How An Administrative Charge Works

An administrative charge is a fee that you must pay for a lease, loan, or insurance account to cover the costs of administrative activities. It is also referred to as an administration fee. For certain types of insurance policies, the insurer uses the charge to maintain the insurance account.

When renting a property, you will have to pay an administrative fee when the landlord is reviewing and processing your application. It is not easy to avoid paying administration fees, especially since most landlords are reluctant to waive fees due to the Fair Housing Act. However, there are exceptions to this rule depending on the landlord and your agreement. It is also unlikely to receive a refund on administration fees, but sometimes a landlord may provide full or partial refunds if your application doesn't go through.

Within law, an administrative charge is a fee collected from an offender for the costs of execution or completion of any work associated with the offense. Enforcement officers may also issue administration citation fees to property owners that violate a municipal or state code.

Administrative Charges Example

For insurance policies, the insurer will use the charge to cover costs associated with administrative activities to maintain a policy, such as record keeping and data filing. Insurers can also use it for costs associated with opening, changing, or closing an insurance policy.

An administrative charge can be part of the annual fee for a loan or borrower bond. For example, a lender may charged you 4% of the initial principal amount of a loan.

An administration charge is required when renting an apartment, house, or other property, so the landlord can determine if you are a good applicant. While it will vary from state or country, it typically ranges between $50 and $200. Some cities have regulated rates. The administrative charge when renting a property will cover costs such as:

  • Cost of the agent's or landlord's time
  • Running background checks
  • Pulling credit checks
  • Gathering references

Significance Of Administrative Charges

Insurance companies need administrative charges to pay their employees responsible for administrative tasks. The charge prevents them from using premium profits to cover the costs required to maintain the policies. Usually, insurers will bill these charges on a quarterly or annual basis.

When you apply to rent a property, landlords will hold the property off the market. They must charge an administrative fee because they have to cover their cost of time and costs for running background and credit checks. These steps are important for landlords because they want to know who is renting their property before deciding to approve the application. Some apartment complexes will also use this fee and credit it towards your first month's rent.

United State's cities issue administrative citation fees to property owners to enforce municipal and state codes. Doing so is a public service and crucial to protecting the public's safety, health, and quality of life.

Types Of Administrative Charges

The main three types of administrative charges are for leases, loans, and insurance policies. However, you will also hear this term used to describe fees collected by an enforcement officer from offenders. These charges generally cover the administrative costs of maintaining loans and insurance policies or reviewing applications for leases.