California state law limits credit check or application screening fees landlords can charge prospective tenants and specifies what landlords must do when accepting these types of fees. (Cal. Civ. Code § 1950.6.) Here are key provisions of the California law:
- Landlords may charge a maximum screening fee of around $35 per applicant. This figure may be updated annually by changes in the Consumer Price Index for the nearest metropolitan area.
- This screening fee may be used for “actual out-of-pocket costs” of obtaining a credit report, plus “the reasonable value of time spent” by a landlord in obtaining a consumer credit report or checking personal references and background information on a rental applicant.
- A landlord who uses the screening fee to obtain the applicant’s credit report must give the applicant a copy of the report upon his or her request.
- If you spend less (for the credit report and your time) than the screening fee you collected, you must refund the difference. A landlord who never gets a credit report or checks references on an applicant must refund the entire screening fee.
- Unless the applicant agrees in writing, a landlord may not charge a screening fee if no rental unit is available. However, if a unit will be available within a reasonable period of time, a landlord may charge the fee without obtaining the applicant’s written permission.
- Landlords must provide an itemized receipt when collecting an application screening fee. For a sample receipt and more details on screening tenants in California, see The California Landlord’s Law Book, Rights and Responsibilities, by David Brown, Ralph Warner and Janet Portman.
Landlords in California should also be aware that consumers may place a “freeze” on their credit reports, preventing anyone but specified parties (such as law enforcement) from getting their credit report. (Cal. Civ. Code §§ 1785.11.2 and following.) However, consumers can arrange for certain persons—such as a landlord or management company—to access their report; or the freeze itself can be suspended for a specified period of time. If an applicant has placed a freeze on his or her credit report, you’ll need access so that you can receive a copy of their report. An applicant who fails to lift a freeze will have an incomplete application, which is grounds for rejecting that application. (Cal. Civ. Code § 1785.11.2(h).)