What is a risk mitigation fee?

A risk mitigation fee is a fee paid by a rental applicant to the landlord as a requirement for conditional approval for tenancy. The risk management fee is nonrefundable and is in addition to the landlord’s required security deposit fee.

A landlord may be willing to rent with conditions to an applicant who does not fully qualify to rental standards. There could be many reasons that a landlord might require the applicant to pay an additional fee in order to be approved for a rental unit. Some of these reasons could include: the applicant is a first time renter; has a low credit score; has a negative rent payment history; owes back rent to a previous landlord; has a record of missed, late, or past due utility payments; has filed bankruptcy; has provided information on the application that cannot be fully verified; or has some other negative public report that has potential to cause financial harm to the landlord if the applicant/tenant would default on his lease. With the provision of a risk mitigation fee as guarantee, the landlord is willing to take the risk of a future default.

A risk management fee may apply to an individual applicant or could be assessed as household fee for all occupants. The fee amount can vary per landlord to landlord according to stated rental policies, terms and conditions. The fee is usually based upon the nature of a negative event and the potential financial risk to the landlord, and typically could range from less than one hundred dollars to several hundred dollars. The use of this fee should be carefully researched regarding applicable state laws and local ordinances to determine if it is allowed by law and the applicable requirements for its administration and disclosure.

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