What Fees Does Tenant Have to Pay When Signing a Lease? 8 Common Fees to Know

Because of the difference in state laws and rental markets across the country, certain fees might not be applicable to your situation, or their amount might vary significantly. However, we’ve aimed to create this guide as a starting point for any tenant in the United States. This article will provide you with a comprehensive list of fees to pay when signing the lease. Also, this will make it much easier to calculate how much money you’ll need if you decide to move to a new rental.

Application Fee

An application fee is one of the first and most common charges you might come across as a tenant looking for a new home. Every landlord is allowed to charge a small application fee to cover the cost of screening the potential tenant. Thanks to tenant screening, property managers can verify information on your application form and choose a trustworthy and high-quality tenant.

The application fee is most commonly used for checking:

• Credit history, credit score, and factors that influence it
• Previous addresses, rental history, and references from previous landlords
• Employment history
• Evictions, civil records, and criminal history

An application fee is usually non-refundable, even if the landlord decides to move forward with another applicant. The only reasoning for the return of an application deposit could be if you believe you were discriminated against and rejected by the property manager based on gender, race, age, etc. 

It is usually paid together with submitting the application form, and the average cost of an application fee is around $30 or $40. Of course, it would depend on the landlord themselves, the rental market, and, most importantly, rental laws in your state. 

In fact, many specifics about the size of the application fee and if it’s legal to charge it at all whatsoever are dictated by the landlord-tenant laws in each state and can largely differ. 

Here are just a few examples of various approaches toward application fees in different states:

• New York. The application fee here is capped at $20. 
• Vermont. Charging an application fee for residential properties is prohibited.
• Delaware. An application fee cannot exceed 10% of the monthly rent or $50.

Holding Deposit

A holding deposit is not a very common concept, but renters might come across it once in a while. Also called a good faith deposit, it could be used to reserve a property if you’re sure you want to rent it out before you sign a lease agreement. A property manager can ask you for a holding deposit as a guarantee you won’t back out of the deal, and they can stop searching for other potential tenants.

Typically, the holding deposit is a few hundred dollars, and later it can be put towards your first month’s rent or a security deposit. However, if you change your mind at the last minute and opt out of renting the place, the property manager can keep the holding deposit or some part of it. They can use it to cover their losses if they need to advertise the apartment again, and in case the property stays empty for some time. 

Note: Double check the credibility of your landlord or property manager if you pay them money before signing a lease. Also, don’t forget to ask for confirmation of the payment and steer clear of paying in cash!

Broker Fee

In certain cities, especially those where the rental market is usually hot, it is common for renters to pay a broker fee. New York City is one of the places where broker fees paid by tenants are an extremely popular practice. Here, it is usually between 10 to 15 percent of your annual rental amount. If you decide to rent an apartment for $3,000, you should be prepared to pay an additional $5,000 or so in broker fees.

While it is possible to find a property where it’s paid for by the property manager or even rent out a place directly from a landlord, it is not common. So, you should definitely keep this cost in mind if you decide to rent in NYC. 

Luckily for renters, it is common for the landlord to pay broker fees in many other cities and states across the US. And, if you’re moving to a new city, make sure to do your research and double-check if a broker fee is something you should account for.

Security Deposit

Another fee you’ll most definitely have to pay when signing a rental agreement is a security deposit. It acts as insurance for the landlords in case something gets demolished by the tenant or they move out, still owing a part of the rent. 

Usually, if you move out and leave your apartment in good condition, the landlord should return the security deposit in full. Otherwise, they have to present you with an itemized list of charges to prove why they decided to keep some part of the deposit (or all of it). 

Wonder how much a landlord can charge you for a security deposit? Usually, it’s one to two months’ rent, although it depends on your local and state laws. Some states have no limit on how much the property manager can ask for a security deposit. Others, especially those where rent control is in place, specify that it cannot exceed a certain amount. For example:

• California. The security deposit cannot exceed two months’ rent for unfurnished and three months’ rent for furnished properties.
• Florida. No limit to the amount that can be charged.
• Massachusetts. The maximum amount cannot exceed one month’s rent.

Want to learn more about the security deposit, what happens to it during your tenancy, and how to make sure you’ll get it back in full? Check our article dedicated to everything you need to know about the security deposit.

Pet Fee/Pet Deposit

Getting a furry friend undoubtedly brings us joy but also results in higher costs. Renting a place with a dog or cat is not an exception. When you find the right apartment, the property manager could add a pet fee or pet deposit (or, in rare cases, both) to your other expenses. A pet deposit works similarly to your regular security deposit and is refundable. It’s an extra precaution for a landlord to ensure they can cover the cost of damages caused by the pet. The pet fee, on the other hand, is non-refundable, charged to allow you to keep the animal in the apartment. 

Want to know what’s the cost of the pet fee and pet deposit? Both of them are in the range of $100 to $500. 

The landlord could also ask you to pay pet rent — a small monthly fee for having an animal in their apartment. 

Note: Not many states have regulations regarding pet fees and deposits. But, in some cases, the pet deposit amount can become part of the security deposit laws. For example, in New York, property managers cannot charge more than one month’s rent for all advanced payments combined. If you paid a security deposit equal to one month’s rent, asking you for an extra pet deposit is illegal.

Learn more about a pet fee, pet deposit, and pet rent in our dedicated article.

Renters Insurance

Buying renters insurance is yet another expense you might have to account for when renting a new apartment. Although it is not mandatory by law in any state, your property manager might insist on you purchasing renters insurance. There are a few reasons for landlords to require it from their tenants, but it will benefit the renter mostly. In fact, we believe that every tenant should purchase insurance, no matter if their property manager requires it or not. 

The average monthly rental insurance cost will be about $15 to $20. So, it should not hit your wallet too hard, but it’s definitely worth it, even if it’s your first rental apartment and you don’t owe much yet. You can also consider buying renters insurance on Rentberry — our plans start as low as $8!

Move-In Fee

A move-in fee is another non-refundable fee you might pay before moving into your new apartment. Usually, it is collected by the landlord or HOA to cover the costs they face when the new tenant moves in. Such costs could be changing the locks, updating the mailbox, refreshing the paint in the unit, etc. Chicago is one of the places where it’s common to charge a move-in fee in addition to or instead of the security deposit. Its size could be around 30% to 50% of the one month’s rent.

Utilities

As a general rule, you don’t have to expect to pay any utilities in advance. However, we wanted to bring up this point to remind you that utility bills such as water, gas, heating, and electricity might add a noticeable chunk to your regular rental payments. So, when you’re assessing if you can afford the rental and calculate all the costs, don’t forget to add utilities into the equation. Usually, the utilities you’ll be paying for will be stated in the rental agreement. Plus, you can ask the landlord how much per month it adds up to. 

Finally, keep in mind the cost of Wi-Fi. In some larger apartment complexes, you could find a rental with preinstalled Wi-Fi included with your rent. However, it’s not a very common practice, and, usually, you’d have to take care of installing it yourself as well as pay for the monthly costs.

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As you can see, there are plenty of costs to keep in mind when you decide to rent a new apartment. Fortunately, renters don’t have to pay for each thing we listed at once. Your exact situation would depend on your location, your landlord, and your HOA if any.

Our last piece of advice? Make sure you read and understand some of the most important tenant-landlord laws in your state. This will include the maximum amount of your rent and security deposit, whether the application fee and holding deposit are legal, and so on. This way, you’ll know for sure how much your landlord can charge you, understand how much money you’ll need on average, and avoid any unpleasant situations.

Good luck in your apartment search! Let us know if you have any thoughts or questions in the comments section!

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