Reasons Landlords Can Deny Rental Applications and How to Do It Properly
Screening rental applications is one of the most important tasks a landlord has. Our guide – the Complete Guide to Tenant Screening – tells you the process to help get it right so you can avoid pitfalls and mistakes.
Once you receive applications and have screened them, you face the next step: approving one applicant and denying the other applications. This is one of the most legally significant steps because you must adhere to objective standards and tenant rights through Fair Housing.
This article explains the most common reasons a landlord can deny rental applications, the proper way to handle those decisions, and the real risk: denying an application even if they meet your rental standards.
The Purpose of Denying Applications
The purpose of tenant screening is to identify consistent and stable individual(s) who can pay rent, maintain the property’s condition, and reduce future stress and hardship to you.
The way to get to this ideal end-point is to have clear standards or requirements for who you are seeking for the property. Those who do not meet those requirements can be outright denied. Those who meet the requirements are eligible for acceptance into the rental — but not guaranteed.
The reason is simple: you are seeking the most qualified based on income, credit, rental history, stability and experience in rentals, number of occupants, pets, and more. For all applicants but the best, you deny them the right to lease the property so they may proceed to find another suitable rental for them.
The Process Landlords Need to Use to Deny Applications
Landlords should follow a clear and ideally objective process for reviewing and denying applications. It should be carried out in the following steps:
- Determine your rental requirements (income, credit, pets) and preferences (rental history, length of expected residency, move-in date).
- List these requirements on your rental listing, or share with interested parties who reach out.
- Compare all applications to this standard and rank applications without personal judgement.
- Select the resident who best fits your requirements and preferences.
- Notify them and secure temporary lease terms — pending a lease agreement.
- Then, notify all other applicants of their denied application.
- Send an adverse action notice, and include copies of their application or credit report.
There are two important parts about this process, which are new legal requirements per California’s state law.
First, you are required to list your rental requirements for interested parties; failure to do so entitles the applicant to a refund of their application fee.
Second, you are required to provide a copy of the credit report you collected, should you serve them a denial notice, which is legally termed an adverse action letter.
Legal Reasons Landlords Can Deny Applications
Landlords are able to deny applications outright should a disclosed requirement be unmet by the tenant. What is key is that it must be based on a “black and white” requirement. These “black and white” requirements are subject to your preference, and you can require a minimum credit of 550 or 750 — the choice is yours. The key is to enforce the same standard for all applicants, regardless of color, race, religion, age, etc.
Black and white requirements you can require:
- Minimum income (for example, 3.5x income to rent) is not met
- Minimum credit score (for example, 750 credit) is not met
- Negative rental history, such as outstanding debt, late payments, and NSF payments, is present
- Income or employment verification cannot be completed
- The applicants have pets that are not service or emotional support animals, and you do not allow it
The other type of requirement is “grey,” and can be thought of as preferences. These are “nice to have” characteristics and are not as clean a way to deny an application, but are valid concerns.
Grey area preferences you can seek are:
- Move-in date
- Overall debt obligations compared to income
- Number of occupants relative to the property size (be careful of this one!)
Illegal Reasons for Denying Applications
Beyond the black and white requirements set by landlords, landlords must adhere to fair housing laws and not discriminate against applicants for the following:
- Race
- Religion
- National Origin
- Sex
- Disability
- Familial Status
- Age
Furthermore, California has other protections that are unique to the state, which include:
- Unable to deny should applicants be in housing assistance, rental vouchers, Section 8
- Should an applicant be in housing assistance, their credit is also not a reason to deny them
- Tenants with an emotional support animal (ESA) or service animals must be treated as if those pets don’t exist as part of their application
- Number of occupants in some cases, as California allows up to 2 people per bedroom + 1 extra on the property. So a 3-bedroom home can legally have 7 people, such as 2 adult parents, 1 grandparent, and 4 kids.
How Landlords Can Deny Applications that Meet their Requirements
What happens if you have an application that does meet your requirements? In fact, you get multiple ones, and you need to select one but deny the others. How do you deny the other applications, and what do you tell them?
Simple — you tell them that while they did meet your requirements, you selected a different candidate who also meets your requirements, and the property is no longer available.
So long as you have multiple applications that meet your black and white requirements, you can now be selective based on different traits like:
- Best available move-in date
- History and desire for long-term tenancy vs short term plans
- Enthusiasm for the property
When multiple applicants are eligible, you can decide who you best deem a fit.
As a caveat, we do recommend good business judgment when approving and denying applications, and that comes down to:
- Best qualified candidate with the highest income, credit, and cleanest rental history
- First qualified candidate who meets the requirements is offered the residence
Best Practice for Verifying Applications to Approve or Deny
Finally, one tip when leasing your home and vetting applications: reviewing and approving applications can be difficult when you have people rushing for an approval or denial notice, others dragging their feet to get documents, or someone who barely meets the requirements but is not an ideal fit for the home.
What are you to do as the landlord?
Our recommendation: when you are providing a tour of the home to tenants, inform them that you will review applications on a set date — for example, 7 to 14 days from now — and that they’ll have until then to submit an application and documents.
This does a few important things:
- It tells all applicants when you’ll have an answer on their application so they don’t need to ask for updates every day
- It gives you a chance to collect as many applications as possible, giving you a wider pool to select the best candidate
- It weeds out applicants who are not serious if they do not submit required documents such as pay stubs, personal info, etc.
This option could be damaging if an applicant applies for other properties in the interim.
The solution is to review applications as they come in, and if someone strong applies, pursue them immediately. Otherwise, the gap of time gives you a chance to find a good tenant who is a fit — after all, you only get one chance at this before they move in.