How to Reject a Potential Tenant (Without Getting Sued)

No one likes to say “no”, especially a landlord who is turning away a prospective renter in a tough market.  But the pain of choosing the wrong tenant will outweigh the costs of a vacancy.  Sometimes landlords have to be tough.

The trouble with rejecting a tenant, though, is the likelihood they will take their hurt feelings to their lawyer’s office or the housing authority.  Before the landlord realizes it, the next “prospect” who tours the rental is actually a “tester” conducting an investigation of their tenant screening practices. Fines and damages for lawsuits or housing disputes can range from the thousands to the hundreds of thousands, and even into the millions for widespread violations in large rental property businesses.

Here’s how to reject or deny an applicant without opening yourself up to legal liability

1. Honesty is the Best Policy

Often we want to say “No, no, it’s not you, it’s me.”  Get in the habit of saying “Well, actually it is you.”  Don’t try to sugar-coat a rejection, or you’ll talk yourself right into a legal tangle.  Tell the applicant the reason for the rejection.  This will offer them closure without the need for further legal action.

2 .Credit Reports

If the rejection is based on something in the tenant’s credit report, you have a legal duty to tell them so.  In addition, you must tell them which credit reporting agency gave you the information in the event they want to dispute the credit report.  Landlords can reject someone outright for credit problems.  You should, however, be prepared to justify how you made the decision. You must enforce the same credit threshold with every applicant.

3. Tenant Screening Questions

Discrimination occurs when a landlord refuses to rent to someone because of the impression they form about the person’s class, including race, color, religion, national origin, marital or familial status, gender, advanced age or disability.

The best way to avoid a discrimination claim is to avoid questions about the person’s class and focus on their behavior.  It is also advisable not to predetermine the “type” of tenant who they think would “fit in” to the property.

There are countless ways to run afoul of this rule, for instance, touting the proximity of your rental to a religious institution, describing the ethnicity of the neighborhood, or suggesting who might like the neighborhood.  Stating that a property is a good match for a young family or a single person are more examples of how a statement may be interpreted as discriminatory.

Do not reject a tenant because they are a member of a protected class.  Rejecting a prospective tenant because they are dressed in a certain way may also be considered discriminatory if you use pejorative words to describe it, for example, stating someone is dressed like a “gangbanger” can imply racial stereotyping and discrimination.  On the other hand, a landlord is not required to rent to the person because of their class status.  If there is a bona fide reason to reject them, like a poor credit report or a dubious reference from the previous landlord relating specifically to the payment of rent or behavior of that particular individual, you do have the right to reject them.

When making a determination about an applicant from a previous landlord or personal reference, be sure to stick to the same rules and only act on information that specifically relates to the person’s behavior, e.g. chronically late rent payments or disruptive behavior, and not concerns generated from that reference’s own personal biases.

4. Criminal Background Checks

Reject tenants with criminal history that could spell bad behavior as a renter – check fraud, disorderly conduct, for instance, and any violent or aggressive behavior that could place other tenants or neighbors at risk.  Some landlords are willing to let minor offenses slide, like parking tickets or traffic infractions. Wherever you decide to draw the line, apply it evenly to all applicants.

5. Eviction Reports

Tenants with a history of eviction can be rejected.  The cost of an eviction is significant, not just in legal fees, but in time lost without payment of rent.  A contested eviction can take months to resolve.  Once an eviction proceeding is filed, the tenant may be more likely to damage the rental property, and those costs can be enormous.

6. Rental Application 

Landlords can reject an applicant who did not complete the entire rental application.  Make certain that the applicant has signed the authorization for a tenant background check, including a credit report, and permission to contact the references listed.  Keep documentation of your contacts with the applicant to prove you did not violate the law when you rejected the applicant.  Most importantly, apply whatever criteria you use to reject or accept a prospective tenant evenly and objectively to all tenants.

Familiarize yourself with the Fair Housing/Equal Opportunity Laws to avoid litigation.

Are there any more points that I may have missed that you can share?

The Mlnarik Law Group, Inc. at (408) 919-0088 or john@mlnariklaw.com

-The Mlnarik Law Group, Inc., Civil Litigation Attorneys