Whether you are a rental property owner or manager, denying rental applications is something that you will have to do at some point. In fact, the sheer volume of applications that will come your way makes this an inevitability. As you would expect, declining applications can get tedious fairly fast if you don’t have a proper process in place. In this article, we will go over what a rental application denial letter is and show you how and when to use it to deny rental applications.
Reasons Why You May Deny a Rental Application
Before delving into how to write a rental application denial letter, we must first go over some of the reasons that may prompt you to deny an applicant. Below is an overview of the legal reasons behind rental application denial.
Low Income-to-Rent Ratio
One of the main reasons why rental applications are denied is a low income-to-rent ratio. As a landlord, you are within your rights to require a minimum income-to-rent ratio when screening applicants. While the ideal rate may vary widely from one landlord to another, it is generally advisable that you require potential tenants to have an income that is at least three times the rent.
Bad Credit
A bad credit score is another reason that could prompt a rental application denial letter. Renters with bad credit are generally seen as a major risk and landlords can legally reject their application. In some cases, more lenient landlords and property managers may suggest the use of a co-signer to offset the bad credit score.
Related: Landlord’s Guide to Renting to Someone with Bad Credit
Checkered Rental History
Naturally, tenants who have a checkered rental history are automatically rejected. Some of the red flags that landlords should watch out for include prior evictions, unpaid rent, and property damage. If you are willing to take the risk that comes with accepting such tenants, make sure to request additional reference letters as well as a co-guarantor.
Various Legal Reasons
Landlords can also deny rental applications over a wide range of legal reasons that are specific to the property in question. For instance, you may choose to deny the application of a smoker if your own a non-smoking rental unit. Another example is turning down a tenant who insists on bringing pets to a pet-free unit.
When is a Rental Application Denial Letter Not Legal?
Just like there is a multitude of legal reasons to deny rental applications, there are illegal ones as well. In fact, renters’ rights are protected under the Fair Housing Act and any violation of these regulations can have legal ramifications for the property owner. Here are the main illegal reasons to deny a rental application:
- race
- color
- religion
- sex
- national origin
- Mental or physical disability/handicap
- family status
Keep in mind that there may be additional illegal reasons to deny rent depending on the jurisdiction. For instance, certain states prohibit discrimination based on things such as age, gender identity, and sexual orientation. Denying rental applications based on the applicant’s arrest record is also prohibited by the Fair Housing Act.
Related: How Does Fair Housing Work in Real Estate Investing?
What You Should Include in a Rental Application Denial Letter
The first thing you need to understand about rental application denial letters is that they are not restricted to a single format. As a matter of fact, landlords have the option of denying rental applications orally, electronically, or in writing. With that being said, it is not recommended to deny applicants orally since the absence of a paper trail can make it difficult to prove your case in case a lawsuit is filed against you. To that end, a written letter is the best option for landlords and property managers.
As for the items and details that have to be included in a rental application denial letter, they consist of the following:
- The name and contact details of the consumer reporting agency that provided the report
- A statement that clarifies that the consumer reporting agency is not responsible for any unfavorable actions
- A statement that explains that the applicant has the right to dispute any inaccuracies found on the report
Best Practices when Rejecting Applicants
As is the case with every aspect of managing a rental property, you need to adhere to certain best practices if you want your rental application rejection to go as smoothly as possible. Here are some best practices to keep in mind when rejecting potential tenants:
- Check your local laws and regulations: Before writing the letter, take some time to go over the Fair Housing Act to make sure you are within your rights to reject the applicant. Additionally, check your local laws to see if there are any extra regulations that are specific to your jurisdiction.
- Be polite: Being polite is one of the first things you need to do when rejecting potential tenants. Besides abiding by the rules and regulations outlined earlier, it is important that you act in a professional manner throughout the process and avoid antagonizing the applicant during such a stressful time.
- Write a concise letter: When writing a rental application denial letter, you need to be as concise and straight to the point as possible. Make the intent of the letter perfectly clear in the first sentence and be sure to include the date, the applicant’s name, and the address of your rental property.
- Include conditions for approval: After outlining all the legal reasons that prompted you to reject the applicant, it is advisable that you also include conditions for approval. This will help give the applicant a clear idea of where they stand and what they can do to remedy their situation for future applications.
Related: How to Become a Successful Landlord in 10 Steps
The Bottom Line
Handing out rejections is never fun. This is especially the case when you are denying someone access to a property they desire to live in. Still, a rental application denial letter is something that you will have to send out sooner or later. As long as you act professionally and abide by the law, you should be able to handle rental application denials in a smooth and efficient manner.
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