Can A Landlord Charge an Application Fee To A Prospective Tenant In Wisconsin?

Earlier today a client emailed me and asked whether or not his property management company could charge a rental applicant an application fee, over and above the cost of a consumer credit report, to cover the company's time and energy reviewing and vetting the rental applicant.

Based on my review of Wisconsin law, a landlord may charge an application fee but it must be refundable.  So while a landlord can charge an application fee, its probably not the kind of application fee that the landlord envisioned, because that application fee must either be returned to the tenant or applied to the tenant's rent or security deposit.  

Let me explain.

Wisconsin law only identifies two costs that a landlord can charge a rental applicant.

1. A landlord can charge a rental applicant for the actual cost, up to a maximum of $25, for a consumer credit report in most situations. Wis. Stat. Sec. 704.085(1) and Wis. Admin Code ATCP 134.05(4).
2. A landlord can charge a rental applicant for the actual costs, up to a maximum of $25, for a background report if the applicant lives outside of Wisconsin, in most situations.  Wis. Stat. sec. 704.085(2).

Neither the Wisconsin Statutes (ch. 704) nor the Wisconsin Administrative Code (ATCP 134) specifically address application fees.  However looking at the definition of an "earnest money deposit" sheds some light.

ATCP 134.02 Definitions.

(3) “Earnest money deposit" means the total of any payments or deposits, however denominated or described, given by a prospective tenant to a landlord in return for the option of entering into a rental agreement in the future, or for having a rental agreement considered by a landlord. “Earnest money deposit" does not include a fee which a landlord charges for a credit check in compliance with s. ATCP 134.05(3). 

An application fee falls under the definition of an earnest money deposit, as an application fee is a "payment" that is "given by a prospective tenant to a landlord in return for the option of entering into a rental agreement in the future, or for having a rental agreement considered by a landlord."

So, if an application fee meets the definition of an earnest money deposit, then you must look to the Administrative Code provision that addresses earnest money. 

ATCP 134.05 Earnest money deposits and credit check fees.

(2)  Refunding or crediting an earnest money deposit.

(b) A landlord who receives an earnest money deposit from a rental applicant shall do one of the following if the landlord enters into a rental agreement with that applicant:

1. Apply the earnest money deposit as rent or as a security deposit.

2. Return the earnest money deposit to the tenant.

To summarize, an application fee meets the definition of an “earnest money deposit” and earnest money deposits must be returned to the tenant or applied to the tenant's rent or security deposit. 

So, while a landlord can charge an application fee to a prospective tenant, that fee cannot be kept by a landlord to cover the costs of his/her time and energy to review and vet the applicant's application. If a landlord is not interested in following these two options then it is best not to charge an application fee. 

Another way to look at it, is "no" a landlord cannot charge an application fee to a prospective tenant under the general understanding of what an application fee is (i.e., a fee that the landlord can keep to cover its costs to review and vet the applicant).

If you are charging an application fee and not refunding it or crediting it as set forth in ATCP 134.05(2) then you are violating that provision of the Administrative Code and the applicant could sue you seeking double their damages and their actual attorney's fees or you could be investigated by the Department of Trade & Consumer Protection (DATCP) and DATCP can issue a temporary or permanent injunction ordering you to stop your practice, order you to restore the applicant for any monetary loss suffered, or fined $25 - $5,000 per offense, or serve one year in jail, or both.   Wis. Stats sec. 100.20(6), 100.26(3) and (6).