Property Management, Tenant Selection, Real Estate News & Tips

How to Legally Deny a Rental Applicant

By on May 23, 2017 in Education with 13 Comments

deny a rental applicant

Property managers are responsible for approving and rejecting rental applicants.

As long as the reasons for denial are legitimate and meet Federal Fair Housing Guidelines, you have the right to approve the most qualified rental applicant to become your next tenant (and say “no” to the rest).  

To understand just how often rental managers have to deny a rental applicant, Nathan Miller, president of Rentec Direct, looked at data from more than 13,000 property managers and landlords who use Rentec Direct’s property management software:

“We reviewed some statistics from 5236 rental applications received during the first two months of 2017.  Of those applications, 56% of the units we rented after receiving just one application,” says Miller.  “The remaining units received between 2 and 63 applicants per unit.  The average overall was 3.54 applicants per unit to find and place a tenant.”

If you are one of the managers with 63 applicants for a single unit, there are going to quite a few people that need to hear why they were rejected.

To save yourself from any discrimination claims, you need to be able to tell a rental applicant exactly why they didn’t get approved for the property.

If you simply tell a rental applicant it’s not going to work out but you give them zero reasons, they can file a discrimination claim, even if you based your decision on legal reasons. If they happen to belong to a protected class, you could be in some legal trouble. (It’s called disparate-impact and you can learn more about it here: Are you breaking Fair Housing Laws unintentionally?)

A housing provider can find a qualified renter by reviewing an applicant’s credit report and criminal record, verifying employment and income, checking references, and speaking to your past landlords to find out if they were a lease-breaking tenant.

You are not allowed to deny any rental applicants due to their race, religion, sex, familial status, disability, color, or national origin, under the Fair Housing Act.

How to Deny a Rental Applicant Legally

You can deny a rental applicant as long as the landlord can prove that every applicant was screened by the same standards and the basis for rejection was due to an applicant’s potential inability to pay rent or if he is seen as dangerous to the property or neighborhood.

However, the way you tell a renter they are “not approved” needs to handled legally – especially if you deny a renter due to their credit score or information on their credit report or another public record.

Denying a Renter Due to Credit Score or Credit Report

If an applicant is rejected based on information found on a credit report, the landlord must provide an Adverse Action Notice to the applicant.

An Adverse Action Notice tells the renter that he was denied due to information found on a consumer credit report, and gives contact information for the credit reporting agency used so the applicant can access the report too.  

Providing an applicant with an Adverse Action Notices is a federal requirement created by the Federal Fair Credit Reporting Act.

If a renter contacts you saying that the information on their credit report is inaccurate, you should advise the renter to refer back to the Adverse Action Notice you provided and speak directly with the credit reporting agency to figure out how to make adjustments to their credit report.

After issuing an adverse action letter, if any rental applicant’s try and dispute the reasoning with you, consider this suggestion from Heather Peake, a former manager of 80+ properties in California, “I used to point [applicants] to the adverse action letter for instructions on who to contact to repair/remove information and then let them know that after they have proof of correction they were welcome to apply to any units we had available at that time.  If they asked about the unit they were denied for I would indicate that we could not hold the unit on their behalf.”

Starpoint provides a free Adverse Action Notice for housing providers: Free Denial Letter

If you are a Rentec Direct Client you can use this template from Starpoint:

CLICK HERE TO USE THE STARPOINT TEMPLATE If you are declining the application based on information obtained within their TransUnion credit report.

Denying a Renter Due to a Dangerous Criminal Record

Landlords and property managers are only allowed to use a criminal record to deny a rental applicant if the record shows dangerous criminal convictions that would put the property, other tenants, or the neighborhood at risk.  

You are not allowed to use arrest records to determine a rental applicant’s qualifications.

According to the U.S Department of Housing and Urban Development:

  1. Arrests records are not a valid reason to deny a rental applicant housing.
  2. Convicted criminals may be denied housing if the reason for their convictions clearly demonstrates that the safety of your residents and/or property are at risk.
  3. Blanket terms in your screening criteria that say “Any criminal convictions will be denied” are now considered discriminatory and in violation of the Fair Housing Act.

If you deny a rental applicant due to information found on a public record (like a criminal background report or eviction search) you need to provide the applicant with a denial letter and instructions on how they can obtain a copy of the report. You do not need to provide a copy of the report, just tell the applicant which agency you used to access the report and who to contact to get a copy.

CLICK HERE TO USE THE CIC TEMPLATE If you are declining the application based on information obtained within their nationwide criminal search (report code: CRIM), or nationwide eviction search (report code: EVICTION).

Kathryn Szymanski from the Client Success Team at Rentec Direct and a former property manager in Oregon, says, “Our best practices when I was in PM was to mail [an adverse action] letter no matter whether whole/part/no credit was reason for denial and then we listed all of our companies used for decision in the letter.”

Denying a Rental Applicant for Other Legal Reasons

The Landlord Protection Agency, recommends creating a generic rejection letter with a checklist of potential legal reasons an applicant was denied. A manager or landlord simply needs to check which reason applied to the applicant and return to them.

  • The LPA Denial Letter provides a checklist of 12 reasons to select for the rejection of the applicant. Some of these include:
    • Rental price offer not accepted
    • Income
    • Unable to verify or insufficient employment
    • Credit history (Adverse Action Letter to accompany)
    • Pets
    • Smoking
    • Tenant Lied on application
    • Incomplete application
    • More…
  • No applicant is happy to be rejected, but the LPA Denial Letter when needed, helps you manage your time more efficiently, rather than spending valuable time on complaining rejected applicants. It also gives the applicant a courteous, detailed explanation of why he or she was declined.

Denying a Rental Applicant Due to Availability

Housing providers are advised to approve rental applicants on a first come, first serve basis. First come meaning, the first QUALIFIED applicant (not the first applicant). Undoubtedly, this means you will have to deny a qualified applicant simply because some else was approved before them.

If you are denying a rental applicant because a property is no longer available, make sure to communicate this as the reason. You can let them know, they were approved for the property, but that another applicant was approved before them. You can also give them instructions on how to apply for another property you manage.

Property managers and landlords can follow legal requirements and protect themselves from discrimination claims by following these steps for denying a rental applicant the right way.

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About the Author

About the Author: Kaycee (Wegener) Miller manages marketing and media relations for Rentec Direct, bringing a unique perspective to the world of property management and proudly shares industry news, products, and trends within the community. .


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There Are 13 Brilliant Comments

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  1. Harris says:

    jokes apart and aplogies for bad use of words..but should there not be a transparency maintained in the whole process..Why should he property managers / landlord have to play games as suggested in this article.This just shows property managers are up to manipulate the who law..

  2. Harris says:

    what if the property managers just keep collecting application fees from multiple prospects and just inform the prospects per the guidance in this blog..what is the protection for prospects against this fraud??

    • vivi says:

      Yes I would like to know as right now I am going through this, they are collecting $25.00 per adult on the application in an effort to raise more money before deciding to rent, and they had my application for a month now, telling me they are still considering applications, but I am the top candidate????

      • Something I hadn’t considered, but perhaps renters are getting denied due to high income because a housing provider does not see the applicant as a long term renter? If a renter makes significantly more than the rental is priced out, a housing provider might assume the applicant will move to a higher priced rental or purchase a house in the near future, compared to an applicant that is closer to the stated income requirements. I am not sure this is the case, just a thought I had. I am not sure if it is legal either, as it seems like an subjective qualification technique. However, income amount is not a protected class. I would speak with a local housing authority for more information about tenant screening in your area.

  3. A good property manager will be very transparent his screening criteria and the minimum qualification required to get approved (like income and credit score). Additionally, it’s standard practice to accept application fees in the order they are received and approved the first qualified tenant. The landlord/manager will then return application fees for anyone he did not screen after approving the first qualified tenant.

    Sometimes there are bad landlords that don’t follow the rules and break the law. Just like there are some bad renters who lie about credit scores or eviction history.

    If you feel like a landlord has unfairly denied your rental application or mistreated you as a tenant, all renters are encouraged to report them to their local housing authority and speak with an attorney if legal action is required.

  4. Harris says:

    are the property managers obliged to disclose who the landlord is. She kept saying that landlord she has taken approval from landlord and requested my partner also to fill another application form so that the rental can be formalized. After a wait of almost 1 week, suddenly one day on being repeatedly followed up, she turned her stand and said that I could submit your application today morning together with another application. It’s now upto landlord who selects either you or other applicant ( same story as suggested in this blog)…what proof should I expect to know my application has been fairly processed?

    • Whether or not the property manager has to disclose who owns the property (landlord) is dependent on your state’s law. But the property manager might not have to disclose that information to applicants, only to tenants after they have signed a lease. You could do your own research and look up public records to see who owns the house, but not sure what benefit that would do. The owner has hired a property manager that you should be working with directly.

      If you are denied based on information found on your credit report or a public record, like an eviction report or criminal background report, the property manager should send you a formal Adverse Action Letter. If the another applicant gets approved, it could simply be because they were “more qualified” as in had a higher income or better references. Some state’s require a first come, first serve policy, but not everywhere does.

      I also wanted to note, that it is standard practice for all adults who would be living in the property submit a rental application and go through the approval process. So even if you meet the qualifications on your own, but your partner does not, you might be collectively denied from renting the property.

      If you feel like a landlord has unfairly denied your rental application or mistreated you as a tenant, all renters are encouraged to report them to their local housing authority and speak with an attorney if legal advise or action is required.

  5. Matt says:

    I have a non violent arrest but have not been convicted and the apartments I’m applying for said transunion denied my application because of the arrest what can I do about this? I called transunion and all they did was put in a dispute that could take up to 30 days for a response. This is urgent for I am soppost to be out of my current home in less than a month. Contact me at asap please and thank you.

  6. Alex T. says:

    Help please: Can a property manager not accept your application and application fee? Can he/she tell that he/she won’t process your application, not to waste your time turning in an application because she won’t process it? I was under the impression that they have to take and process ones application before approving or denying it.

    • Some property managers will complete a “pre-screening process” before processing a rental application. This might include asking about income or a prospective move-in date, or if you have pets. If you don’t meet the pre-screening qualifications, they might not move forward with processing your actual rental application. It will cost the property manager and you money to process a rental application, which is why this happens.

      It is illegal for a property manager or landlord to refuse to process a rental application or deny a rental applicant based on information related to protected classes under Federal Fair Housing Laws.

  7. Lori L. says:

    My family and i applied for an apartment and paid the application fee. While in the property managers office i was gathering all the requested information, my income along with verification my daughter receives SSI. The property manager requested that I apply for HUD voucher, I advised her that i did not need it and I would be denied. She insisted that we may qualify because the income for family of 4 went up. so i filled out the application anyway. The property manager allowed us to view apartments and even assigned us an apartment number with a move in date. She showed me receipts from where new appliances were purchased for the assigned apartment and said that we would be the first to use them. While waiting on a response to our application i reached out to the property manager for an update and would get responses as though she was out sick and so forth. During this time, she was discussing my application with other tenants. I know this because one of the tenants was a family member of mine and another was a family member of hers. After 33 days since we applied i received an email stating that she sent something in the mail and we are over income. I have checked the mail box everyday without anything from her in it. my family and i was just led on by this property manager and while she was looking at our financials she knew that we would not be approved. and no where on the application did it say anything about certain income limits or did she say so when I was applying. I contacted the property owners main office and it seems like they do not care and i filed a complaint with the local housing authority along with reaching out to lawyers because i feel as though our information and confidentiality was breached along with being falsely presented information.

    • This is the second time I have heard about an applicant getting denied because they have too much income. It’s something I am not familiar with but plan on researching more. It’s a shame the manager didn’t give you any information about an income limit. Good job taking the steps to protect yourself and report the company if you felt mistreated. Keep us posted with what happens.

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