Rejecting Prospect Tenant (Non Refundable Application Fee)
Investor · King of Prussia, PA · Member since 2014 · 1k+ posts · 339 votes
Should my rejection letter read something like this:
We're sorry to let you know that the property at [address] is no longer available. At this time we've rented this property to other applicants. Thank you.
Do I need to add a reason why their application was declined? In this case it's income and employment is 3 months.
Here's the content of our response form: Just check the box and send the notice!
RENTAL APPLICATION REPLY
(Adverse Action Notice)
Date______________________
Attention: ___________________________________________________:
Thank you for your application(s) to rent one of our rental properties. We regret that we
were not able to rent to you at this time, for the following checked reason(s):
The rental was committed to another party at the time we received your application.
You indicated disinterest and/or declined our offer of the rental unit.
You tentatively qualified, but the rental was given to another party with equal or
better rental qualifications, or to another qualified party that applied earlier.
You needed to meet our conditions on rent, deposit, co-signer, use, or other.
You did not provide requested documentation in a timely manner.
Previous landlord/other references failed to provide needed timely information.
We were not able to hold the rental until the date you were able to pay the deposit
and/or initial rent, assume tenancy, or meet other stipulated conditions.
You did not meet requirements on pets, occupancy, smoking, cars, or other terms.
You did not meet our standards for references, income, felony, credit, history, etc.
Your application was denied based upon a written credit report with optional FICO
score; directions to receive a copy may be obtained by contacting us below.
Your consumer/credit report did not contain sufficient information.
You submitted an incomplete, inaccurate, unclear, or unsigned application.
You did not provide a phone number, call back, or return our calls or emails.
You did not submit the required screening fee.
Other_____________________________________________________________.
Submitted Screening Fee:
Since your submitted fee was used in the processing of your application, we regret
that we are not able to return any back to you
Since your submitted fee was not used in the processing of your application, we are
returning/refunding your payment totaling $ _________________.
Federal and State guidelines limit us from giving further details other than name, address,
and phone number of any consumer reporting agency resulting in denial (by contacting us
below for a free report copy with right to dispute). Thank you for your consideration.
______________________________________________ _______________________
btw... We call people directly to let them know why the application is being rejected. It rarely comes as a surprise to them since we had already gone through the criteria.
Don't do the background check until they meet all your other criteria. This way you can refund their fee having not already wasted it on a background check you did not even need.
Agreed!
Don't do the background check until they meet all your other criteria. This way you can refund their fee having not already wasted it on a background check you did not even need.
Agreed!
But it doesn't always work like that. People will tell you anything to get past that first criteria.
We had one about 3 weeks ago. The guy was a veteran, served in Iraq and got hurt, spent a year in hospital, and is now on military disability pension for the rest of his life. We really liked the guy, really excited that he put an application in, but we always ask the question - "are we going to find any evictions or criminal records?".
We got a resounding "no". Great.
We processed that application within the hour, and there were two problems. One could be explained as 3 criminal charges that resulted in not guilty verdicts. Fair enough, he doesn't have a criminal record. But then.....there was that eviction 14 months earlier.....
We had to go back to him, deny the application, and explain that the eviction blew the application up. They had a really good excuse but it's too late. Should have told me that before we ran the check.
Here's the problem, if they had told us about the eviction, and been up front about it - we could either have saved the application fee being wasted, or taken a view whether to continue on it, which we might well have - as I said, he was a nice genuine guy.
But by not disclosing it his credibility was shot.
it's explained upfront 'non-refundable'
All qualification criteria needs to be explained (somewhat scripted)
Your traffic needs to be documented
Care should be taken on a tenant who qualifies.
Fair Housing is a big issue.
Always conduct your business professionally
It's no guarantee the tenant will do the same, and don't think you can always make everyone happy.
Run all your aps, and let them know they along with others are qualified. Who ever comes in, brings their deposit, and executes their lease first gets the rental.
If they don't make it, offer to put them on a waiting list, and let them know their application is good for x days.
Great topic.
In Cali, we (landlords), are not entitled to any proceeds generate from an application, i.e. you charge $39 for the application fee but receive a valued landlord discount for 10 bucks from the service you use for the background check. Well that $10 must be refunded to the applicant and all transactions are to be memorialized by the issuance of a receipt of the transaction.
Its been my experience that everyone has some dirt on them, so it will be quite easy for you to establish justification for the rejection and you would really only need to to a judge if it ever got to that point. If that were the case you would have to keep a record of the application and receipt for a minimum of 4 years.
This is one of the main reasons I outsource this activity. I never wanted to get caught up in any Housing discrimination.
Keep us posted
Best wishes
The thing that really scares me in this thread, and @Steve Babiak touched on it briefly, is everyone here is willy-nilly writing a rejection letter that could get them into serious legal trouble.
When you reject a tenant because of information from a criminal, credit or investigative report [investigative would cover income and employment verification through a third party], you must provide an adverse action notice, which has specific requirements.
The law allows you to do it verbally but almost everyone sends a letter. The letter needs to say the form of the adverse action, where the data is coming from, that the screening company was not involved in making the decision, and how they can dispute and get a copy of their report. If you used a credit score as well then there are certain additional factors you need to add: credit score, score range, negative factors influencing score (and mentioning too many inquiries if that is a factor].
BTW if you have set standards in terms of screening you pretty much cover your FHA issues too by being obviously non discriminatory.
@Fred Heller I think there has to be some consistent job history. If they were jumping every 3 months from job to job that might be a problem. I'd want some consistency over time, no?
Finally, the application fee is a fee with multiple components:
Why should that be refundable? I realize it gets expensive if you apply for 8 places, but perhaps it serves a purpose as well in bringing in serious applicants only [where allowed by state law etc]
I would love for there to be a universal repository trusted by all across the board so applicants would only have to pay once every 30 days or something [and of course I would want that to be us, heh], but I think for all sorts of reasons in a competitive marketplace that's not going to happen.
Each property owner/manager has their own standards and wants to have their own data and solution to evaluate a tenant. I know some real estate agents and landlords will allow a tenant to bring their own report from annualcreditreport.com, but that doesn't really scale if you do volume.
If you can't absorb the time or the $40 to process an application then you ain't got much of a business and a charity would be letting the house rent-free.
On that note why don't we charge job applicants the cost of setting up and running their interview - after all it's the cost of running a job and most employers aren't charities either.
Aside from that the last thing I need is some disgruntled applicant lobbing a brick through a window in my property because they've had their money kept and been jerked off by some anodyne rejection letter.
That last part is just priceless!
@Ariel O. Aside from the email I sent the prospect tenant, I also called and sent them a text since their voice mail box was full and explained why I their app wasn't accept which was due to inconsistencies with job employment. I didn't touch on their credit but the ability to pay and lying on the application and the boyfriend didn't fill out and submit his application after 10 days since his girlfriend submitted her own even when I asked/reminded them that I needed it. It was a red flag right there.
@Account Closed @James DeRoest
But it isn't $40.
It's $40 times however many applications need to be submitted in order to get a house, some of which they will be rejected for even though they qualify because landlords have taken non-refundable fees and are running the process as a beauty paegeant.
I agree with your sentiment about the process being run as a beauty paegeant being wrong, but that's not what your ire was about.
And although it's not just $40, but $40 per adult, considering each adult must have some sort of income these days, it's still not a large amount of money.
James, I think you missed both points.
First, "the process being run as a beauty pageant" is likely to be EXACTLY what gets @lhe O.' ire (because pageants encourage obvious non-contenders to still pay all their fees regardless, smiling all the while)!
Second, "although it's not just $40, but $40 per adult" was not the issue, but rather, $40 multiplied by the number of applications needed to be made before they arrive at the top of a list - better odds than Lotto, but more expensive!
In the future if it's not specifically adverse action and you're 100% sure I would just send a one line email/text:
Dear X,
Unfortunately your rental application was denied.
Ayodeji Kuponiyi
No risk of suits then. If you do it because of info reported as mentioned, then it's adverse action letter all the way through.
@Account Closed
I'm going to send you my paypal information. If you wouldn't mind please send $40. It shouldn't be a big deal for you to "absorb," right?
How about vice versa, for every time you have to make an application to become a tenant in my town, all of which properties I own?...
@Ayodeji Kuponiyi @James Wise et al
You have a choice as a landlord as to how you conduct your affairs. We specifically set out to discourage hopeless applications at the earliest and every subsequent stage.
Stage 1 is when you first show interest on the phone. Yes we talk and don't just text because if you aren't going to qualify we'd rather not spend the time and money showing you the house.
Brief digression here. Yes we sometimes pay someone to show our houses, I'm usually out of state and my wife is usually at work. We see that also as a cost of doing business.
Stage 2 is when you come to see the house and that's another opportunity to persuade a non-qualified applicant not to apply so we try and do all our own showings.
Stage 3 or 2b if you like is when we go over the application form with you before you complete it and we emphasise all the things you are going to have to produce to support your application and all the things we are going to check.
Here is the result of that process.
Last month we had an applicant who told us she had never rented as a tenant before but was found to be a co-plaintiff on a lead paint landlord-tenant suit. This was the first completed application that we had ever had to decline. We returned her application fee, as we were not out of pocket for processing it. So it can be done.
I don't subscribe to the "you lied therefore you don't get your application fee back" school of thought. To those who do let he who has never applied for a job for which he didn't meet all the stated prerequisite qualifications, he who has never told an untruth on a resume and he who has never lied at an interview to get a job cast the first stone.
What I would recommend is examining their paystubs before you run their background/eviction check. This way if they do not meet the income requirement you can quickly detect that and give them back their app fee.
Yes, I know in the pre-screening process most landlords go over the income requirement, but you would be surprised how many people have no idea how much money they take home per week/month.
@Randy E. I agree considering I posted this on April 8th and hadn't received a comment until yesterday. However I appreciate the feedback and comments.
@Account Closed the lying aside, we went through the phone interview and then an on site visit and interview as well as going through the criteria. When I did my due diligence on employment history I found disrepancies, they didn't make enough or 3x the rent and one of the couple failed to fill out an application which I brought to their attention immediately and I waited 11 days for. I believe in karma and being fair 100%. They understood that the fee was no refundable. It was something I stressed over and over from our phone to face to face Interview.
Like others, I don't take a background check fee until I approve them based on what's on their application. I don't want anyone's money if I can't verify their employment (by actually speaking to their manager or HR), or their previous rental history (by actually speaking to their current or previous landlord) and that's what I tell them. I make it clear that I will be verifying all their info, and then doing the background check. Incomplete or false information are grounds for rejection, as stated on the app.
And yes, there have been applicants whose apps have been "approved", and then paid for their background check, only for me to find a judgment, false addresses, a charge of theft, etc. My application clearly states what are grounds for rejection. If they want a copy of the background check, I refer them to American Tenant Screening.
@Ariel O., I just call them and let them know. When they asked to see the report, I referred them to ATS.
I did have a recent tenant that I approved, whose background check showed 2 different addresses than she had on the application. She said she had never lived at those addresses, had documentation to prove her current address for the last 15 years, and sent it to ATS as well. I approved her as a tenant.
Another approved applicant a few years ago had either a judgment or an outstanding department store bill on her background check but provided proof that it had been paid.
If they're able to explain (and prove) things like this, and they're qualified in other ways, I'm good with them.
It's bad enough they didn't get the house. Shelter is a basic human need and they didn't hurt you by applying. So instead of coming here to ask how you should phrase your rejection letter designed to keep their money why not just return it.
You wouldn't like it if it were done to you and you wouldn't like it if it were done to your child.
I'm just curious, Ihe... do you actually own or operate any type of business? If you have 12 applicants for a rental property, and you spend $35/each on background checks, how long do you think you'd stay in business by refunding the application fee to each?
The fact that shelter is a basic human need does not mean it is free. Food and water are also basic human needs, and neither are free.
We never ever have 12 applicants for a rental property because we don't do not conduct our application application process like a beauty paegeant.
We process one application at a time and we accept that application if it qualifies and only if it doesn't will we invite further applications. I'm not the only person in this thread who operates that way so it shouldn't lead you to speculate as to whether I actually run a business.
We do our own background checks so we don't pay for those. The only thing that we would have to pay for is the credit check but since we defer that to that last and we have always made a decision by the time we get to that stage we don't run the credit checks (I have documented extensively in other threads why they are not helpful to us).
In a nutshell, by
a) rigorous early weeding of applicants.
b) only paying for credit check and deferring that till last
c) always knowing whether an application will be successful before the credit check stage
d) doing our own background checks.
we are able to refund unsuccessful applicants.
For the avoidance of doubt if we haven't decided we can accept an application by the time it gets to the final stage (credit check) we reject it.
@Ayodeji Kuponiyi
@Jay C. I don't understand. I didn't screen multiple parties at once. I told the couple that I would have to run a background check on both of them. The lady dropped her app a week later than we agreed upon (I had to call her to see if she was still interested) and I told her immediately that her boyfriend's app was missing. She informed me he would fill it out and 10 days passed with no response. I even called/emailed her to 3 days after I informed her that I need her boyfriend's app and no response.
I already ran the girl's background and called her employers and what she had on her app didn't match what her employers told me. With all this I simply told her "Thank you for your interest at 123 Main Street but your application was rejected. Best of luck on your search."
All in all this was a learning process for me. We learn from our mistake and we turn it into a positive for next time. I'm not asking for trouble, just a great tenant.
If your not screening multiple parties at once then no worries. Never take funds until you have looked over the app and its complete. Thats on you to do it right for your tenants.