How to write a rental application denial letter

Disclaimer: This article is not legal advice. Legal information is not the same as legal advice, where an attorney applies the law to your specific circumstances. Consult an attorney for advice on your interpretation of this information or its accuracy. You may not rely on this article as legal advice, nor as an endorsement of any particular legal understanding.

Reviewing rental applications is so important because it can help you select the right applicants and reject the ones who aren’t an ideal fit for your property. Once you’ve let your future tenant know they’ve been accepted, you also need to reach out to those who were rejected. You’ll have to issue a rental application denial letter outlining the reasons for your decision while following the Fair Credit Reporting Act (FCRA) requirements.

Whether you’re a landlord, real estate listing agent, or property manager, here's what you need to know about when you can reject an applicant, the legal considerations to keep in mind, and tips for writing a professional and effective rejection letter. 

What is a rental application denial letter?

Also referred to as an adverse action notice, a rental application denial is a formal document sent to an applicant when you decide not to accept them as a tenant. It must contain the reasons for your choice along with information about the consumer reporting agency you used to pull their credit report. In addition, you must provide the applicant with a copy of the report and information on how to dispute inaccuracies. 

Valid reasons to deny a rental application

You must base your rejection decision on objective, non-discriminatory criteria that applies equally to all applicants. To comply with fair housing laws, your rejection criteria must not be due to race, color, religion, sex, national origin, familial status, and disability. Below are several legal reasons why an application may be rejected:

Income-to-rent ratio

Most agents and landlords require applicants' monthly earnings to be at least three times the rent. Insufficient income is a red flag and gives you the right to deny an applicant, as you want tenants who can pay rent in full and on time every month. 

Poor credit history

If you run a credit check on an applicant and discover they have a low credit score it could suggest they have a history of late payments and may pose a financial risk to you. 

Criminal history

You can deny a renter's application based on their criminal record if the record includes serious offenses that may threaten the safety of others or the security of your property. 

Negative rental history

A solid rental history is often a key factor in tenant selection. If an applicant has a history of evictions, frequent late payments, property damage, or their previous landlords have shared negative feedback about them, you can legally reject them. 

Incomplete or inaccurate application information

If an application is incomplete or you can prove the information supplied is inaccurate or false, you have the right to issue a rejection. An applicant may intentionally leave some of the fields empty because they have something to hide or, worse, they may have purposely chosen to mislead or deceive you. 

Exceeding occupancy limits

You can also deny an application if the number of occupants exceeds legal or safety limits, which are typically set by local housing codes or fire regulations. Similarly, if you’re able to fill vacancies quickly because of high demand and you’ve received more applications than you can accept, you can legally tell an applicant there are no more units available.

Legal ramifications of unfairly rejecting a candidate

Unfairly rejecting a rental application can have far-reaching legal and financial consequences. To avoid these risks, your application and screening processes must be fair, transparent, and in compliance with all relevant laws.

Lawsuits and fines

If a rejection is based on discriminatory criteria such as race, color, religion, sex, national origin, familial status, or disability, it can result in a fair housing violation. Regulatory agencies, such as the The U.S. Department of Housing and Urban Development (HUD), can investigate complaints and, if violations are found, impose fines, require corrective actions, and mandate policy changes.

Damage to your reputation

Illegal rejection practices can lead to negative publicity and a loss of trust and potential tenants. Applicants who feel they haven’t been treated right may leave negative reviews online or share their experiences, further harming your reputation.

Legal costs

Legal action taken by rejected applicants can result in costly litigation expenses, including significant legal fees and settlements. If a court finds you guilty, you may be required to pay damages such as compensation for emotional distress, punitive damages, and other legal fees.

Tips for writing an effective rental application denial letter

Crafting a denial letter requires clear communication and a thoughtful approach. Here’s some advice on how to let someone know they’ve been rejected. 

1. Be concise

Start the letter by stating that the applicant’s rental application has been denied. Then mention the specific reasons why to help the applicant understand the basis for your decision.

2. Adhere to legal requirements

Ensure that the denial reasons comply with fair housing laws by avoiding discriminatory criteria. Additionally, if the decision was influenced by information from a credit report or background check, you must include a notice informing the applicant of their right to obtain a copy of their report and dispute any inaccuracies, in accordance with the Fair Credit Reporting Act (FCRA).

3. Be professional

Write the letter in a formal and respectful tone to minimize retaliation and demonstrate that the decision was made objectively. Include your contact details so the applicant can reach out if they have any questions or need further clarification.

4. Be compassionate and tactful

Recognize the effort put into the application process and express appreciation for a candidate’s interest in the property. You can also offer general advice on how they might improve their application in the future or connect them to additional resources if needed.

5. Document everything

Keep a copy of the denial letter and any related documentation for your records to ensure compliance and address any future disputes. Send the letter using a method that confirms receipt, such as certified mail or email with a read receipt, to guarantee that the applicant receives it.

6. Be timely

Send the denial letter as soon as possible after making the decision. Timeliness helps the applicant move forward with their search for housing without unnecessary delays.

Rental application denial letter FAQ’s

What are some helpful rejection parameters I should set?

Set clear rejection parameters such as requiring income to be 2.5 to 3 times the rent, a minimum credit score, and a positive rental history without recent evictions. Define acceptable criminal history criteria, require all necessary documentation, and enforce pet and occupancy limits. 

‍What if an applicant asks for reconsideration of their application?

If an applicant requests reconsideration, review their request objectively and assess any new information or changes in circumstances. Communicate your final decision clearly, ensuring it aligns with your policies and legal requirements, and provide feedback if applicable.

How long should I keep a copy of the denial letter?

Maintain a copy of the denial letter and any related documentation for at least one year. This helps ensure compliance with legal requirements and provides records in case of any disputes or audits.

What are some ways to prevent rental application denials?

Communicate your requirements clearly to applicants ahead of time and provide them with guidance on how to meet your criteria, including tips on improving their credit score or addressing past rental issues.

For a free adverse action notice letter template, click the link below:

Free Rental Application Adverse Action Notice