Landlords typically receive several tenant applications for their rental properties. As you might expect, landlords cannot accept multiple applications for one unit. They have to choose a rental applicant and deny the rest. How can landlords decline a tenant according to the law? What are the best practices? Let’s answer these questions below.
Valid Reasons to Deny Rental Application
If your question concerns how to legally decline a tenant, then you must first understand that there are invalid reasons to decline a tenant. The Fair Housing Act provides legal protection for people in certain classes. This means landlords cannot decline a rental application because of the tenant’s race, color, national origin, disability, familial status, religion, sex, gender identity, or sexual orientation. Violating any fair housing laws could lead to liability.
Outside of these categories, landlords may decline a tenant application for several valid reasons. Establishing criteria beforehand is good so you know exactly what you’re looking for. Landlords can use these criteria to streamline the screening process and remain compliant with local, state, and federal regulations. The criteria can also be used to justify a landlord’s choice of tenant.
What are some valid reasons to decline a tenant? Here are some common examples.
1. Low Credit Score
Landlords often set a minimum credit score for tenants. After all, no landlord wants a tenant with unmanageable debt. It could hinder their ability to pay their rent in the long run. The higher the score, the better the odds of approval.
Conversely, a bad credit score is a good reason for landlords to decline a tenant. Many landlords set the minimum at 650. However, landlords can set a lower or higher limit as long as it’s reasonable.
2. Unclean Criminal Record
Landlords often screen tenants before they decide to sign a rental contract. They check the applicant’s criminal history. If a landlord finds anything sketchy about the tenant, they may reject the application.
Consider checking the National Sex Offender Public Registry and the Most Wanted Databases to make sure the tenant isn’t doing anything shady. Landlords can also use a professional screening service to conduct a more thorough investigation. Doing this keeps the landlord free from liability.
3. Past Evictions
It’s essential to check a tenant’s eviction history from previous rental properties. Tenants who have been evicted in the past are more likely to be evicted again, after all. Landlords may take previous evictions as warning signs that could lead them to reject a rental application.
4. Unstable Employment History
It’s important to determine whether or not the tenant can meet their financial obligations. For this reason, landlords may check an applicant’s employment history to verify their financial capability. They may reject rental application submissions if the tenant is unemployed or has an unstable job.
5. Inadequate Income
Landlords may ask for proof of income to verify the applicant’s capacity to pay. This is important as landlords must determine whether the tenant can afford to pay rent in addition to their living expenses and unforeseen costs. A good ratio is an income three times as high as the rental price.
6. Negative References
Landlords often check a tenant’s history by consulting their previous landlords. If a former landlord gives a bad review or provides negative feedback, landlords may take that as a warning sign to reject the application.
For example, a former landlord may say the tenant frequently made late rental payments. Some landlords may also tell you how the tenant caused trouble with their neighbors, broke the rules, or even damaged the rental property.
7. Incompatible Lifestyle With Rental Rules
A landlord has the freedom to disallow smoking or pets within their rental property. After all, these can be a liability for the landlord as they can cause disruption and property damage. If an applicant intends to live with pets or smoke in their unit, the landlord has the right to reject them.
However, keep in mind that landlords may need to make an exception for pets that are certified support animals. Animals that the tenant needs for physical or emotional support are protected under Fair Housing Laws.
8. Better Options
Landlords who receive multiple applications may choose the best candidate among the applicants. In this case, they may have the right to reject the other less qualified applicants.
How to Decline a Tenant Application
What can a landlord do when they want to deny a renter? How do you politely decline a rental applicant? Here’s what you need to know about how to decline rental application submissions.
Send a Letter
The Fair Credit Reporting Act (FCRA) states that landlords must give a rental application denial letter to applicants if they take adverse action against prospective tenants based on any consumer report.
Consumer reports include eviction reports, background checks, credit reports, and credit scores. Meanwhile, adverse action consists of a denial or an increase in the applicant’s requirements based on their profile. A landlord can increase the applicant’s requirements, also known as “accept on condition,” by doing the following:
- Requiring a guarantor or co-signer
- Increasing the security deposit (within the limits set by state law)
- Raising the rent price
The FCRA requires landlords to deliver the adverse action electronically, in writing, or orally. Written notice is preferred because it serves as physical evidence of the notice. Applicants won’t be able to assert that they didn’t receive the notification.
Sending a rejection letter is also good practice, regardless of the reason for denial. It’s a good precautionary measure and ensures the landlord complies with the law. Moreover, it allows the landlord to be transparent with the applicant about why they were rejected.
What to Include in a Rejection Letter
According to the FCRA, landlords should include the following information in the rejection letter:
- The reporting agency’s name, telephone number, and address
- A statement that the reporting agency did not decide and cannot provide reasons for the landlord’s decision
- Notice that the prospective tenant may dispute the report’s completeness or accuracy
- Disclosure that the prospective tenant may receive a free copy of their report if they request it within 60 days
Exercise Caution
Landlords can decline a tenant for any number of reasons. However, they must ensure that the reason for rejection does not violate any laws. Moreover, it’s best to send a formal rejection letter to applicants who don’t make the cut.
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