Jan 16

A reader asks

[C]an I charge a flat application fee ( $20-25) to prospective tenants that includes the cost of the checking them out, labor etc. in our office, this may not include a credit check. Do I have to give it back if I don’t accept them?

No, you can only charge the actual amount you paid for a national credit bureau report.  Any amount collected above the cost of the credit report must be refunded if the tenant is rejected or applied to the amounts they owe if they are accepted.

For us the cost of the report in minimal (less than ten bucks) and the requirement of the law to provide a copy of the report to the applicant violates our terms of use with the bureau we use, so we do not charge a fee.

We do require a $50 deposit to hold the unit while it is being processed.  If the tenant is accepted the money is applied to their move in money.  If the tenant is rejected, the $50 money order is returned to them.  If they are accepted, but then fail to take the unit and we lose rent because of this, the earnest money is used to offset part of the lost rent they owe under ATCP 134.05 (3).

The law:

ATCP 134.05 (4) Credit check fee.
(a) Except as provided under par. (b), a landlord may require a prospective tenant to pay the landlord’s actual cost, up to $20, to obtain a consumer credit report on the prospective tenant from a consumer reporting agency that compiles and maintains files on consumers on a nationwide basis. The landlord shall notify the prospective tenant of the charge before requesting the consumer credit report, and shall provide the prospective tenant with a copy of the report.
(b) A landlord may not require a prospective tenant to pay for a consumer credit report under par. (a) if, before the landlord requests a consumer credit report, the prospective tenant provides the landlord with a consumer credit report, from a consumer credit reporting agency that compiles and maintains files on consumers on a nationwide basis that is less than 30 days old.

Note: Paragraph (b) does not prohibit a landlord from obtaining a more current consumer credit check at the landlord’s expense.

ATCP 134.05 (3) Withholding an earnest money deposit.

(a) A landlord may withhold from a properly accepted earnest money deposit if the prospective tenant fails to enter into a rental agreement after being approved for tenancy, unless the landlord has significantly altered the rental terms previously disclosed to the tenant.

(b) A landlord may withhold from an earnest money deposit, under par. (a), an amount sufficient to compensate the landlord for actual costs and damages incurred because of the prospective tenant’s failure to enter into a rental agreement. The landlord may not withhold for lost rents unless the landlord has made a reasonable effort to mitigate those losses, as provided under s. 704.29, Stats.

Note: See Pierce v. Norwick, 202 Wis. 2d 588 (1996), regarding the award of damage claims for failure to comply with provisions of this chapter related to security deposits. The same method of computing a tenant’s damages may apply to violations related to earnest money deposits.

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