Tenant Screening: Getting Reimbursed for Tenant Application Screening Fees

Aug 31, 2023
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By: Ariel S. Holzer, Esq. with contributions from Brice Wilkerson and Elysse Anderson

In 2021, New York enacted a bill – the Housing Stability and Tenant Protection Act of 2019 (the “Act”) – limiting the amount landlords and their agents[1] may charge a potential residential[2] tenant (“Applicant”) for application fees, including background checks and credit checks (“Screening”), to $20 (“Fee Cap”).[3] However, some applications of the Act aren’t totally clear, and this lack of clarity presents a challenge for compliance.

What Does the Act Actually Say?

Under the Act, landlords may no longer charge any kind of fee for applications. However, certain reimbursements for the costs of Screening Applicants are permitted. Landlords may seek reimbursement of actual Screening expenses up to the Fee Cap – $20. If Screening costs $15, reimbursement is limited to $15. If Screening costs $30, reimbursement is limited to $20. And so on. Furthermore, for landlords to seek reimbursement of any amount, they must provide copies of the Screening results and receipts, to each Applicant.

Who is Subject to the Act and the Fee Cap?

The Act requires that “no landlord … may demand any payment … for the … acceptance of an application, or … any other payment … before or at the beginning of the tenancy, except [Screening].”[4] This means that the Act explicitly applies to landlords when they are Screening Applicants and their guarantors[5] for properties that aren’t otherwise regulated or exempted under the Act.

Landlords may only seek reimbursement up to the Fee Cap for each individual Applicant. DOS Guidance provides in relevant part “the Department interprets ‘potential tenant’ to mean the individual as opposed to the application itself.”[6] This “individual” interpretation also suggests the Fee Cap applies separately for each “individual” guarantor.

What if a Broker or Property Manager Does the Screening?

Third-party agents and brokers are subject to the Fee Cap just as landlords are. They are, however, permitted to charge tenants a broker fee[7] – a fee paid to the agent or broker in return for them connecting the tenant with an apartment.[8]

What Happens if the Applicant Has Recently Received a Background or Credit Check?

The Act stipulates landlords may not demand Screening reimbursement if an Applicant provides their own Screening (a “Self-Screen”) from within 30 days prior to application (“Fee Waiver”). If a landlord receives a valid Self-Screen, they may either: (a) accept the Self-Screen; or (b) order their own Screening. Either way, if the Self-Screen is from within 30 days prior to application, the landlord may not seek any reimbursement, regardless of the expense incurred.

Can a Landlord Require an Applicant to Obtain Screening from a Specific Company?

Landlords may require Applicants to obtain Screening from a specific company (“Company”).[9] But note, landlords are still limited to the Fee Cap. This means if a landlord specifies a Company in the application, the net cost to the Applicant of Screening may not exceed the Fee Cap. If the cost of using the Company exceeds the Fee Cap, then the landlord shall reimburse the Applicant for the difference. Finally, the Fee Waiver also applies: If a landlord requires a Company and an Applicant provides their own Screening, then the landlord must reimburse the Applicant for the Applicant’s full cost of using the Company.[10]

If you need assistance in navigating these circumstances and other landlord-tenant and commercial real estate matters, reach out to FRB’s Real Estate Practice Group or submit the form below for a free consultation.

[1] Hereinafter, all references to “landlord” or “landlords” shall also include references to agents thereof.

[2] Hereinafter, all references to “tenant”, “tenants”, “Applicant”, or “Applicants” shall only refer to those of residential properties unless otherwise specified.

[3] N.Y. Real Prop. Law § 238-a (2021).

[4] Id.

[5] Even if the guarantor is not a “prospective tenant” or “tenant” under the language of the act, reimbursement sought for a guarantor’s screening is either required for “acceptance of [the Applicant’s] application,” or it is at least a “payment … before [the Applicant’s] tenancy.” The applicability of the Fee Waiver and Specific Service requirements are less clear, but it would be prudent for a landlord to assume they apply.

[6] N.Y. Dep’t. of St. (May 25, 2021) (emphasis added), https://dos.ny.gov/system/files/documents/2021/05/dos-guidance-tenant-protection-act-rev.5.25.2021.pdf.

[7] N.Y. Dep’t. of St., supra note 6.

[8] The Act and Fee Cap do not apply to Screening service providers (“Service Providers”), who may set their own prices for Screening. When a would-be tenant otherwise purchases from a Service Provider, there is no landlord-tenant relationship, and the potential tenant isn’t applying to anything, so they are not subject to the Act. Since the Act is aimed at protecting tenants during the application process and to address the power imbalance between the landlord and tenant, Service Providers aren’t subject to the same cap landlords are.

[9] Id.

[10] DOS encourages landlords to waive such requirements instead, rather than reimbursing, except where a landlord has reason to believe Self-Screen provided by an Applicant has been doctored or is otherwise untrustworthy.

DISCLAIMER: This summary is not legal advice and does not create any attorney-client relationship. This summary does not provide a definitive legal opinion for any factual situation. Before the firm can provide legal advice or opinion to any person or entity, the specific facts at issue must be reviewed by the firm. Before an attorney-client relationship is formed, the firm must have a signed engagement letter with a client setting forth the Firm’s scope and terms of representation. The information contained herein is based upon the law at the time of publication.

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