Rental Application Denial Letter

Last Updated: January 11, 2023 by Robert Bailey

A Rental Application Rejection Letter (Adverse Action Notice) is a formal letter from a landlord to an applicant that states that their application to rent a particular unit is denied. The letter can also offer acceptance if the applicant agrees to certain additional conditions. The letter should detail the specific reasons for the rejection or need for those conditions.

Legally Acceptable Reasons to Reject an Applicant

There are several valid reasons to reject an applicant. Some of the typical reasons include:

Low Credit Score

It is common practice for landlords to use a credit report for evaluating rental applicants. Credit scores are a good indicator of an applicant’s financial history and whether they are likely to pay their rent on time.

For any rejections due to a consumer report, applicants have 60 days from receiving the letter to request a copy of the credit report, challenge its accuracy, and notify the landlord.

Excessive Debt

An individual may have a high credit score but still have a significant amount of debt. Depending on the types of debt and the amount owed, a landlord may determine that those debts might hinder an applicant’s ability to pay their rent.

Employment History

Employment history is important for demonstrating that an applicant will have the means to pay their rent. A history with large gaps of unemployment or constantly changing employers may be a reason to reject an applicant.

Employment References

In addition to employment history, references from an employer may be a reason for rejecting an applicant. If the references provide any concerning information, such as anger issues or tardiness, this could be a reason to reject an application.

Inadequate Income

A landlord wants to make sure that their tenants have enough income to comfortably pay their rent. A general rule of thumb is that the rent should be one-third or less of an applicant’s total income. This can be verified through proof of income such as pay stubs or bank statements.

No Rental History

While usually not the sole basis for rejecting an applicant, no rental history makes it harder for a landlord to feel confident that they will pay their rent on time and be a good tenant. If no rental history is combined with any other negative information, this could be a good reason to move on to the next applicant.

Previous Evictions

Evictions are a red flag. Previous evictions can be disclosed on the application, disclosed by a previous landlord, and listed on a consumer report. While it’s always good to have a conversation with the applicant, a previous eviction is a strong indicator that this applicant may be an unreliable tenant.

Poor Feedback from Previous Landlord

Sometimes when you ask for a landlord reference letter or reach out to a landlord directly, they provide negative information about the applicant. This might be anything from property damage to late rental payments. Poor feedback from previous landlords is a valid reason for rejecting an applicant.

Inaccurate or Incomplete Application

A rejection is legal if a tenant provides misleading or false information. Landlords can also reject an application if they did not provide enough information. However, it is a good idea to reach out to the applicant if it is believed there is an accidental error. Misleading or incomplete information can be grounds for denying an application.

Required Application Documents Missing

Similar to an incomplete application, an application can be rejected if the individual did not provide certain requested documents. This could be anything from proof of income documents to rental history documentation.

Applicant Disagreement with Lease Terms

An applicant might not agree to all of a landlord’s lease terms such as the length of the stay or rent amount. While a landlord may consider requests to change these items, it can also be grounds for rejection.

Inadequate Capacity in Rental Unit

It could be that the rental property an applicant is applying for is not large enough to accommodate the applicant’s family. Some states and local governments even have specific health and safety laws that limit the number of people that can live in a rental unit depending on its size.

Rental Unit No Longer Available

An application may be denied because the landlord has already found a qualified tenant. This happens often for rental properties that are in high demand. While an applicant is not being formally rejected, it is still considerate to inform any applicant that a property is no longer available.

Miscellaneous Reasons

A landlord might not allow smoking on their rental property and the applicant indicated they smoke regularly. The same could be true if there is a “no pet” policy and the applicant wants to have their pet stay at the property. However, for animals, be aware that under the Fair Housing Act a landlord cannot prevent a tenant from having a support animal as a reasonable accommodation.

Illegal Reasons for Denying an Applicant

There are also illegal reasons for rejecting an applicant:

  • Protected Classes under the Fair Housing Act – Landlords cannot reject an applicant based on an individual being a member of any of the protected classes provided in The Fair Housing Act (FHA). These protected classes include race, color, religion, sex, national origin, disability, and familial status.
  • Arbitrary Discrimination – In addition to the protected classes under the FHA, it may be deemed illegal if it is determined that a landlord was arbitrarily discriminating against a group of people. This might include anything from not renting to tenants based on their appearance (e.g., tattoos or piercings) to not renting based on an applicant’s occupation (e.g., law enforcement).
  • Other Legal Reasons – There are additional protections for applicants under other federal laws such as the Americans with Disabilities Act and Title VI of the Civil Rights Act. This includes sexual orientation or gender identity.
  • Criminal History – Generally speaking, a landlord can deny an applicant because of their criminal history. However an applicant cannot be rejected for having been arrested (as this does not imply guilt) or if their record has been expunged.

How to Legally Deny a Rental Applicant

It is important for landlords to know how to legally reject an applicant. Landlords should send a rejection letter to any applicant that is being denied the opportunity to rent a particular property. Beyond being a common courtesy, there are legal reasons why a landlord should send this letter to a denied applicant. Those include:

  • The Fair Credit Reporting Act (FCRA) – The FCRA requires landlords to provide applicants with an adverse action notice if any basis for the action is due to information from a consumer report. For instance, if the rejection relied on a credit score a landlord must provide this notice. 
  • Documentation – Even if not required by law, it is good practice to have written communication of any adverse action taken against an applicant. Any rejection of an application has the potential for legal retaliation from the applicant. Having a letter documenting these reasons will be helpful if a landlord has to defend their decision in court.

What to Include in a Rental Application Denial Letter

When preparing this letter, it is important to know what specific information to include. This letter should include the following:

  1. Date
  2. Applicant’s name
  3. Applicant’s address
  4. Rental property address
  5. Specific terms – monthly rent amount, security deposit, and the lease term for the property subject to the application
  6. Professional greeting
  7. Friendly introduction in which the landlord thanks the applicant for applying
  8. Statement that the application has been denied and the specific reasons for the denial
  9. An offer to the applicant to reach out to the landlord if they have any questions
  10. Landlord’s contact information
  11. Landlord’s signature
  12. Landlord’s name
  13. Fair Credit Reporting Act Notice – The applicant has a right to know how their credit and other information is being used in the screening process. The letter should include a notice of their rights under this act, and where the landlord obtained this information from. This should include the contact information of any reporting agencies that provided a consumer report.
  14. Fair Housing Act Notice – A notice of the types of discrimination prohibited in the rental screening process under the Fair Housing Act.

There are other items a landlord may want to include in or with their letter depending on the situation and the policies the landlord has in place. These may include:

  1. The Right to Appeal – Some landlords have a policy that allows an unsuccessful applicant to appeal the denial. If so, the letter would inform the applicant that they have the right to appeal, how they can do so, and a deadline for submitting the appeal.
  2. Acceptance on Condition – In some instances, an applicant may provide some concerns, but the landlord is still willing to rent to them under certain conditions. In this situation, the notice may have extra conditions (e.g., co-signer, higher security deposit, first and last months’ rent, etc.) for approval of a tenancy.
  3. Supporting Documentation – A landlord can also decide to include supporting documentation such as a credit report if it was any part of the basis for rejection.

Make sure the letter is professional, yet polite. Kind words thanking an applicant for applying can go a long way. The goal of this letter is to convey specific reasons why their application has been denied, but in a friendly and courteous manner.

As discussed, there are legal requirements for rejecting an application and the specific content of the letter. If a landlord has any questions, they should contact an experienced real estate attorney to discuss further.

Proactive Measures to Avoid Applicant Issues

There are certain proactive measures a landlord can take in the screening process to ensure that they are fairly evaluating applicants. This will not only ensure that they are acting fairly, but can also protect them from accusations of unfairly denying an application. One of those ways is by having a policy in place for rejecting and accepting applicants. This type of policy would include the following structure:

  • Objective Parameters – Landlords should create objective parameters and apply them consistently for all applicants. First, a landlord should determine and define certain objective parameters for rejection or acceptance on condition (e.g. credit score less than 600 = rejection, credit score less than 700 = requirement for first and last month’s rent). Second, the landlord should put these parameters in writing to document their evaluation criteria.
  • Order of Evaluation – Another good practice is to review applications on a first-come, first-served basis. Every landlord should document when they receive an application. This shows that the landlord is evaluating applications fairly and consistently.

How to Send the Rental Application Denial Letter

The landlord should send the letter in a way that requires signature confirmation to document its receipt. This can be accomplished by certified mail. Even better if a landlord sends it by restricted certified mail which requires the addressee to be the only person that can sign for the letter.

The landlord should keep a copy of this letter filed with a notation of the letter’s delivery method and any other relevant information.