What Should be Included in Tenant Denial Letters?

January 16th, 2021
What Should be Included in Tenant Denial Letters?

In a perfect world, only qualified applicants would apply for your rental -- but we all know that's not how it works. When it comes to property management, there will be times when you must turn down a potential tenant. Any landlord or property manager should know how to turn down an application with both grace and authority. In a digital world, even your tenant denial letters can affect the reputation of your property.

Luckily, this digital world also provides many solid references to help property managers navigate this unpleasant process. Here are some of the most important tips you need to know.

Adverse Action

When denying an applicant, it's important that you let them know. Don't just quietly assume they will go away if you don't reply. If possible, send a denial usually referred to as an adverse action as soon as you can so that the persons involved can either correct their application or find alternative housing.

Adverse action letters or notices are a notification to the tenant if you deny a rental application for any legal reason and you accessed any type of consumer report. The letter will inform the tenant why they have been denied (such as poor credit) and if there is any action the tenant can take to correct the issue. If a corrective issue is an option, this is called an "accept on condition" which could look like:

  1. Requiring a co-signer/guarantor
  2. Increasing the security deposit
  3. Increasing the rent amount

Creating your Denial Letter

When creating your denial letter, there's a few things you should remember. You can legally deny a prospective tenant via an oral notice, in writing or electronically. But while you can give oral notice -- it's best not to rely on that alone as a dispute could become a "he-said-she-said" type of situation. When it comes to writing, you should include the following in your notification:

  • Add the full name, phone number, and address of the applicants info that was run, and to what reporting agency this information was given.
  • Acknowledge that the reporting agency is not responsible for denying the rental application and is not able to influence this decision directly.
  • Inform the applicant that they have a right to dispute the information reported with the credit reporting agency directly if they feel there is an error.
  • Provide the applicant with information on obtaining a free copy of this report if it is requested within 60 days.

The basics of a tenant denial letter are pretty simple, and it's best to not veer too far "off script" in the process. There are simple methods to add information.

Specific Denial Information

If you feel strongly that it can better inform either your rental process or support the potential tenant, you can add a reason why the application was not approved. Don't add a paragraph explaining how you feel bad but their credit just isn't a match. Instead, keep it professional and unemotional and try adding a checklist that details common denial reasons. Select one or multiple as the situation applies. Consider denial checklist items like the following:

  • Employment history that relies too strongly on temporary jobs or irregular hours
  • Employment and income that cannot be verified through standard methods
  • Length of rental history in both years and/or duration
  • Lack of credit or poor credit
  • Negative credit penalties
  • Obligations due to previous or current rentals or rental evictions
  • Bankruptcy
  • Criminal record - *Remember that denials for criminal history must meet specific legal criteria

Adding specific denial information can be used as you track your application process to see the type of renter you are attracting and how your standards match with occupancy rates. In addition, it can guide a potential renter should they reapply in the future. 

Your rental application denial letter should include all basic information required in an adverse action, as well as any specific information that you find useful. Tenant denial letters should be based on fair and evenly applied criteria, not personal feelings or emotion. 

And while a denial is discontinuing a relationship, remember that this is still part of your brand and your public image. Handle denials as professionally and kindly as you can using simple language and clear information.