Direct Deposit Drama

7 Replies

What are the tricks and traps that tenants can use when they pay directly into your account electronically?

Currently, I use electronic direct deposit because I like not having to deal with late rents.

But, now, I'm facing a issue that makes me question if I should continue using it.

My tenant made a repair without my permission and wants to deduct $500, the cost for repairing the garbage disposal, from January's rent.

I told them not to do it because that is not allowed in the lease and that I first needed to see the invoice.

But, the tenant's response was it was too late because they had already paid for January's rent and deducted that amount from the rent.

My next action would've been to return the payment and inform the tenant that I would only accept full payment of the rent.

And, if the tenant had sent a check for not the full amount, I could refuse to cash it in.

Or, if the tenant paid in cash for not the full amount, I could refuse to accept the cash.

But, I had an electronic direct deposit set up. It goes directly into my account.

Doesn't that mean I accepted their money, even if its partial?

It seems like direct deposit might open a can of worms when the tenant pays only part of the rent.

Can't tenants use such a direct but partial payment tactics as a way to forestall and evade eviction?

You have to know your states rules. What I would do, is accept it, tell them its partial. If the amount different isn't receive by due date you will deduct the late fee will begin and you will start eviction process. Check out you other post I went into more detail :)

While I have never had to do it with my 9 tenants (although I have had plenty of other fun), the companies I worked for did this all the time. 

They are in violation of the lease by performing repairs without your knowledge or permission. Taking it upon themselves to deduct anything from the rent means they haven't paid the rent. My leases have wording, by my attorney, that state anything owed to the landlord is considered "additional rent" and not paying it is just like not paying the rent. 

I would post the Pay or Quit in accordance with your state law and follow through until the balance of the rent and late fees are paid.

@Dana R.  First I must say either way you could have run into this problem whether direct deposit or not. Ultimately it depends on what you have specifically in your lease, how far you want to take it and the relationship with the tenant. Personally if in your lease you have a provision up upgrades that are made are at the tenants expense, I would review this with the tenant and explain that payment needs to be made in full. Me personally I wouldn't want to get in the habit of tenants renovating for concessions for many of reasons. I do have a question did the tenant present this problem to you or your  PM prior to the replacement? Again some may say start the notice/eviction process, especially if you didn't talk about it before they made the repair by themselves.  I'm sure more will have a better straight forward answer soon. Good luck

I tend to look at the big picture and would try to come up with a compromise.

If I rented the house with a garbage disposal and it would stop working, then I'd be responsible for fixing it. That would be cost. Likely more than $ 50.00

So, in this case I would likely offer the tenant half of the money, with proper documentation for the cost. It's cheaper than what it would have likely cost me and it teaches the tenant a lesson that he will remember. 

I believe that starting the eviction process is sort of cutting off your nose to spite your face. It'd cost more to have an eviction, a vacancy, maybe a retaliating tenant than $ 25.00

Originally posted by @Marcia Maynard :

@Dana R. What was the outcome? That happened almost two weeks ago. What did you decide to do and how did it work out?

The outcome was pretty bad. 

In order to try to avoid the drama and cost of eviction, I tried to work out a compromise where the tenant and I split the costs where I would pay what it would have cost my plumber to fix it and the tenant would have paid the difference. 

In my mind, I thought that was a pretty fair compromise considering that the lease specifically said the tenant could not make repairs or changes first without prior written consent and that the lease stated that they needed to contact me by phone if there are any problems.

But, my tenant is psychopath. And, afterwards, the tenant emailed me to taunt me about it afterwards.

But, I should probably go through everything that happened in my original post.

Originally posted by @Dana R. :
Originally posted by @Marcia Maynard:

@Dana R. What was the outcome? That happened almost two weeks ago. What did you decide to do and how did it work out?

The outcome was pretty bad. 


But, my tenant is psychopath. And, afterwards, the tenant emailed me to taunt me about it afterwards.

Have you seen the movie Pacific Heights? That is my definition of a psychopath vs. landlord nightmare.  Did you follow the advice of serving a pay rent or quit notice for the difference of what they paid and what you are due? I would not communicate by email (or texting) with the tenant about this matter. Have a face to face, with a witness present and follow up with a letter. You need to enforce the terms of your rental agreement, evict the tenant, or get out of the business. I'm betting that you can turn this around, unless the tenant really is a psychopath. If the latter, then get an attorney on this right away. Good luck.

Join the Largest Real Estate Investing Community

Basic membership is free, forever.