How to Send Denied Rental Application Letters

How to Send Denied Rental Application Letters

When looking through rental applications, sometimes you have no choice but to reject someone. Whether it be because of their credit score, eviction report, or something else, it can be tough to figure out how to send out a denied rental application letter. Going through the screening process, it should be your top priority to give your decision lawfully. In this article, we will go through what you need to know and how you can go about rejecting an applicant or a tenant.

Screening Criteria

Be careful when you are rejecting an applicant. To ensure that you are not engaging in discrimination, there are a few protected classes outlined by the Fair Housing Act. You will be in the process of discrimination if you reject an applicant based purely on race, religion, sex, national origin, familial status, or disability.

However, you can send a denied rental application letter to an applicant based on other, acceptable screening criteria.

Red pen marking boxes for sending denied rental application letters

Setting up Rejection Criteria

Set up the criteria you will use to reject or accept an applicant. Even before looking at rental applications, a policy should be in place to ensure a fair and equal review of applicants.

Examples of rejection criteria can be; rejecting an applicant who has a credit score lower than a specific threshold or if he or she has less than your required rent to income ratio. Your criteria should be uncompromising and applied equally to all applicants. Ideally, you should develop these criteria with an attorney who specializes in housing law, to ensure there are no violations.

When to use a Denied Rental Application Letter

A denied rental application letter is also known as an adverse action notice. What is an adverse action? An adverse action is an action that you take when you want to communicate an unfavorable circumstance to an applicant or a current tenant. Keep in mind that communicating an adverse action to your applicants in many situations is a must. Most importantly, in compliance with the FCRA, your adverse action notice must be done orally, in writing, or electronically.

When you’ve finally concluded the rental application process, you have three possible responses you can give to applicants:

Couple holding green check signs, send a denied rental application letter or not

1. Accept
The simplest of the three decisions is the ‘accept’ decision. This decision doesn’t require you to do anything special, and all you need to do is let the applicant know they were accepted. This decision means you found the applicant’s application materials favorable, so you would not need to send out a notice to your new tenant.

2. Accept on condition
This decision is an ‘accept,’ but only if the applicant were to meet a specified requirement. You would give an accept on condition decision if for example:

Let’s say you use the following decision range for credit scores:

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Some examples of an accept on condition:

  1. Requiring a guarantor/co-signer on the lease title.
  2. Requiring a deposit that might not be needed for other applicants.
  3. Requiring a larger amount on a deposit.
  4. Raising the price of rent that might not be applied to other applicants.

This decision may consider information on consumer reports or the rental application. In most cases, when you use consumer reports in your screening, you may be required to deliver an adverse action notice to tenants to let them know the outcome. The notice should have your decided condition and the basis of your decision.

3. Deny
The final decision that you can make is the deny decision. When you reject an applicant, your decision to deny should be made considering any rejection criteria, consumer reports, and rental application materials. Your denied rental application letter or adverse action notice must have your decision to deny them as well as how you made the decision. To avoid discrimination when denying an applicant, please refer to the Fair Housing Act (FHA) or consult a tenant attorney.

Please keep in mind, if you based your ‘accept on condition’ or ‘deny’ decision on a consumer report, then its likely that you need to let applicants know of any adverse decisions through an adverse action notice.

What is Required on a Denied Rental Application Letter?

Even though FCRA guidelines say you can deliver your decision orally, in writing, or electronically, you might think about rendering decisions in writing. Letting applicants know orally does not leave a paper trail that you can lean on in case an applicant claims you violated the law. According to the Fair Credit Reporting Act or FCRA, a few crucial items need to be on the adverse action notice when you are sending them out. They are as follows:

  • The name, phone number, and address of the consumer reporting agency that supplied the report.
  • A statement declaring that the consumer reporting agency did not decide any unfavorable actions.
  • That the applicant can dispute inaccuracies found on the report and that he or she is entitled to a free report if requested within 60 days.

In Closing

Sending a denied rental application letter is not always the easiest thing to do, so you should take the time to learn the nuances. Being mindful of the law can help keep you out of trouble and not have a potential lawsuit from an applicant or tenant. While you should watch out for things like discrimination, sending an adverse action can also help prove that you are acting within FCRA guidelines. In the end, working within the law and using objective standards can keep you out of trouble.