What role does an application fee typically play?

An application fee is primarily intended to cover the costs associated with processing a tenant's application for rental. When potential tenants apply for a rental property, landlords or property management companies often incur various costs, such as conducting background checks, credit checks, and verifying rental history. The application fee helps to offset these costs, ensuring that the landlord or property manager can effectively evaluate the suitability of applicants.

This fee is typically non-refundable because it compensates for the resources and labor expended to process the applicant's information, regardless of whether they end up leasing the property. In contrast, other options do not accurately depict the primary function of the application fee. For instance, it does not serve as a security deposit, does not provide income subsidy for landlords, and it does not ensure a rental agreement since the payment of this fee does not guarantee approval or acceptance of the application.