What Is an Adverse Action Letter?

As a landlord, you’ll eventually face situations where you have to make hard rental decisions. Maybe an applicant looks like a great fit, but their credit score raises concerns. Or perhaps you’re willing to approve them—just with a higher security deposit or a co-signer. In moments like these, it’s easy to step into fair housing trouble without realizing it. That’s why an adverse action letter is part of the rental process.

They allow you to take certain actions, such as denying an application or approving it with conditions, while staying compliant with housing and credit reporting laws. So what does an adverse action letter actually cover?

Below, we’ll break down what an adverse action letter is, when you’re legally required to send one, how it should be delivered, and what it typically includes. We’ll also walk through a simple example to show how it works in practice.

Main Takeaways

• Adverse action letters are required when you deny a rental application or approve it with conditions based on screening results, such as credit or background checks.
• The letter must include specific details, including the screening agency’s information and the applicant’s right to review or dispute the report used.
• Following a consistent, compliant process helps protect landlords from fair housing issues while keeping application decisions transparent and fair.

What Is an Adverse Action Letter in Real Estate?

In real estate, an adverse action letter is a written notice you send to a rental applicant after you make a decision that negatively affects their application. From our experience as a Philadelphia property management company, we usually send one when we deny an application or approve a tenant with conditions, such as a higher security deposit or a required co-signer.

Most of the time, this situation comes up when your decision is based on information from a credit report, background check, or tenant screening report.

So, rather than explaining or defending your choice, an adverse action letter simply communicates the outcome to the applicant. It then explains how they can review or dispute the screening report used.

When Are Landlords Legally Required to Send One?

Now, let’s look at the situations where landlords must send an adverse action letter. If screening information leads you to deny an application or approve it with conditions, sending one is not optional.

Here are some common situations where landlords must send one:

1. You deny a rental application based on screening results

If you deny an application because of low credit, a past eviction, or a negative background check, you must send an adverse action letter. This applies even when the decision feels straightforward or routine. The letter ensures the applicant understands the decision and knows how to review or dispute the screening information used.

2. You approve an applicant, but only with conditions

Sometimes you’re willing to move forward, but only with extra requirements, such as a higher security deposit or a co-signer. Even though the application isn’t fully denied, the law still treats this as an adverse action. In these cases, you’re required to send an adverse action letter explaining that the approval came with conditions.

3. You rely on a third-party screening or credit report

Whenever your decision depends on information from a tenant screening company or credit bureau, adverse action rules come into play. This remains true even if the report was only part of your decision-making process. If the screening data influenced the outcome in any way, an adverse action letter is required.

4. You deny a co-applicant or guarantor

You may approve the primary applicant but decide not to accept a co-applicant or guarantor after reviewing their screening results. When that happens, the person you rejected must receive an adverse action letter. The notice should clearly explain the decision and outline their rights related to the screening report.

What Must Be Included in an Adverse Action Letter?

To help simplify things, we’ve listed the key elements of an adverse action letter below. This gives you a clear idea of what needs to be included and what doesn’t.

Required Element	What It Means for Landlords
Notice of adverse action	You must clearly state that the application was denied or approved with conditions. This doesn’t need long explanations—just a clear outcome.
Name of the screening or credit reporting agency	List the company that provided the credit report or tenant screening information used in your decision.
Agency contact information	Include the agency’s phone number and address so the applicant knows who to contact for questions about the report.
Statement that the agency did not make the decision	Clarify that the screening company supplied information but did not decide to deny or condition the application—you did.
Applicant’s right to a free report	Inform the applicant that they can request a free copy of their screening or credit report, usually within 60 days.
Right to dispute inaccurate information	Explain that the applicant can dispute any errors or incorrect details found in the report.

How to Deliver the Adverse Action Letter

Once you’ve decided to send an adverse action letter, the next step is making sure it reaches the applicant in a proper and timely way. While the law focuses more on what the letter contains, how you deliver it still matters.

Here are the most common and acceptable ways landlords deliver an adverse action letter:

1. By email

Many landlords send adverse action letters by email, especially when the application process already happened online. This method is fast and convenient, and it works well as long as the applicant provided an email address during the application process. To be safe, make sure the email is clear, professional, and easy to reference later.

2. By mail

Some landlords still choose to send adverse action letters by regular mail, especially when they want a clear paper trail. In many cases, mailing the letter also adds a more formal touch, which some landlords prefer. If you go this route, be sure to send it promptly to avoid unnecessary delays.

3. Through your property management system

If you use a property management or tenant screening platform, the system may automatically generate and send the adverse action letter for you. This can help reduce errors and keep records organized. Even so, it’s still your responsibility to make sure the letter includes all required information.

A quick practical tip: No matter how you deliver it, consistency helps. Using the same delivery method for all applicants keeps your process clear and avoids unnecessary questions later.

Sample Adverse Action Letter Template for Landlords

Below is a sample adverse action letter that landlords commonly use after denying an application or approving it with conditions. You can adjust the details based on your screening results and the specific situation.

Sample Adverse Action Letter (Conditional Approval Example) Subject: Rental Application Decision Notice Dear [Applicant Name], Thank you for your interest in renting [Property Address]. After reviewing your rental application, we are able to move forward with conditions. Based on the information reviewed, including your credit report, we require a higher security deposit in order to proceed with the application. This decision was based, in whole or in part, on information provided by a tenant screening or credit reporting agency. The agency that supplied this information is: [Name of Screening or Credit Reporting Agency] [Agency Address] [Agency Phone Number] Please note that the screening agency did not make this decision and cannot provide specific reasons for it. You have the right to request a free copy of your screening or credit report from the agency listed above within 60 days of receiving this notice. You also have the right to dispute any information in the report that you believe is inaccurate or incomplete. If you have questions about this notice or wish to discuss the conditions outlined above, you may contact us at [Your Contact Information]. Sincerely, [Landlord or Property Management Company Name]

How Bay Property Management Group Supports Landlords

Handling rental applications isn’t always black and white. As screening results come in, landlords often have to make decisions that affect applicants in different ways—whether that means denying an application or approving it with conditions. In those moments, using an adverse action letter helps keep your process clear, consistent, and compliant. At the same time, it protects both you and the applicant by promoting transparency and fairness.

At Bay Property Management Group, we work closely with landlords to navigate rental screening and application decisions with confidence. Along the way, our team follows consistent, fair-housing–compliant processes and takes care of required notices, documentation, and applicant communication. Whether you manage a single rental or a growing portfolio, we help reduce risk, maintain compliance, and keep your focus on the bigger picture of running a successful rental business. Contact us today!