Application Fee Receipt
Caution: Lessors cannot use this form. Only third-party brokers can charge an application fee.
Unless the apartment you’re renting is in the top ten percent of apartments by price point, you are absolutely harming your chances of finding a good tenant by taking an application fee. In the lower tiers, only the most desperate will pay.
Let’s Look at the Economics of Fees
The viability of a fee varies by market. Many apartments in the Boston and Cambridge area could get away with charging fees for applications. Fees are helpful because they offset the cost of a CORI and/or Credit Check, they might cover some of the labor cost in processing the application, and they help the tenant assert to the landlord, “Yes, I should qualify for this place.” But in Boston and Cambridge, $50 in application costs would be a mere 2% of the monthly rent. They’re a drop in the bucket. There’s competition to get good apartments, so paying 2% more to get your application checked out seems worth it.
Brokers should fill out the form in duplicate. The tenant’s copy is for their records. Your copy would be to show them that the fee was non-refundable when they came back saying they’d changed their mind about applying.
But Application Fees are Illegal
We like Richard Vetstein’s summary of a recent class action lawsuit, filed against a large landlord, in which application fees, amentity fees, and pet fees were all ruled illegal. This is not a specific interpretation of Massachusetts law. You can read the law yourself (this excerpt was current as of September 24, 2014):
(b) At or prior to the commencement of any tenancy, no lessor may require a tenant or prospective tenant to pay any amount in excess of the following:
(i) rent for the first full month of occupancy; and,
(ii) rent for the last full month of occupancy calculated at the same rate as the first month; and,
(iii) a security deposit equal to the first month’s rent provided that such security deposit is deposited as required by subsection (3) and that the tenant is given the statement of condition as required by subsection (2); and,
(iv) the purchase and installation cost for a key and lock.
Period. Lessors cannot charge a pet fee, an application fee, or a “take it off the market” deposit. It’s first, last, security, and locks.
Brokers, on the other hand, can follow a specific provision set aside for them to charge application fees (254 CMR 7.00).
The question always arises, “What if I’m a lessor and a broker?” The answer is you are a lessor, so you cannot take anything more than the four items listed above. Only a third party broker can charge an application fee.