As a property manager, landlord, or real estate agent, part of your job involves denying applications. This task, while unpleasant, is sometimes necessary and must be done correctly and by the book. You want to make sure that your denials, like your approvals, are up to code and can stand up to scrutiny. This article reviews how you can use a Rental Application Denial Letter to deny applications professionally without legal fallouts.
What Is a Rental Application Denial Letter?
A rental application denial letter, or tenant rejection letter, is a document that informs an applying tenant that their housing application has been denied. The reason behind the denial is usually a negative consumer report but can be other factors, except discrimination. When it involves a consumer report, you must inform the tenant that they can obtain a copy of the report from Equifax, Experian, or TransUnion within 00 days of sending an application.
When Can You Deny a Rental Applicant?
Denying a rental applicant should involve a legal and fair process that doesn’t involve discriminatory practices. For example, most states allow you to deny an applicant on grounds such as criminal history, but you cannot do so for a non-conviction arrest. Some reasons to deny an applicant are:
- Inability to verify income
- Negative credit report or credit score
- Income-to-rent ratio
- Denies guarantor or co-applicant
- Incomplete or falsified application
- Unfavorable tenancy history
- Pets where the landlord does not allow them
- Insufficient references
- Applicant was party to a bankruptcy
- Property no longer available for rent
What Should You Include in a Rental Application Denial Letter?
According to the Fair Credit Reporting Act, a rental application denial letter must contain the following details to be considered valid and fair:
- The name and contact information of the reporting agency that supplied the applicant’s negative credit report.
- An explanation that the reporting agency was not involved in the denial decision and, thus, cannot explain it.
- A statement informing the applicant that they can dispute the accuracy of the report.
- A statement explaining that the applicant can apply for a free copy of the report from the reporting agency within 60 days.
Sample Tenant Rejection Letter
2 August 2031
300 Indigo Road
Topeka, KS 20056
Re: Application Denial
Dear Geffrey Peters,
This is in regard to the rental application you sent us on 25 July 2031 for the property located at 899 Mottle Road, Topeka, KS 11092, whose terms were as follows:
Monthly Rent: $4,200
Security Deposit: $4,200
Lease Term: 6 months
Start Date: 5 August 2031
Thank you for expressing interest in our rental property. Unfortunately, we are forced to reject your application at the moment due to negative information on your credit report.
Please note that you have the right to obtain a free copy of the said report from a consumer reporting agency within 60 days of receiving this notice.
Thank you and all the best.
Tenant Rejection Letter (Word Template)
Setting a Rejection Process
Now that you know the reasons for which you can deny a rental application, you should incorporate this information into a denial system, which you will use to evaluate applicants. Here is how:
Step 1: Identify the Rejection Ranges
Create a list of all the factors you will consider when evaluating a rental application, e.g., income-to-rent ratio and credit score. From your list, develop a rejection range to guide your decisions, e.g.:
- Income-to-rent ratio: Less than 2x – (REJECT)
- Credit score: Less than 650 – (REJECT)
Step 2: Optimize Your Criteria
Now, add more information to your rejection range so it becomes more wholesome. For example, you can add a middle range between ‘ACCEPT’ and ‘REJECT’ that allows you to ‘ACCEPT ON CONDITION.’ You can then create the criteria for this middle range.
Note: Remember, your criteria should meet legal standards and be applied to all applicants indiscriminately.
Step 3: Be Systematic
Lastly, create a system that allows you to record the order in which you receive applications so that you apply your criteria on a first-come-first-serve basis. Once an applicant meets your criteria, stop looking at other applications.
How to Write
The FCRA dictates that rent application denials must be delivered orally, electronically, or in writing. While oral delivery is allowed and will work just as well as the other options, a written notice serves as proof that the adverse action was communicated to the applicant. Here is how to use this option:
Step 1: Provide Basic Details
Highlight the basic details about the rental application. Start by indicating the current date (when the denial letter was prepared), then the applicant’s name and mailing address. Then, identify the property being discussed by adding its physical address next to the words, ‘for the property located at….’
Step 2: Describe the Property
Specify the terms related to the denied application, including monthly rent amount, security deposit, and lease term. This information will help the applicant recognize their application.
Step 3: Explain the Rejection
Next, tell the applicant why you rejected their rental application. Remember, the reason must be fair and no-discriminatory, e.g., the examples discussed earlier in this article. You should also offer more information about the rejection, such as informing the applicant that they can get a free copy of their credit report from a credit bureau within 60 days.
Step 4: Sign the Document
Lastly, reiterate your regrets over the denial and sign the letter.
Is It Necessary to Tell the Rental Applicants That They Are Denied?
Besides being courteous, the Fair Credit Reporting Act (FCRA) dictates that you must inform applicants of all adverse actions either in writing, orally, or electronically. This means that sending a denial letter is not only necessary; it could also save you from legal troubles.
If the denial is based on a credit report, you are also obligated to inform the client about how you obtained the report and that they can get a free copy from the agency within 60 days.
The screening process can end in good news for some applicants but often also involves preparing a Rental Application Denial Letter or two. Remember, it is crucial that all your adverse actions (denials) be based on legal, fair, and non-discriminatory reasons. You should also share the news of the denial with the applicant early so they can continue their home search.