What are some examples of adverse actions?
An adverse action is any action by a landlord that is unfavorable to the interests of a rental applicant. It includes not only a landlord’s denial of a rental application but also an action by the landlord that imposes a burden not required of all tenants. Common adverse actions by landlords include:
- denying a rental application,
- requiring a co-signer or guarantor on the lease,
- requiring a deposit that would not be required for another applicant,
- requiring a higher security deposit that would not be required for another applicant, and
- requiring an increased rent amount that would not be required for another applicant.
As examples, landlords must send an adverse action letter to applicants who are denied a lease if any of the following describes the decision related to denial of tenancy even if other factors also played a part in the decision.
- A tenant screening company is hired by the landlord to provide a report that includes negative information about the applicant leading to denial of tenancy.
- A consumer screening agency is used that supplies only a credit report and the applicant is rejected on the basis of information in the report.
- The landlord pays someone on a contractual basis (as an independent contractor rather than an employee) to do tenant screening and the contractor’s report leads the landlord to conclude that he shouldn’t accept the applicant.
- The landlord contracts with a property management company to investigate an applicant and the landlord rejects an applicant based on what the management company says.
What if the rental decision is based upon something other than a consumer report? Federal law does not require a landlord to provide the report if the decision is based on information that the landlord or his employees verified on their own. This type of information might be information on the application form, a report from a previous landlord, or a record of an eviction obtained directly from county eviction records.
An adverse action report is generally not required if the basis for the denial of tenancy is based on:
- Information obtained from applicants themselves on the application form or in conversations with them or,
- Oral or written information provided by an applicant’s reference.
Landlords usually needn’t send a formal adverse action letter if the following describes the situation.
- The applicant is not accepted because the applicant does not meet the landlord’s rental standards and the landlord is unwilling to modify his rental terms and conditions such as rent amount, required deposits, or pet policy.
- Information supplied on the rental application indicates that the applicant cannot meet the landlord’s criteria – e.g., insufficient income.
- The landlord learns from a conversation with the applicant that he has to move in by a certain date because he’s being evicted and the eviction is considered to indicate a high risk.
- The landlord or his employee calls the applicant’s past or current landlord, employer, or personal reference who provides information that leads to rejection.
- A self-employed applicant provides tax returns that show an income below the landlord’s qualifying criteria such as income to rent ratio.
- Upon analyzing an employed applicant’s pay stubs the landlord discovers that the applicant was untruthful regarding place of employment or amount of income when filling out the application form.