Am I required to tell applicant why I am rejecting them?

Question

I'm about to start taking applications for my rent house.

If I reject a tenant who fills out an application (which is free) do I have to tell them that I am rejecting them and if so, do I need to tell them why?

Same question goes for applicants who pass the initial application phase but fail the criminal/credit/eviction screen.

Thank you.

Joe Butcher, Dallas TX

Steve Babiak · Answer

Further reading:

http://www.biggerpockets.com/forums/52/topics/88894-rejecting-applicants

Drey Taylor · Answer

Here's some info dug up from one of my books.  This info is specific to Texas.  Nothing on mandatory notifications unless it's in relation to the Fair Credit Reporting Act.

Legal Reasons to Reject an Applicant

You are legally free to reject someone for legitimate business reasons.

That includes factors that make them a bad risk, including:

You can also turn down applicants if there are too many people for the size of the unit. But your occupancy limit must be clearly tied to health and safety or other legitimate business needs. With a few exceptions, the maximum number of adults that a landlord may allow to occupy a rental unit in Texas is three times the number of bedrooms. (Tex. Prop. Code § 92.010.) If you violate this Texas law by having an excessive number of occupants, you may be sued by a neighbor or government agency and face a penalty of $500 for each violation, plus court costs and attorney fees. If you do not rent to someone because of negative information in a credit report, or you charge someone a higher rent or larger security deposit because of such information, you must give the prospective tenant the name and address of the agency that reported the negative information. You must also tell the person of their right to obtain a copy of the file from the agency that reported the negative information. The person must request it within 60 days of being told that your rejection was based on the individual’s credit report, or within one year of having asked for their last free report. You must also tell rejected applicants that the credit reporting agency did not make the decision to reject them and cannot explain the reason for the rejection. Finally, tell applicants that they can dispute the accuracy of their credit report and add their own consumer statement to their report. These notices, known as “adverse action reports,” are a requirement of the federal Fair Credit Reporting Act. The federal requirements regarding adverse action reports do not apply if your decision is based on information that the applicant furnished or that you or an employee learned on your own, such as by talking with a previous landlord.

Jay C. · Answer

I let my screening agency do it. I let the applicant know up front I have a criteria that they must pass. Its a pass or fail from the screening agency. I elect not to see the personal information with the hippa laws and its that simple. Before hand I set up the criterea.....credit score........several other things. Its pretty simple. I have put in tennents that have failed in the past as well. I let them know up front.a prior felony or previous exiction is an auto fail.

Joe Butcher · Answer

Excellent thread @Steve Babiak Thanks.

Bill Gulley · Answer

If you reject an applicant for credit reasons, yes and you need to tell them the issue, the reporting agency and give contact information to that agency.

If they just seem to be ugly nasty people, not really, you can simply say they do not meet you lease requirements and let them know if it isn't due to credit issues, if it isn't.

Usually this can be done nicely with a letter thanking them for their interest.

Federal law covers any denial based on credit. Otherwise, so long as you don't hit discrimination areas, if they have pink hair, you don't have to lease to them if your guidelines disqualify those with pink hair. :)

Kimberly T. · Answer

I've heard that it varies by state/local laws, don't know if that's true.  One thing that I believe is universal, though, is if you reject them in whole or in part because of their credit report, you have to send them one of those letters that states such and lets them know they have the right to a free copy (the company you use for credit checks may have a copy of such a letter for you to use).  My understanding is that in CA, for example, you don't have to tell them you're rejecting them or the reason why (other than the credit issue mentioned above).  Just make sure you're rejecting for a legal reason (don't discriminate).  We've rejected people for all sorts of reasons other than credit (showing up more than 15 minutes late to the showing appointment, having a messy car, not enough income, having a pet dog, having a past eviction, etc.).

I'd recommend researching what is required in your state and city.

Am I required to tell applicant why I am rejecting them?

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