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Declining rental applications comes with the territory of being a landlord. Though it’s never fun to reject an applicant, sometimes it’s necessary to ensure your property is in good hands. You may feel inclined to reject an application for many reasons, whether it be a poor credit score or low income. Nonetheless, you should always act fairly, professionally, and compliantly when rejecting rental applications. Check out our guide below for the best practices for denying rental applications.
Why Do Rental Applications Get Rejected?
To get the best grasp on rejecting rental applications, you should start by understanding why you would deny an application. Doing so will help you make informed decisions throughout the applicant screening process and ensure you comply with industry standards.
As a landlord, you must follow the fair housing act and state rental laws and regulations when evaluating rental applications. While regulations will vary from state to state, most local mandates will permit rejections if at least one of the following conditions apply:
1. Insufficient income-to-rent ratio
Rejection is almost always guaranteed for applicants with insufficient income-to-rent ratios. Most landlords require renters to have income that is double or triple the monthly rent. If they cannot meet this requirement, rejection should not come as total shock.
An applicant should provide you with proof of income, either with pay stubs, bank statements, or a job offer letter, to verify affordability for the cost of rent. Otherwise, you have the right to be concerned about their ability to pay rent on time and in full each month.
2. Low credit score
Credit scores are a good indicator of an applicant’s financial history. If they have a lower credit score than you require or one that makes you feel uneasy renting to them, you are legally allowed to decline their application. While you can suggest that the tenant use a co-signer or guarantor to get approved, it might be best to forgo their application altogether if you have other options.
3. Prior evictions, property damage, or unpaid rent
An applicant’s rental history will help you determine the probability of the person being a good fit for you and your rental property. If an applicant has any prior evictions, unpaid rental fees, or have damaged a rental property, you have every right to be hesitant.
An applicant with a poor rental history will have a difficult time finding a new place unless you’re willing to negotiate with them by requiring more money upfront (such as first and last months’ rent), additional reference letters, or a co-signer/guarantor. If they can promptly and correctly meet these requirements, then it’s up to you to decide whether to move forward with their application.
4. Bad references
Requesting references is a great way to vet an applicant. Whether they be former landlords or employers, contacting references will give you a better idea of an applicant’s character and living habits. You should proceed with caution if a reference gives you any reason to doubt an applicant. In this case, you might request the additional materials we mentioned above, such as upfront payments and co-signer/guarantor signatures.
5. Other legal reasons
Perhaps your rental is a non-smoking unit, or you don’t allow pets. If the applicant notes that they smoke or intend to bring pets with them to the rental, it is your legal right to deny their application. The only exception to this would be if the animal is a certified support animal under fair housing laws.
6. Multiple qualified applicants
High-demand rental properties attract large applicant pools. If you have several applicants in the running, you can be selective about whom you choose, just as long as you base your decision on legitimate business reasons. If you’re choosing between renters, you should select the candidate that best meets your income, credit score, and other requirements. While one renter might have adequate credentials, you might have another that exceeds your expectations. In this case, you have the right to reject the lesser-qualified candidate.
When You Cannot Reject an Applicant
While landlords can pick or choose between renters, they must do so while complying with fair housing laws. The FHA ensures that landlords treat all applicants equally and prohibits discrimination of any kind.
Rejecting an application under discriminatory circumstances will not only harm your reputation as a landlord but also puts you at risk of potential legal and financial consequences. The FHA prohibits rental application rejection on accounts of:
- Race
- Color
- National Origin
- Religion
- Sex
- Familial Status
- Disability
You also cannot deny a renter’s application based on arrest records. Landlords and property managers may only use a criminal record to deny an application if it shows dangerous criminal convictions that may put the property, neighbors, or the landlord at risk.
How to Decline a Rental Application: Step-by-Step
There’s more to declining a rental application than the rejection itself. To make the right decision, you must go through a number of steps to evaluate applicants, reflect on your findings, and communicate the outcome. Below, we break down the steps to declining a rental application to ensure you make the best decision for you and your rental property.
Determine your renter criteria
Long before you list your rental and review applications, you must determine your renter criteria. Determine how much you want to charge for rent, the minimum credit score you will accept, and other non-negotiables for your lease agreement. Will you allow pets in your rental? How about smoking? Establish realistic standards for your renters, and then outline them in your listed rental application. This way, ineligible renters won’t waste their time applying, and, as a result, you won’t waste time reviewing underqualified candidates.
Review the application
When reviewing rental applications, there are two questions to ask yourself. Is the application completely filled out? Is the information on the application accurate? If the answer to question one is yes, then you’re good to proceed with the applicant screening process to answer whether the information on the application is accurate.
Screening applicants involves a series of steps to verify a renter’s financial standings, rental history, criminal records, and more. Going through this vetting process is essential to finding a qualified renter. Otherwise, you risk putting your property in the hands of someone who might not be trustworthy or fit to take care of it.
Below are steps to take when screening a rental application:
Request and review application
Require the renter to fill out an application providing their contact information, current and previous employers, income, type and number of pets if applicable, and employer/landlord references.
Comply with fair housing
Review fair housing laws to ensure your screening process does not discriminate based on race, color, religion, sex, national origin, disability, or familial status.
Run a background check
Run a background check to receive a detailed report on the applicant and their past. Look for any red flags, such as prior evictions, criminal records, or legal battles.
Check for a criminal history
Check the applicant’s background to ensure it's free of any felony charges. If an old criminal offense is found on the report, consider requesting references to verify the applicant’s reliability.
Review rental history
Review the applicant’s rental history by checking landlord references. The applicant might provide a landlord reference letter for you to read as well. When speaking with any references, ask about the applicant’s history of paying rent on time, leaving the unit in good condition, and abiding by the lease.
Run a credit check
Running a credit check will tell you the applicant’s credit history, going as far back as ten years. When reviewing this history, look for late payments, overcharging accounts, large loans, maxed-out credit cards, or other related indicators of financial strain.
Check employment history and proof of income
Employment history is another factor to pay attention to when screening an applicant. Verify the applicant’s history by asking for current/former employer references. Additionally, you should request proof of income, such as pay stubs, bank statements, or job offer letters.
Make the decision
Once you’ve gone through the screening process, you should have all the information you need to make a sound decision. If you decide to decline the applicant, go back and review FHA guidelines and your state’s rental laws to ensure you have good reason for the rejection. Remember, it’s crucial that you abide by these rules and regulations when rejecting a candidate. Otherwise, you could be subject to legal, financial, and reputational repercussions.
Communicate with the applicant
When you are confident in your decision, you must then break the news to the applicant. In doing so, you should disclose why you denied the applicant. The Fair Credit Reporting Act requires landlords to inform rejected applicants of information discovered in an applicant screening. For example, you should let applicants know if their credit score is insufficient. This way, they can rectify their standings for future applications. Keep reading to learn more about how to communicate with an applicant when denying their application.
How to Write a Rental Application Denial Letter
When rejecting rental applications, it’s best to get everything in writing. As a landlord, the best way to decline a rental application is to write a polite and detailed rejection letter. In your letter, you should politely decline the applicant. Then, you should also express appreciation for the applicant’s interest and welcome follow-up questions or concerns.
You can also include a contingency in your rejection letter, offering acceptance if certain conditions are met. For example, you might request the additional materials that we mentioned earlier, including references, the first and last month’s rent upfront, or a co-signer/guarantor signature. This is a great alternative to an outright rejection, as it gives the prospective renter a second chance to meet rental requirements.
Rental application denial letter example
We’ve created a sample letter to show you the most professional and polite way to turn down a rental applicant. Check it out below!
Date
Applicant's First and Last Name
Dear [Name of Applicant],
Thank you for applying to rent the property at [Rental Property Address]. We regret to inform you that your rental application has been denied for the following reason(s): [e.g., insufficient income, low credit score, owner chose another applicant, negative rental history, etc.].
Should you have any questions regarding the status of your application or the contents of this letter, please feel free to reach out to me.
Sincerely,
[Landlord or Property Manager Name]
If you are providing conditions for approval, list them in the letter after explaining why the application has yet to be approved. You may also include a list of legal reasons to deny a letter and check boxes next to those that apply.
Screen Applicants with Apartments.com
Screening rental applicants is a foolproof way to find the right renter for you. Fortunately, it’s never been easier than with Apartments.com!
Listing your rental property on Apartments.com makes applicant screening very straightforward. When prospective renters apply directly to your listing, you can survey their profiles and compare applications. Apartments.com will also help you screen tenants by providing you with comprehensive credit reports and extensive and reliable background checks from TransUnion®.
After screening tenants with Apartments.com, your next step is to make a decision. If you’re going to reject an applicant, do so by writing a polite and professional rental application denial letter. You can do this with our user-friendly rental tools.
Denying rental applications is part and parcel of being a landlord or property manager, but it’s rarely easy. Landlords should take great care to properly screen tenants when assessing rental applications. Doing so will not only ensure legal compliance but also build a positive reputation with potential future tenants.
This article was originally published on December 1, 2020, by Megan Bullock.
