Legal Reasons to Deny a Rental Application

As a landlord, searching for the perfect tenant can feel overwhelming.

And as the applications flow in, you may wonder what valid legal reasons you have as a landlord to reject an unqualified applicant. Read on as we empower you with the legal knowledge you need to know both landlord and tenant responsibilities and rights to succeed as a military landlord.

First, Comply With Landlord Regulatory Guidance and Licensure

Before screening tenants, research any governing jurisdiction and licensure requirements in the state of your rental property, including possible county and local mandates. For example, a state may mandate that your property meet specific environmental requirements, such as lead or radon testing. The county may mandate that you obtain a business license and possibly a property inspection before issuing a rental license.

Some states have no licensure requirements for a landlord and rental property, while others have several layers of requirements for both the landlord and the physical property. You will need to start at the state level and research down to the local authorities to ensure that you and your property fully comply with any established mandates.

TIP: All states have some form of ratified Landlord/Tenant law mandates, with some states more onerous than others. Nolo is an excellent starting point for researching state-specific rental licensure requirements for both the landlord and property, along with tenant screening guidelines.

Photo from Canva

Potential compliance requirements include:

• State-mandated rental property requirements, particularly environmental tests and inspections. Does your state require lead testing, reporting, and proof of inspection for the property? Radon? Do mandates exist to inform potential tenants of environmental testing results before showing the property?
• Does the state, county, or city require a business license for you to operate as a landlord?
• Is the property in a Homeowners Association (HOA)? If so, are there any HOA "Covenants, Conditions and Restrictions" (CC&Rs) clauses, particularly exclusions, to operate as a rental property?
• Are there any state, county, or city property inspection requirements, such as the Department of Housing or Housing Authority, that need to issue an Occupancy License before you can legally offer the property for lease?
• Are there any city or county database enrollment requirements to capture property details, such as square feet, age, bedrooms, baths, basements (and risk of radon), and proof of environmental test results?

Landlords found non-compliant can face heavy fines for attempting to operate a non-licensed property. For example, a tenant who feels they were not screened fairly or discriminated against can begin their grievance process by researching if the property and/or landlord are properly licensed and registered with the municipality.

Landlords not in compliance are not viewed favorably by governing jurisdictions and expose themselves to fines, civil suits, and potential legal infractions. Do the legwork first to ensure that you are a legally operating landlord before attempting to do any tenant screening.

Understand Federal Fair Housing Law Tenant Protections

Once you are fully compliant with any required landlord responsibility, it's time to consider legal considerations when screening tenants. The most significant screening protection is the Federal Fair Housing Act or FHA.

Potential renters have protection from discrimination in several classes when searching for a home.

The FHA is described in-depth in our article, What Homeowners and Landlords Should Understand About the Fair Housing Act, but a simple understanding is:

“The FHA forbids housing discrimination based on race, color, religion, national origin, sex, disability, and familial status. Homeowners are legally bound to uphold the same terms and conditions for each applicant. Homeowners cannot attach different qualifiers to a protected class applicant, for example, requiring a deposit for one set of renters, but not another.”

As a landlord, you cannot deny a tenant based on any of the protected classes within the FHA and must use the same set of screening qualifiers for any applicant.

Photo from Canva

Legal Reasons to Deny a Tenant, Based on State and Local Landlord/Tenant Law

Within the confines of state and local law, landlords can legally reject an applicant for legitimate business, safety, or background concerns, such as:

• Poor credit history.
• Income that a reasonable businessperson would deem insufficient to pay the rent (monthly income 3x the rent is a common rule of thumb in assessing ability to pay).
• Negative references from previous employers, landlords, or property managers.
• A criminal conviction relevant to the person's suitability as a tenant and/or posing a safety risk to other tenants.
• A prior eviction.
• Misrepresentations discovered on the tenant's application.
• Valid occupancy concerns tied to health, safety, and sanitation, but tread carefully. For example, it would be reasonable that an 800-square-foot condo cannot suitably house a family of twelve or that an ancient septic system can only accommodate a family of four. But the landlord cannot adopt a low occupancy standard to exclude families, as familial class is protected.
• Smoking, including vaping. A landlord can legally refuse to rent to smokers, as smoking is not a protected class.
• No pets, some pets (such as cats or dogs), no dangerous breeds (as determined by a local authority), or limiting the number of pets, with a caveat.
• A landlord cannot deny an applicant a reasonable request to accommodate a Service or Assistance Animal under the U.S. Department of Housing and Urban Development protected FHA class disability discrimination. HUD has compiled a tenant screening tool to assist housing providers and landlords. A simple understanding in evaluating a reasonable accommodation for an assistance animal is that the animal is not a pet. It is an assistance animal that does work, performs tasks, or provides assistance or other therapeutic support for individuals with disabilities.
  
  

The key to legally screening and rejecting tenants is to apply the same disqualifiers equally to all applicants and, as required, inform the tenant why they were denied.

Photo from Canva

Options for Tenant Screening

Once you understand the legal reasons you can deny a tenant, you can request an applicant's information and proceed with screening.

Fortunately, there are various online options for screening prospective tenants, and RentRisk is one of the easiest and most secure tenant screening programs. It provides a straightforward tenant application, credit and criminal background check, rental history screening, and financial document portal.

Here's more info to help you screen tenants: Tenant Screening Tips for Landlords.

Two Potential, State-Specific, Sticky Disqualifiers for Legal Rejections

There are two prominent sticky disqualifiers where landlords must tread carefully when legally rejecting a tenant. These can vary widely in state-specific landlord/tenant law, for instance, in the interpretation and application of Alabama, Alaska, or Virginia laws.

1) Criminal History

Some states have enacted legislation making it unlawful for a landlord to use criminal history as a sole disqualifier and subsequently deny a housing unit. State law can be exhaustive, consistently changing, and politically volatile in whether the state considers criminal history a valid legal disqualifier for a housing unit and landlord.

A simple internet search of, "Can you deny a tenant for criminal history in State X?" should lead you to the applicable state's fair housing and civil rights departments and the state's interpretation of criminal history in tenant screening.

2) Source of Income

Each state offers housing assistance through state, county, or city housing and urban development departments. In short, an applicant requests financial housing assistance through a housing voucher or other rental assistance through a housing agency and, if granted, then uses that income to help pay for the rental unit.

Some states do not mandate landlord participation in housing assistance programs, and in those states, a landlord can refuse to accept a housing voucher and deny an applicant based on insufficient income. However, other states consider "source of income" a protected tenant class under their landlord/tenant law, making it illegal for a landlord to refuse to accept an applicant using a housing assistance program.

Photo from Canva

Searching for and screening tenants is a multi-pronged process, and understanding landlord and tenant rights and responsibilities is one of the best ways to set yourself and your property up for success. At MilitaryByOwner, you’re never alone.

Don’t miss our featured resource below, The Military Landlord: What to Know About Renting Out Your Home!