How to turn down a tenant with bad rental history?

21 Replies

So, I was listening to the BP podcast and the subject of how to do background checks on your renters came up. I was wondering, how exactly would or should you turn down a tenant that has bad rental history so to avoid being taken to court for "discrimination?" Pacifically eviction history? Has anyone dealt with this before? Do you just say "oops we're all full at the moment.?"

Well bad rental history should have nothing to do with race but that is what people are usually concerned about.  I dont see why you cant turn them down if they do have a bad rental history.  Your making a decision based on the evidence you have.  

You just make "no prior evictions" part of your rental criteria. That is not discrimination (in the legal sense) just sound policy.

When some people don't get what they want, they throw the term "discrimination" around.  I would not tell them the place is rented, when it isn't, because if they see later it's not, they will have more of a basis to assume that is discrimination.  I would be in a real nice way and as apologetically as possible tell them that unfortunately the company/owners policy (this works best if they don't know that you are the owner) is such that we cannot accept anyone with an eviction, and based on the background check, and eviction came up for XX property XX year. Then wish them luck in their search. The nicer you are, the less likely they are to get angry and want to sue you.

What am I missing? If they don't meet the credit mark they cant move in. That's what you tell them. How could this have anything to do with any discrimination of their ethnicity? Why is bad credit being tied to ethnicity in the first place?

Discrimination in itself is not illegal. For example, I discriminate against people who don't have enough income to qualify. I discriminate against people who've been evicted. I also discriminate against certain occupations, like lawyers. There are a bunch of protected classes, but people with bad rental histories are not protected.

I wouldn't tell them that "oops we are full at the moment", unless you actually are. 

Thank you all for your answers! 

We try to keep applicants in a holding pattern until we can legitimately contact them to say we rented it to someone else.  We normally say as little as possible, less for them to get upset about.  Not sure if it is state or federal, but if a turn down decision is made based on info in the credit report, landlords are required to declare that (but not what the specific reason is, there is a standard form that can be used) and give them the info to contact the credit bureaus themselves.

We have no evictions as a stated criteria, but applicants don't always realize that there past poor behavior went far enough in the court system to be on the credit report.

In the past, we have used a template response for declines that looks something like this:

Dear applicant,

Thank you for your recent rental application. Based on provided information, we find that we are unable to accept your application for rental at this time.

This decision was based in whole or in part on the information provided to us in a Consumer Report or Investigative Consumer Report prepared on our behalf by a consumer‐reporting agency. Their mailing address and phone number are listed below:

TransUnion

2 Baldwin Place

P.O. Box 1000

Chester, PA 19022

877-322-8228

The credit reporting agency plays no part in the decision to take any action on your rental application and is unable to provide you with specific reason(s) for our action.

You have the right to a free copy of the report within 60 days of receipt of this notice and to dispute the completeness or accuracy of any information in the consumer report issued by the credit reporting agency.

Sincerely,

@Account Closed  

Thank you so much! @Michael M.  This was the exact wording I was looking for. 

Monteria, 

  I find that if you word your ads in a professional manner, use a registered business name & include that a credit check is required you cut down on a lot of the riff raff. You will still get those who know what to say to get a showing, all the while hoping the mentioned credit check in the ad was a bluff, or that they hope to charm you into not doing a credit check, etc.. Here is where a thorough application with the release for credit check & the required fee required with the filled out app shows that you mean business and that this is not your first rodeo. I've never got a completed app back with the $10 each adult from a deadbeat loser, pretty much anybody who got to that point got offered the rental. I've seen it all too often that people just love the place and want to move in right away, then when you hand them the two page app with all the questions & credit release, you could see it on their faces, the "oh sh*t look, it's a real app & credit check", they take it and tell you they will return it, yada, yada... and you never hear from them again. They do a self denial all on their own.

  ** at the time of application, I take a picture of their DL's for positive proof of their ID,  to make sure they are who they say they are and not using someone else's ID/credit to get the rental. I haven't run into that, but it's all too easy to get screwed relying on other peoples word.

For me, a prior eviction is an automatic disqualifier.  My application asks about prior evictions, and if they disclose it on the application I don't go any further.  They get a letter explaining to them that evictions are an automatic disqualifier and that no additional credit check or background check was performed.

The worst thing you can do is lie about the status of the unit. That will get you in serious trouble if they do decide to file a discrimination complaint.

Good luck.

@George C. Thank you for the response. You made some valid points that I will be considering in the future when searching for tenants!

Thank you  @Ursula Britt, no worries I will keep all lies out of it to avoid getting in any kind of trouble. Thank you for the advice. 

First off start with @Rob K.  advise about presentation. While I do what he has done, I also have had one or two people try and apply anyway. They have learned that not everyone who takes applications and application fees actually check them out. There is no short cut.

 Lastly, why do you feel compelled to "deny them"? You can put their application in "pending" until they get the eviction cleared up. I tell tenants, "If you are approved, I will call you in 24-48 hours." If they don't qualify, I move on to the next one. If they call me, I tell them I need more information on your eviction in ????. 

You only have to provide the credit letter if it is credit that is used to disqualify them. Eviction is a civil court case so no need for the credit letter. You can tell them verbally that they don't qualify if you want to go that route.

Refusing to lease a tenant with bad credit payment history is not discrimination.  You can refuse to rent to a tenant who you do not think will be making your rent payment.  Just because a person has had bad credit before does not mean that the potential tenant is a dead beat. There are extenuating circumstances where a person can have lost a job, had a loss of a business, medical issues, or divorce.  Look at the overall credit history and look at the last 12 months and see if he or she has been paying their bills on time recently.  If you look at their overall credit history and they had always been a dead beat, the chances are that they will remain to be dead beats and will either be late on their rent or not pay.  However, if they had a 10 year credit history and on year 7, 8, and 9 had a credit slump due to a long job gap and after they got their new job have re-established their credit, then I would take a chance with them.  If they are blowing off their recent bills, tell them once they learn not to have total disregard for credit , to come back and re apply.  You can always ask for two to three months security deposit also.  Make sure they have verifiable income also so you know they have the ability of paying rent.

Kind Regards,

Gustan Cho

Not accepting an application is different than denying an application to rent. We stop accepting applications after the vacancy has been filled. We also don't accept an application that is missing a signature or isn't accompanied by an application fee. We also won't accept an application if the person can't produce a valid government issued picture ID.

If a tenant completes an application and turns it in with the application fee, I process it. If I determine they don't meet our minimum criteria to rent, then I will deny them. If I haven't spent much time on the application and haven't run the legal and credit checks, I return the application fee along with our denial letter. If I have done a substantial amount of work in processing their application, and then determine they do not meet our minimum criteria to rent, I will deny them and retain their application fee. In our state we must notify them in writing with an "Adverse Action Notice".... which is a specific type of denial letter. 

The key is to have your rental criteria well thought out beforehand and in writing. Your rental criteria must be in compliance with non-discrimation laws and you must not do anything that would be considered discriminatory against a protected class. The federal government has established fair housing standards and lists protected classes. In addition, many states have added more protected classes to the list for their jurisdictions. 

You certainly can discriminate against people who have had an eviction, as you can discriminate for many other reasons, such as insufficient income or certain types of criminal convictions. No need to skirt the issue. Don't give a false reason, such as "we're full at the moment", if it isn't true.

@ Monteria Cook

Be sure to understand the "Fair Housing" law. In some cases, if you own three or fewer SFH units you might be exempt. Get familiar with the law first.

There are seven "Federal" protected classes for discrimination: race, color, religion, national origin, sex, disability, and familial status. Your state may have protected classes "In addition to" the federal protected classes. For instance, in Maryland we have 3 more, (one becomes effective starting 10/1/14). Then there are local/county protected classes for a total of 12 more. In total, Maryland Landlords could have up to 22 protected classes they have to know about.

Research your state. Google "Fair Housing Protected Classes New Mexico." Go to the source for the facts, either the state website itself or a reputable source, such as the state association of realtors. 

Err on the side of caution - it only takes an accusation to bring a case against you. Your then left with different individual interpretation of the law and a legal process to deal with.

There is some incorrect information in some of the preceding posts that must be pointed out. 

The Fair Credit Reporting Act (FCRA) requires specific things be done when there is an ADVERSE outcome based on information received in a report from a third party information agency. What is adverse to your applicant? Higher security deposit is, as well as denial of the application. Delaying or deferring the processing of an application can be adverse to the applicant; suppose they miss out on another rental while you are sitting on that application. Have your acceptance and rejection written down, give it to the applicant at the time you give them the application, and the decision on them should become more clear.

If your eviction data comes from a third party, then you have to comply with the FCRA. When you use an agency such as NTN to get your reports, they will usually supply you with a sample denial letter that they want you to use, so use it. If you did not get one from your reporting agency, then there was an earlier post that gave one, or you can use one I posted:

http://www.biggerpockets.com/forums/52/topics/90852-tenant-screening-uncovered-duis-jail-time-etc?page=1#p563573

And a link to one in the fileplace can be found in this next thread:

http://www.biggerpockets.com/forums/52/topics/8889...

Now, regarding any sample denial letter: your state may have some consumer protection laws that you would have to comply with as well, so check into that to see whether you will be required to include additional stuff in a denial letter. 

Just because somebody says they do things a certain way all the time does not mean that is the proper way to do it ...

I am able to look up evictions on a state website, should I just format a denial letter simple like:

Dear Bob,

Thank you for your recent rental application. Based on provided information, we find that we are unable to accept your application for rental at this time due to a prior eviction.

Sincerely,

Joe Landlord

Or should I use the template similar to that above that @Michael Modesto provided?

I just simply write declined on the application and put it in the declined pile. When they call I look up the reason and say your records show that you have xyz issue which is not acceptable with our acceptance policy. I don't apologize or play the sympathy card. Because then they try to reason with you. 

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