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The Honolulu Advertiser
Posted on: Saturday, January 21, 2006

No-refund fees add to renters' distress

By Dan Nakaso
Advertiser Staff Writer

APPLICATION FEE IRKS RENTERS

Cost: $10 to $69 (non-refundable)

For: Credit checks, employment backgrounds, landlord references, criminal background checks.

Source: O'ahu property managers; O'ahu chapter of the National Association of Residential Property Managers.

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Would-be renters already frustrated with rising rents and increased competition are now finding a new source of aggravation: Non-refundable fees just to fill out a rental application.

Property managers and landlords are increasingly charging fees that range from $10 to $69 to run credit checks, employment histories, get references from previous landlords and sometimes look up criminal histories.

Adding to renters' frustration is the fact that lower-priced apartments, condos and single-family homes receive the most applications, leaving lots of people with nothing to show for their money.

Since 2001 application fees have become a staple of doing business for the majority of the more than 100 members of the O'ahu chapter of the National Association of Residential Property Managers, who represent more than 6,000 rental units on O'ahu, according to Carl Frazier, the organization's president.

"It's becoming more and more of a widespread practice to charge application fees because we are being charged for credit reports," Frazier said. "It's not a money-making avenue at all. ... With two-bedroom (units) running $1,500 to $2,000, that's a pretty big asset and we have to protect our clients."

For renters like Graham Black, 26, plunking down $20 to $25 to fill out rental applications all around town can add up.

And it's even more aggravating when Black doesn't even receive a call back on his applications — let alone get the apartment he wants.

"I think they're exploiting the market," said Black, who has been struggling to find a place to rent since he arrived on O'ahu this month from his home in Arbroath, Scotland, to work as an architectural technologist. "You're competing against sometimes 25 people who are all paying $20 to $25. Do the math. That's a lot of money."

Debbie Palmer has looked at places that charge from $45 to $65 to process an application, and is getting frustrated that she hasn't found a home for herself, her husband and her sister.

"Every place you go they want a fee," Palmer said. "We fill out the applications but we never hear back. If you get 10 people all going to the same place, those people are making bucks. ... They want your bank account number, they want your savings account number, they want to know your store accounts, the make and model of your car and whether you still owe on the cars. This is more like an application to buy a house, not rent one."

Several property managers insisted that — despite some renters' doubts — they process each application.

"Sometimes we get 40 or 50 applications on a single property," said Cindy Rasmussen, property manager for Oishi's Property Management. The company's $20 application fee "just covers the cost," she said. "Sometimes there's an awful lot of man hours involved. We have to look at every application that comes in."

Bill Ramsey, whose property management company — Bill Ramsey, Inc. — charges a $10 application fee to run a credit report, said, "We do it for every single applicant."

"You want to treat every single application the same way," Ramsey said. "It's not a profit center. Whenever you have multiple applications, the one thing you want is that all of your decisions are objectively made, not subjectively made. A credit report is an objective decision."

With various industries increasingly relying on credit checks, Ramsey has blunt advice for renters who continually lose out on rental homes to people with better credit:

"Their credit history is their responsibility," Ramsey said. "If they have done things to make their credit unacceptable, clean it up."

Officials with the Hawai'i Office of Consumer Protection, State Regulated Industries Complaints Office, Hawaii Civil Rights Commission and U.S. Department of Housing and Urban Development all said they were unaware of any complaints about application fees in Hawai'i.

"The practice of charging fees for applications is not a violation of the Fair Housing Act unless it's shown to be done unfairly or unequally," said Jelani Madaraka, lead civil rights analyst with the U.S. Department of Housing and Urban Development in Honolulu.

Steve Levins, executive director of the Hawai'i Office of Consumer Protection, said his office would be concerned if landlords or property managers continued to charge application fees for units that are rented.

"That clearly would be improper," Levins said.

And if there was evidence that landlords and property managers were not running checks on everyone who paid fees, "that would be a concern, too," Levins said.

Al Lynde, information officer with the Hawaii Civil Rights Commission, said, "We've heard that it is not uncommon on the Mainland (to charge application fees) and apparently it's becoming more common here. If these fees were charged with the intent to discriminate ... it would be a violation. But we're not aware of any complaints filed with us based on this practice."

Even though the prices range widely on O'ahu, several property managers said the fees only cover their actual costs to run credit histories and pay employees to make reference and other background checks.

Kalaeloa Rental Homes charges some of the highest rates on O'ahu: $47 for a single renter and $69 for multiple renters to cover credit checks, verification of previous rental histories and criminal background checks for people wanting to rent 584 former military homes at Kalaeloa.

"We just charge what we get charged," said Lisa Nakoa, Kalaeloa Rental Homes property manager. "It's just to recoup our costs."

But for Mary Lenz, 24, the fees can be costly and intimidating as she continues her search for an apartment for herself and Pancho, her 4-year-old Terrier-mix.

"When there's a line of people, I debate whether it's even worth it to apply," Lenz said. "Landlords can pick and choose who they want. So a lot of times I just leave."

Reach Dan Nakaso at dnakaso@honoluluadvertiser.com.