Selecting the right tenant for your rental property can be challenging, especially when you have multiple applications to review. When the time comes to inform unsuccessful applicants, it’s important to do so professionally and respectfully.
Whether you’re a seasoned rental agent or a first-time rental property owner, this guide will ensure that you handle the process of turning down applicants with ease and professionalism.
Rejecting Applicants
Landlords must make decisions about renting out their properties fairly and in compliance with the law. Rejecting a tenant based on discriminatory criteria is illegal and can result in legal consequences. To avoid this, it’s important to understand the Fair Housing Act and the local landlord-tenant laws in your state.
To narrow down the pool of applicants, the rental agents must know the landlord’s specific criteria for acceptance. This can include factors such as income, credit score, rental history, and employment. Clearly state these requirements in your rental listing. By doing so, you can avoid receiving unqualified applications, making it easier to decide which applications to approve or reject. However, be cautious in making these decisions and ensure that your criteria are not discriminatory.
Illegal Reasons to Reject Tenant Application
The US Department of Housing and Urban Development outlines unacceptable criteria for denying a rental application through the Fair Housing Act. These protected categories include race, color, national origin, religion, gender identity or sexual orientation, familial status, and disability. Any discrimination based on these factors is a violation of the law and can result in legal consequences. Additionally, discriminatory practices that are not based on a protected category, such as denying an applicant based on appearance or tattoos, are also deemed illegal. It is important to consider these guidelines during the tenant screening process to ensure compliance with fair housing regulations.
Legal Reasons for Rejecting an Application
Although rejecting an application is legally sensitive, it doesn’t mean you should not reject a potential tenant. There are acceptable reasons to do so. Let me give you a few.
Low Credit Score
A credit check can give a rental agent insight into an applicant’s financial history. If the prospective tenant has a credit score lower than the minimum requirement, the landlord may choose to decline their application or require a guarantor.
A FICO Credit Score below 580 is considered low and could indicate that the applicant is financially irresponsible or unable to pay rent on time.
The top three credit bureaus are Equifax, Experian, and TransUnion. Upon request, they can provide a credit report that includes a credit score, debts, collections, inquiries, and more.
Insufficient Income
Ensuring that tenants can pay rent on time is crucial for a rental business’ financial stability. Most landlords expect applicants to have an income of at least three times the monthly rent.
To verify an applicant’s employment and income, the rental agent can contact the employer or request documents such as tax returns, pay stubs, or W-2s.
To avoid fake documents, the agent can also confirm employment, check the numbers, and ask for additional information from the human resources department if needed.
Poor Rental History
Checking the applicant’s rental history can provide insight into their behavior as a tenant. By contacting the previous landlord, the landlord can confirm the rental history and ask about any problems such as lease violations, late rent, property damage, or evictions. If there are red flags, the rental agent can legally reject the application.
Missing Application Requirements
A rental application form is used to treat all applicants fairly and request the necessary information. The rental agent can request various details but must comply with local landlord-tenant laws. Some applicants, such as international renters, may not be able to provide common forms of identification, but there are alternative options such as a credit reference, landlord reference, or bank statement. If the tenant fails to provide the required information, their application can be rejected.
Other Legal Reasons
Other reasons for rejecting a tenant’s application may include smoking on the property, bankruptcy, or disagreement with the lease terms.
Refusing to communicate with rejected applicants might be tempting, but it’s important to exercise professionalism and courtesy by informing them promptly of your decision. Prompt and effective communication can enhance your reputation as a landlord and provide protection against potential discrimination claims.
Should you inform denied applicants?
Additionally, it’s worth noting that if your decision was based on the results of a consumer report, the Fair Credit Reporting Act mandates that you must notify the applicant as per the legal requirements.
You can politely do so by writing them a letter. The letter should clearly state the reason for the denial and, if applicable, specify what screening reports influenced the decision. Writing a denial letter is not only a legal requirement, but it’s also an opportunity to maintain good relationships and avoid potential legal issues in the future.
So if you’re a rental agent and you publish a listing on platforms like Padleads, you could receive multiple applications. However, you have to make sure to conduct a thorough screening process so that if you have to reject their application, you would have a clear legal basis of doing so.