to be cost of business.   having said that, I am in Oregon so I cant pick and choose tenants  I must accept the first qualified individual/group that applies  

Same as @Mary Mitchell .  I screen out most applicants before I even provide an application.  Once I accept an application, it generally leads to a lease agreement.  I do understand why this does not work for the big dogs with 00s or 000s of properties.  However, for a small business owner like me, I don't need to hassle of arguing about application fees. 

So say you have 5 people apply and give you applications and checks for app fees. You pick the best one that meets your standards, run their background/credit check and find out they lied. No app fee returned - cash that check for your wasted time and the cost to run the background/credit checks. Based on their application they DID qualify to live there, but when you verified it and they had lied/misrepresented they DIDN'T. The form states that in this case they get no refund. They are out the money for lying. Had they been truthful they would never had the background/credit checks done and would have gotten their check back in the mail.

Had they been telling the truth, their background/credit check would have backed that up and they'd now be getting the rental. Then you would mail back the uncashed checks to everyone else that you collected them from, because their apps were never processed and their background/credit checks were never done.

Here's what I do. I'm very clear with people that they need decent credit and a CLEAN background check. I have it on my website and I tell it to them before they even apply. I don't collect an app fee, I just review applications and if they qualify based on that info I'll send them the link through SmartMove and let them pay the $40 fee there. I get the info I need emailed to me and we are done. They can't ask me for the money back because they didn't pay me. Had they been honest, they wouldn't be out the $40.

I would decline them based on his criminal history. If they question it just tell them that that is why you ask for this information on the application and if he had been forthcoming with that information at that time that they would have been disqualified immediately based on that information and gotten their app fee check returned.

Thanks everyone for the responses. We've changed our process to make sure there's no ambiguity in the future. We've also added a front page to the application that the tenants need to verify/initial again before we'll even run the background and credit checks, so we're not wasting our time and their money.

Though even with the four checks we have run in total so far, I'm already surprised at what tenants are willing to try to hide/lie about on the application. Another prospective tenant had 3 evictions in the last 4 years. Still marked the "no evictions" box on the application form. *shrug*

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