Congratulations—your rental property is in high demand! Maybe you recently invested in home renovations, or your rental’s location is gaining popularity. Whatever the reason, the applications are rolling in!
While having multiple applicants is better than none, evaluating several applications at once can be tricky. As you determine your best-fit renter, you must ensure you’re professional and compliant with industry standards. Otherwise, you could be at risk of legal repercussions.
Below, we’ve compiled a guide on how to choose between rental applicants to ensure you abide by your landlord rights and responsibilities throughout the selection process.
Can Landlords Choose Who to Rent To?
The simple answer is yes. Landlords have the right to choose the most qualified applicant as long as the decision is based on legitimate business reasons, such as sufficient income or credit score. The decision must also comply with fair housing laws.
The Fair Housing Act protects rental applicants from discrimination based on race, color, religion, sex, ethnic background, familial status, or disability. As a landlord, you must abide by FHA guidelines when selecting rental applicants. Based on your location, you may also be subject to state laws enforcing additional discrimination guidelines, such as protection for source of income, sexual orientation, or age.
According to the Fair Housing Act, landlords cannot perform any of the following actions based on a renter’s race, color, religion, sex, ethnic background, familial status, or disability:
- Terminate a lease
- Refuse to provide reasonable accommodations for renters with disabilities and/or service animals
- Falsely claim that a unit is unavailable
- Refuse to rent or show the property
- Set more restrictive screening standards for certain applicants, such as requiring a higher income
- Enforce different rules for certain tenants, like a stricter policy for late rent payments or fees
- Advertise a listing in a way that shows a preference for one specific group
Creating a Fair Applicant Selection Process
The only fair way to choose between multiple renters is through the applicant screening process. Doing so will ensure you pick an applicant based on impartial, legitimate business reasons, such as insufficient income, poor credit score, or prior evictions.
Below, we outline the step-by-step process for creating a fair applicant screening.
Request an application
To be considered for a rental property, each applicant must complete an application that includes their contact information, current/previous employers, income, type and number of pets, if applicable, and employer/landlord references.
Listing your property on Apartments.com will make this process easier for both you and your applicants. With our tools, renters can submit an application directly from your listing hassle-free!
Comply with fair housing laws
Review fair housing guidelines to ensure your screening process does not discriminate against candidates based on race, color, religion, sex, national origin, disability, or familial status.
Throughout the selection process, use an FHA-compliant list of criteria to review applicants. Using a written list will help you maintain consistency and ensure compliance and equal evaluations for every applicant.
Run a background check
Running a background check will provide necessary intel on your applicants. A thorough background check will cover an applicant’s rental history, financial stability, criminal record, and other relevant factors. This report will reveal a candidate’s potential red flags, such as prior evictions, criminal history, or legal battles. When you list with Apartments.com, you’ll receive an extensive, detailed background check from TransUnion®, along with eviction history and credit checks.
Check criminal record
Checking applicants’ criminal records is the best way to ensure the safety of yourself, your property, and your neighbors. However, you cannot deny an applicant based on arrest records. You can only reject an applicant based on criminal history if it shows dangerous criminal convictions that jeopardize your property’s safety.
If you are uncertain of an applicant based on their criminal records, request reliable references to prove their credibility. These could be from employers, landlords, or other significant stakeholders.
Review rental history
When choosing between applicants, contact each candidate’s landlord references to learn about their rental history. In doing so, you should inquire about the applicant’s past behaviors. Did they pay rent on time? In what condition did they leave the property? Did they abide by the lease agreement? All these questions will give you a good idea of what to expect from an applicant.
Sometimes, candidates will provide a landlord reference letter with their application. This letter essentially serves as an endorsement from their former landlord or property manager and can be used to help their application stand out. We recommend reaching out to landlord references even if your applicant provides a letter. Doing so will give you better clarification on their renter history.
Conduct a credit check
A full credit check will reveal everything you need to know about a candidate’s financial standings. Not only will it disclose their credit score, but it will also reveal years of credit history. Some things to look out for when reviewing an applicant’s credit report are late payments, overcharging accounts, maxed-out credit cards, significant loans, unpaid balances, or bankruptcies. Any of these red flags could indicate financial recklessness, which might make you reconsider the applicant.
Look at employment history
Employment history is another thing to consider when evaluating applicants. Not only will this verify their income streams, but it will also indicate whether an applicant is a loyal and responsible individual. Has the applicant been fired in the past? Have they been unemployed for an extended period? Take these factors into account when making your selection.
Request proof of income
When reviewing employment history, you should also request proof of income through bank statements, pay stubs, or offer letters. As a landlord, this will answer your main question: Can this applicant afford rent? If not, then the applicant is immediately ineligible unless you’re willing to negotiate prices.
The typical income requirement for renting is double or triple the monthly rent. This income can come solely from one renter or collectively from multiple occupants. You can make your income requirement as flexible as needed, but this is typically the gold standard for ensuring on-time, in-full payments from renters.
Common Mistakes in Applicant Selection
There’s a lot of room for error when choosing between rental applicants, and even the smallest mistakes can result in an FHA violation or other legal repercussions. Whether reviewing applications out of order or forgetting to document your process, minor hiccups can significantly cost you if you’re not careful.
Below are some common mistakes to avoid when choosing between rental applicants.
Reviewing applications out of order
Accepting applications out of order isn’t illegal, but it’s probably in your best interest as a landlord to accept (and deny) applicants in the order you receive them. Consider implementing a first-come, first-served system where early applicants take priority. Doing so will minimize any appearance of discrimination.
Your other option is to evaluate applications through a ranking system. While this is allowed, you must be careful when establishing your grading scale. Ranking factors must be the same for all applicants, particularly for those in protected categories under the FHA. The ranking system must be solely based on legitimate business criteria, such as credit score, income, and rental history. If two applicants are equally qualified, it’s best practice to choose the applicant who applied first.
Regardless of the method you choose, avoid making promises to applicants about their chances of renting the property. Misleading potential tenants could cause legal problems if the applicant relies on your word and turns down other available rentals or, even worse, gives their current landlords a non-renewal notice.
Not having backup applications
It’s always a good idea to accept backup applications in case your first applicant doesn’t work out. Perhaps they found a better-fit rental elsewhere. Or maybe their background check revealed incriminating information. You can never be 100% with an applicant until all is signed on the dotted line. So, it’s best to keep backup applications in your pocket.
To stay organized and save time, consider limiting your number of backup applications. Also, hold off on running credit and background checks until it’s time for the next application to be reviewed. In doing so, make sure to communicate with your applicants. Let backup candidates know that someone has already applied for the unit, but they are next in line to be considered. This will prevent any suspicions of discrimination and make every applicant feel acknowledged and welcome.
Forgetting to document the process
Having proper documentation is necessary throughout the applicant selection process. Not only will this help you stay more organized, but it will also help immensely if an applicant accuses you of violating fair housing laws.
You’ll want to document everything from start to finish. Every time you accept a new applicant, record your reasoning for choosing them. If you ask for references from previous landlords, document the day you called them and their responses to your questions. For example, make note if a former landlord flags an applicant for late payments, noise complaints, or property damage. Doing so will justify your rejection in case there’s any pushback from the applicant.
Following inconsistent policies
Consistency is key when selecting a rental applicant. Whether you’re following a first-come, first-served system or creating your own ranking scale, pick one method and stick to it. Keeping policies consistent minimizes the risk of FHA violations and ensures legal compliance. You’ll also be able to refer to your documentation to prove your history of consistency if an applicant questions a rejection or files a discrimination claim.
How to Decline a Rental Application
Rejecting applications comes with the territory of having a high-demand property. And while rejection isn’t fun for either party, it’s necessary if you’re going to find the best-fit renter for your property.
As we mentioned earlier, landlords have the right to decline a rental application if they have legitimate business reasons. Reasons to reject a potential renter are revealed throughout the applicant screening process outlined above. These reasons could be one of the following:
- Insufficient income-to-rent ratio
- Low credit score
- Poor rental history, such as prior evictions, property damage, or unpaid rent
- Bad references from employers or landlords
- Owning a pet, in the case of a non-pet-friendly rental (exempt if the animal is a certified support animal under fair housing laws)
- Smoking habits, in the case of a non-smoker rental
The best way to reject a rental applicant while maintaining professionalism and compliance is to write a rental application denial letter. In this letter, you should politely state your reasons for rejecting the candidate and express appreciation for their interest in your property.
If you’re denying an applicant for credit report findings, you must state these reasons in your letter. The Fair Credit Reporting Act requires landlords to disclose information discovered in the screening process with an applicant. Include the name and address of the agency that reported the negative information. You should also let the applicant know that they can obtain a free copy of the credit report by requesting it from the agency within 60 days.
If you don’t know where to begin with your applicant rejection letter, allow us to simplify things! Download our Rental Application Denial Letter template to get started.
Choose the Right Renter with Apartments.com
Having multiple people interested in your rental property is a good problem to have, but you should proceed with caution when handling several applications. Landlords can select the most qualified applicant based on credit, income, references, and other business reasons. They can’t, however, accept or deny an applicant based on discriminatory biases.
Whether you prioritize applications chronologically or use your own ranking system, it’s important to be consistent throughout the selection process. Be consistent with your methods, particularly when it comes to documentation. Doing so will help narrow down applications while maintaining compliance and professionalism.
Receiving applications and screening renters is one of the biggest parts of managing a rental property. If you use Apartments.com’s comprehensive suite of Renter Tools, you can receive and review applications online, making the selection process easy for both parties. Additionally, hiring a property management company can also help ensure fair, equitable decisions are made when evaluating rental applications.
This article was originally published on January 28, 2021, by Jamia Kenan.
