How to Legally Navigate Rental Application Rejections
If you’re a landlord, you know rental application rejections are part of the process. While it’s never fun to deny a tenant, you always want to make sure your property is in good hands. That said, you can’t reject an applicant for no good reason. Being fair, professional, and compliant throughout the process is crucial. Today, we’re reviewing why you might deny an applicant, when you can’t deny one, and how to legally handle rental application rejections.
Main Takeaways
- Landlords should use clear, consistent rental criteria when reviewing applications and avoid decisions based on characteristics protected by fair housing laws.
- If a landlord takes an adverse action based partly or entirely on information in a consumer report, the Fair Credit Reporting Act requires an adverse action notice with specific information.
- State and local laws may provide additional protections or screening requirements, so landlords should review the rules that apply where their rental property is located.
Why Do Rental Applications Get Rejected
Rejecting rental applications is part of the rental process. There are several lawful factors landlords may consider when evaluating rental applications, depending on their established screening criteria and applicable federal, state, and local laws.
That said, landlords and rental property managers in Washington, DC, must follow the Fair Housing Act and any relevant state rental laws and regulations when making a decision. Rejecting a tenant for no good reason can land you in a lot of legal trouble.
However, there are plenty of reasons you may be able to legally reject an applicant, including the following.
- Inadequate Income
- Poor Credit History
- Prior Evictions or Bad Rental History
- Bad References
- Incomplete Information
- More Qualified Applicants
Inadequate Income
You’ll want to choose a tenant who can pay their rent each month. That said, landlords may use income requirements as part of their screening criteria, as long as those requirements comply with applicable laws and are applied consistently. However, it’s also important to consider state and local source-of-income protections, which may affect how income requirements are applied.
Poor Credit History
Credit history can give landlords more information about an applicant’s financial history and ability to manage financial obligations. Landlords may establish credit requirements as part of their screening criteria. If an applicant doesn’t meet those criteria, the landlord may be able to deny the application, provided the decision complies with applicable federal, state, and local laws.
Prior Evictions or Bad Rental History
Landlords may consider certain aspects of an applicant’s rental history, depending on their established screening criteria and applicable laws. For example, prior evictions, unpaid rent, or documented property damage may be relevant when reviewing an application. However, landlords should apply the same screening standards consistently and make sure any decision complies with federal, state, and local requirements.
Incomplete Information
Filling in all required information on a rental application is important so landlords can properly evaluate whether the applicant meets their established screening criteria.
If required information is missing, landlords can follow their established application procedures for incomplete applications and give applicants any opportunity to provide missing information that the screening policy requires. Applying the same process consistently can help keep screening fair and organized.
More Qualified Applicants
If several applicants are interested in the same property, landlords should follow their established application and screening procedures when deciding which applicant to approve. Screening criteria should be lawful and applied consistently without regard to protected characteristics. That said, if you’re choosing between renters, you should select the candidate that best meets your criteria.
When Can You Not Reject an Application?
While landlords can choose among applicants who apply for a rental property, they must comply with Fair Housing laws throughout the screening process. The federal Fair Housing Act prohibits housing discrimination based on protected characteristics, ensuring that everyone has equal access to and opportunity to rent. That said, the FHA prohibits rental application rejections based on:
- Race
- Color
- National Origin
- Religion
- Sex (including gender identity and sexual orientation)
- Familial Status
- Disability
Additionally, while you can request a background check, criminal history screening is also subject to federal guidance and may face additional restrictions under state or local laws. Landlords should avoid blanket policies based on criminal history and review the requirements that apply in their jurisdiction.
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How to Legally Handle Rental Application Rejections
Denying a rental application isn’t always a quick and easy decision. Landlords must thoroughly evaluate all applicants, consider their findings, and communicate their decision regarding whether or not the application is approved or denied. Here are a few steps on how to handle legal rental application rejections.
Set Your Criteria- Before listing your rental, determine your renter criteria. How much will you charge for rent? What’s the minimum credit score you’ll accept? Outline your expectations in your rental application.- Review the Application- Review each application carefully for completeness. If required information is missing, follow your established procedures for incomplete applications and apply the same process consistently to all applicants.
- Run a Background Check– Once you have an applicant’s information, you can run a background check on them. If you use a tenant screening report, review only information that your lawful screening criteria allow you to consider and follow applicable federal, state, and local requirements.
- Review Their Rental History- Ask each applicant for contact information for previous landlords and contact them. This can give you a better perspective of who they are as renters.
- Run a Credit Check-A credit check can provide information about an applicant’s credit history and financial obligations. Review the information according to your established screening criteria and applicable laws.
- Verify Income- Verify the applicant’s income according to your established screening criteria. Depending on the circumstances and applicable laws, documentation may include pay stubs, bank statements, benefit statements, or other acceptable proof of income.
- Make a Decision– Once you’ve gone through your entire screening process, you have the information you need to decide whether or not you’re going to rent to an applicant. Before denying an application, make sure the decision is based on lawful, consistently applied screening criteria and complies with applicable federal, state, and local laws.
How to Write a Rental Application Denial Letter
If you decide to reject a rental application, it’s generally best to communicate the decision in writing. A written notice provides clear documentation of the decision and gives the applicant information they can reference later.
If information in a consumer report influenced the decision to deny an application or take another adverse action, landlords must also comply with the Fair Credit Reporting Act. The adverse action notice must include the name, address, and phone number of the consumer reporting agency that provided the report. It must also explain that the reporting agency did not make the decision and cannot provide the specific reasons for it. Additionally, applicants must be informed of their right to dispute inaccurate or incomplete information and request a free copy of the report from the reporting agency within 60 days.
Here is an example of a professional yet polite way to deny a rental application. Remember, this is a general example only. If information in a consumer report contributed to the decision, the landlord must also include all information required in an FCRA adverse action notice.
Date
Applicant’s First and Last Name
Address of Rental Property
City, State, and Zip Code
Dear [Applicant],
We appreciate your interest in the property located at [property location], and thank you for your application. We regret to inform you that we’ve chosen to decline your rental application for one (or more) of the following reasons:
[e.g., applicant did not meet established income, credit, or rental-history criteria]
If you have any questions regarding the status of your rental application or our decision, please don’t hesitate to reach out.
Sincerely,
Landlord or Property Manager
FAQs About Rental Application Rejections
Rejecting a rental application requires more than simply choosing another applicant. Landlords should follow consistent screening criteria and understand the laws that apply to their decisions. Here are answers to some common questions.
Can a landlord legally reject a rental application?
Yes. Landlords may reject applicants who do not meet their lawful and consistently applied rental criteria. However, they cannot make decisions based on characteristics protected under federal, state, or local fair housing laws.
Does a landlord have to explain why an application was denied?
Requirements depend on the circumstances. If information from a consumer report influenced an adverse decision, the Fair Credit Reporting Act requires the landlord to provide an adverse action notice containing specific information about the report and the applicant’s rights.
What is an adverse action notice?
An adverse action notice informs an applicant that information from a consumer report contributed to an unfavorable rental decision. It must include certain information about the consumer reporting agency and explain the applicant’s rights to obtain a free copy of the report and dispute inaccurate or incomplete information.
Can a landlord reject an applicant because of bad credit?
A landlord may generally consider credit information as part of lawful, consistently applied screening criteria. However, landlords must comply with the FCRA when using consumer reports and should also check state and local laws for additional requirements.
Can landlords reject applicants based on criminal history?
Landlords should be particularly careful when using criminal history. Federal fair housing considerations apply, and state or local laws may further restrict what information landlords can consider and when they can consider it. For example, Washington, D.C., imposes specific restrictions on criminal-record screening for rental housing. Covered housing providers generally cannot inquire about an applicant’s criminal history until after making a conditional offer of housing, and additional restrictions apply to what information may be considered.
Thoroughly Screen Tenants With BMG
Every landlord wants to find tenants who will pay rent on time and care for their properties. However, not every applicant you get will be able to meet your expectations. This is why it’s important to know how to navigate rental application rejections without breaking the law.
If you need help finding tenants who fit your expectations, work with a property management team! Bay Property Management Group uses a thorough tenant screening process to evaluate applicants according to established rental criteria and applicable laws. Contact BMG today to learn more about our full-service management throughout Baltimore, Philadelphia, Northern Virginia, and Washington, DC.
