How to Legally Decline a Tenant Application

What is your ultimate goal as a landlord? Finding quality tenants to fill your rentals, pay rent on time, and be a positive addition to the community. The best way to find and vet those potential residents is by leveraging a thorough tenant screening process.

Tenant screening verifies income and employment and helps you gauge a tenant’s quality, minimizing the risk of costly evictions, future property damage, and more. While we wish every applicant were a perfect fit and we could approve them all, that’s just not reality.

You will have to reject a tenant’s application. It could be due to bad credit, insufficient income, a previous eviction, or other valid reasons. But the key is to navigate these situations carefully, ensuring you act legally and ethically—all while following best practices and applicable laws, like the Fair Housing Act. 

We’re breaking down how to reject a tenant application legally and ethically and avoid legal trouble.  

Establishing Clear Tenant Selection Criteria

Part of the tenant screening process is establishing clearly defined and objective tenant criteria, like:

• Stable employment and income
• A solid rental history
• A credit score that meets your minimum requirements
• A clean background check

Documenting these criteria allows you to make fact-based decisions instead of being subjective. The criteria should be transparent and you should communicate it clearly with potential renters so they know what to expect. Consistency is key to maintaining a fair and equitable screening process. 

On top of identifying and documenting tenant criteria, you’ll want to confirm that criteria comply with local regulations and the Fair Housing Act—a federal law that ensures equal access to housing opportunities. By complying, avoid potential tenant discrimination lawsuits, like violations based on race, religion, or disability.  

A thorough tenant screening process helps mitigate the risk of discrimination backlash and the possibility of renting to individuals who could pose a threat to residents or the property. 

Common Legal Reasons to Reject a Tenant Application

Not sure how to reject a tenant application legally? There are several legal justifications for declining a tenant application—from insufficient income to poor credit history to a suspicious background check.

We’re sharing a few of the most common (legal) reasons why applications get denied.

Insufficient Income or Unstable Employment

Insufficient income is one of the most clear-cut and obvious reasons to reject an application. If they can’t pay rent, you obviously don’t want them as a tenant. But what constitutes sufficient income?

Many landlords establish an income baseline for approval that follows a 3:1 income-to-rent ratio. This ratio shows whether a potential tenant’s income is 3x the amount of the rent. So, if rent is $1,000/month, they’d need to make at least $3,000/month to qualify for approval.

Another legal way to reject a tenant application is by looking at their employment status and stability. Request recent pay stubs and contact their employer to verify income, position, and duration of employment.

You can also request bank statements to confirm how much money they make. But make sure you review everything carefully—financial document fraud isn’t uncommon. 

Poor Credit History

If an applicant has a poor credit score (typically under 600), it could be a potential red flag that they won’t be able to pay their rent or pay it on time. While you set the specific credit score cutoff for your property, most landlords consider a score of 620+ to be good and a score above 670 to be excellent.

When you receive an applicant’s credit report, look out for:

• Any delinquent accounts (payments past due)
• Bankruptcies
• Charge-offs (when creditors can’t collect a debt and leave a negative mark on the credit report)

These may all indicate that the applicant won’t be a reliable tenant and can give you legal standing to reject a tenant application.

Negative Rental History

A negative rental history serves as a glaring red flag that a potential resident might make a poor tenant due to undesirable previous behaviors. These include:

• Previous evictions
• A history of late payments
• Property damage
• Unresolved conflicts with a landlord

A renter’s previous behavior just might be the best predictor of how they’ll act once they become tenants at your property. Carefully review their rental history to determine whether you should approve or reject a tenant application. 

Criminal Background

If you uncover a criminal history during the vetting process, you need to ensure you follow all local, state, and federal laws around tenant rights (to avoid violations). You’ll also want to consider the nature, severity, and recency of the crime.

For example, someone convicted of a misdemeanor five years ago may make a better tenant than an applicant with multiple felonies over the past decade. Consider these factors when determining whether you’ll accept or reject a tenant application.

Incomplete or False Information on the Application

Potential tenants may intentionally leave out key details or falsify information—like using a fake ID or fraudulent documents—to increase their chances of approval.

If you discover that the applicant has indeed falsified or left out vital information, you can legally reject a tenant application, especially if their income or employment history is false (or inaccurate).

Reasons You Can’t Use to Reject a Tenant Application

While there are many legal reasons you can reject a tenant application, there are just as many scenarios where you can’t. 

Under no circumstance can you deny a tenant application based on discrimination. The Fair Housing Act protects individuals based on the following classifications:

• Race
• Color
• Natural origin
• Religion
• Sex (includes gender identity and sexual orientation)
• Familial status (protects families with children under the age of 18)
• Disability

Violating the Fair Housing Act can result in civil penalties—including fines—along with the possibility of legal proceedings and reputational damage. 

You can’t ask questions founded on any of the protected characteristics and should avoid rejecting an application based on a family’s type or size, disability status, or gender identity. For example, rejecting a Jewish family based on their religion is illegal.

You’ll also want to adhere to any local and state-level laws.

Best Practices for Legally Declining a Tenant Application

Rejecting a tenant application is never easy. But… there is a right way to do it politely—while still complying with fair housing laws. Best practices include keeping thorough documentation, clearly stating the reasons for denial (in writing), and maintaining transparent communication. 

Document Your Decision-Making Process

As a property manager, it’s paramount you keep detailed records of every application and document the reason(s) for denial. Whether it’s insufficient income or a lengthy criminal record—document everything.

You’ll also want to store all communication between parties, like emails and text messages, for reference later. Comprehensive documentation goes a long way in protecting against potential discrimination claims because it shows every step you took and clearly explains your reasoning. 

Use a Written Adverse Action Notice

Always put everything in writing and use a written adverse action notice. The purpose of this letter is to formally detail the reason(s) why you rejected a rental application—it could be anything from a low credit score to negative details revealed in a background check. 

An adverse action notice should include:

• The name, address, and contact information of the consumer reporting agency
• If applicable, the credit score you used to make a decision
• A notification about anti-discrimination laws
• An explanation of your decision
• Why you sent the notice
• A statement informing the applicant of their right to request a free copy of the credit report (if you rejected them for credit-related issues)

Regardless of the basis for rejection, employing an adverse action notice is required by federal law under the Fair Credit Reporting Act (FCRA). You might also use this notice may include the requirement of a larger security deposit or a co-signer.

Be Transparent and Professional

Transparency is always a good approach—especially when communicating the decision to reject a tenant application. Handle the conversation professionally and with respect, and do your best to communicate with the applicant promptly.

Share feedback with the applicant without violating privacy or disclosing too much information. It’ll likely be hard for them to hear but focus on the approach—kind, respectful, and clear.

The Role of the Fair Credit Reporting Act

The Fair Credit Reporting Act is a federal law that safeguards consumers’ privacy and controls how you collect and disseminate their credit information—protecting applicants from inaccurate credit reporting.

The FCRA ensures that when you evaluate consumer reports as part of the tenant screening process, you do it equitably and transparently.

If you reject a tenant application based on credit history, you’re legally required to provide them with a copy of their credit report. Per FCRA, you must also supply the applicant with a notice outlining the reason(s) for denial, along with the name and contact information of the credit reporting agency. 

Applicants have full rights to dispute the findings of a screening report. If they do, take the following steps to remain compliant with FCRA:

1. Carefully examine the report. Get a clear understanding of the details the tenant’s disputing.

2. Review the source. Contact the screening company and request a dispute form.

3. Provide documentation. State the reason for the dispute and give the applicant any supporting documents.

4. Maintain communication. Keep an open line of communication with the applicant and inform them of any progress.

5. Consult with an attorney. If legal issues are involved, seek counsel from an attorney.

Creating a Standardized Rejection Process

When screening tenants, maintaining consistency is essential. Using the same process for each applicant ensures fairness and legal compliance. 

Creating a standardized rejection process that includes defined criteria will help mitigate the risk of discrimination claims, while templates and scripts can make communicating rejections a standard, simple process.

Even with templates, make sure you run everything through an internal review to guarantee you meet legal requirements. 

Want to start with templates? Check them out here or copy and paste the one below.

[Your Name]

[Your Contact Information]

[Date]

[Applicant Name]

[Applicant Address]

 

Dear [Applicant Name],

We are writing to inform you that your rental application for the property located at [Property Address] has been declined.

After careful review of your application, we determined that it did not meet our established criteria for tenancy, specifically regarding [Reason for denial, like credit score, income verification, rental history, etc.].

We understand this may not be the news you were hoping for, and we appreciate your interest in our property.

If you have any questions regarding this decision, please do not hesitate to contact us at [Phone Number] or [Email Address].

 

Sincerely,

[Your Signature]

[Your Printed Name]

Handling Rejected Applicants Professionally

No property manager looks forward to difficult conversations, but you can make it more bearable by handling rejected applicants professionally and being as clear as possible. 

To avoid any potential backlash, offer alternative solutions (like suggestions for improving credit). You can also give applicants helpful resources, like directing them to local housing assistance programs. 

Rejecting an Application the Right Way

Denying a tenant application can be daunting, but it doesn’t have to be. You can reject a tenant application professionally, legally, and ethically. First and foremost, make sure you’re denying an applicant based on legal reasons, like poor credit, inadequate income, or a prior eviction. 

Build a comprehensive screening process that includes defined selection criteria and make sure you document everything. Follow best practices, like using a written adverse action notice, and foster transparent communication to reject a tenant application effectively and efficiently. 

Maintaining compliance and professionalism throughout the screening process will help uphold your reputation and attract stable and reliable tenants. And to make sure you stay compliant with local, state, and federal laws, conduct regular reviews of your process and policies.

Done right, you can legally and ethically reject a tenant application.