Chapter 7

How to Accept or Deny Prospective Tenants

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The Complete Guide to Tenant Screening

Accept or Deny Tenants

The goal of tenant screening is to make an informed decision about prospective tenants. You want to choose a quality tenant who will:

  1. Pay rent on time
  2. Take care of your property

To determine if a tenant will be a quality tenant, you followed the steps of a thorough tenant screening process:

Pre-screen tenants

Review rental applications

Verify employment

Contact prior landlords

Analyze tenant credit reports and background checks

Each stage of tenant screening helps you gather information. Below, we outlined signs you should watch out for to make your decision easier:

Accept or Reject Tenants

How to Accept a Prospective Tenant 

If your tenant screening was successful, you should be able to determine if a tenant is able to pay rent on time and is likely to take care of your investment property. If you’ve found your ideal applicant, then it’s time to say yes!

You should accept an applicant via email. That way, you can follow up with next steps immediately. In your acceptance email:

  • Let the tenant know that your property is still available and you’d like to rent it to him or her.
  • Let the tenant know that the next step is signing a rental agreement.
  • Confirm the move-in date.
  • Discuss collecting first month’s rent and the deposit.
  • Create a deadline for when you expect the agreement to be signed by.
    • It’s reasonable to ask a tenant to sign a rental agreement within 24 to 72 hours of providing the agreement.

At this point, you should begin working on a copy of the rental agreement as soon as possible. You can draft the agreement with the tenant’s name, move-in date, etc.

We recommend setting a deadline for signing the rental agreement because it ensures that a tenant will not drag his or her feet. If your tenant doesn’t follow through, then you’re risking having a vacant unit on your hands. And chances are, you are relying on the tenant’s rent to pay mortgage bills. So it’s important to facilitate this next step in a timely manner.

This is especially easy if you are using our online rental agreement at Rentalutions. Our rental agreement is entirely digital. You can create, customize, and sign it all online.

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As for first month’s rent and deposits, we recommend that they be paid within a week of signing the rental agreement. And this should occur before the tenant receives a key to the unit and moves in. Be sure that the rent and deposit clears in your account, as sometimes tenant’s will initiate payments that don’t go through. This helps protect you from tenant scams.

In addition to using our rental agreement, collecting rent online is extremely easy with Rentalutions. Simply add charges, send them to your tenants, and you’re all set up- your tenant can pay with his or her checking account, debit card or credit card and it will land directly in your bank account. No more checks or waiting for standard mail.

Legal Implications When Denying Prospective Tenants 

The reason why you deny a tenant can have legal implications. According to Fair Housing Laws, you cannot reject a tenant based on:

  • National origin
  • Religion
  • Sex
  • Familial Status
  • Handicap
  • Marital status
  • Veteran status
  • Citizenship
  • Sexual orientation
  • Political ideology
  • Gender identity
  • Age
  • Participation in the Section 8 Program or other subsidy programs

Make sure you can pinpoint the reason why you’re denying an applicant. And even better, back up the reason with your notes and forms (a rental application, an email from an employer reference, etc).

This is why we strongly recommend you document every stage of your tenant screening process. This is easy to do if you use our landlord software.

How to Say No to a Prospective Tenant 

We recommend declining applicants in writing. Email works well.

If you’ve rented the unit to another applicant you can say:

“We’re sorry, but we’ve rented the unit to another applicant. Thank you.”

Remember, you cannot tell an applicant that the unit is rented unless it has actually been rented.This is why we recommend that you accept a tenant first, make sure this tenant is moving forward with the lease signing, and then reject all other applicants. However, if you haven’t yet rented the unit, you can say:

“We’re sorry, but we’ve rejected your application. Thank you.” 

This also ensures that if the tenant you choose backs out, you will have backups that you have not rejected yet. This is good business practice because you want to avoid a rental vacancy.

Many landlords wonder if they have to provide their prospective tenants a reason for the rejection. You are not legally obligated to provide a reason. However, if a tenant reaches out and asks, the professional thing to do is inform the tenant of your reason. It’s also legally risky to not provide an answer, as your tenant may be motivated to seek legal action in order to find out.

There is one exception to this rule- you need to tell a tenant if you are rejecting him or her based on a credit report. According to the Fair Credit Reporting Act (FCRA), any user of a credit report must notify the tenant when an “adverse action is taken” based on information in the report.

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  • Find Quality Tenants
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In other words, if you are rejecting a tenant based on credit score, debt, missed payments, or any information you found in a credit report, then you should notify the tenant of this reason.

Final Thoughts 

Tenant screening helps you find quality tenants. If you’ve been following our tenant screening advice, you are now able to identify quality tenants who will take care of your property and pay rent on time each month.

For more, check out our article on how to approve and reject tenants the right way.

If you’d like a full summary of our Guide to Tenant Screening, continue reading below.


Also published on Medium.

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