You invested in a rental property and someone is showing interest. You’ve met the potential tenant, they have viewed the property, and have now asked to move forward with the application process. How exciting right?
As you go through the application and thoroughly screen the potential tenant, you must decide whether or not the applicant meets your requirements to rent the space. If not, you may consider denying the applicant. When you do, however, it better be for the right legal reasons – or you may find yourself in some hot water.
So, how do you properly deny a tenant without breaking the law? Let’s take a look.
Reasons You May Deny an Applicant
As you work through the tenant screening process, there are many reasons why you may consider denying an applicant. Here are some of the most common:
- Lack of income.
- Refusal of background check or credit check.
- A non-smoking policy.
- Pet policy.
- Unable to verify income.
- Lack of rental history.
- Poor rental history – missed rent payments, damaged property, prior evictions, etc.
- False information provided on application – or not completed in its entirety.
- Poor credit.
- Evidence of illegal activity.
- Lack of job security or negative review from the manager.
- The tenant doesn’t agree to rental terms.
When it comes to finding a tenant for your rental property, these are justifiable reasons to deny an applicant. However, you should note that local and state laws vary and it is wise to double-check those that govern your area.
What the Law Says
There are laws that protect rental applicants from getting denied due to discriminatory practices. These are in reference to the Federal Fair Housing Laws. You absolutely cannot, under no circumstance, deny a potential tenant on the basis of:
- National Origin
- Gender or Gender Identity
- Familial Status
- Marital Status
- Sexual Orientation
- Participation in the Section 8 Program or other subsidy programs
- Arbitrary Discrimination, such as denying a particular group of individuals.
Easy Ways to Deny a Potential Tenant
If you choose to deny an applicant from moving into your rental property, you need to advise them in writing. With the advancement of technology today, it is generally acceptable for this written denial to come in the form of an email.
Technically, unless your local law states otherwise, most landlords are not legally required to explain their reasoning for a denied application. However, if you want to avoid confrontation down the road from disgruntled applicants, it is often easier just to simply explain your reasoning.
There is, however, one exception. If you deny an applicant based on his or her credit report. It could be due to a low score, missed payments, overextended credit, etc. Whatever the reason, if it pertains to the credit report, the individual must be notified.
Having to deny a potential tenant can make some landlords a little leery or fearful. After all, nobody wants to be told no. Worrying about backlash can bring a heavy burden. As long as you do a thorough screening process for each and every applicant and are unbiased and legally fair with your decision, you will find that you have nothing to worry about.
Marina Shlomov, a managing partner at ALH|Podland Rental Homes Property Management is the author of many articles on Landlording, Property Management, and Real Estate Investing. A residential builder in the state of Georgia since 1999, Marina is an investor herself. Her property management company is intended “For Investors” and “By Investors” for a simple reason – she knows what investors’ goals are and she works hard to reach their goals. In her spare time, Marina likes to spend time with her family, friends, garden, read and travel. Check her out atwww.alhpodland.com. You can find Marina’s articles and comments at @rentalhomesatl on Twitter, on Facebook, Google+, Blogger. and YouTube, Bigger Pockets and REI CLub and LinkedIn.