Trouble with money oder for rent.

General Landlording & Rental Properties
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Trouble with money oder for rent.

Peter Crabtree
Investor · Jefferson City, TN · Member since 2016 · 24 posts · 7 votes
Hi BP, I need a little guidance. I have my tenants mail their rent to a PO box. My rule is that as long as it is post marked by the 5th it isn't charged a late fee. I have a tenant who has lived in one of my units for 4 months now and has always been prompt on his payments. He pays via money orders (I assume he doesn't want or have a checking account). I have not yet received his rent for September. He said he mailed it on the 1st and has a receipt for the money order. Obviously if it got lost in the mail, that money is gone. My question is this: how do I handle the situation in a way that is fair, but also guides him toward a more responsible way of paying rent. I am trying to run a business, but I never want to put my profits above ethics. It would hurt for me to just eat the loss but I know it would be much more devastating for him to have to come up with another month's rent. Also, if it went as far as eviction, he can prove that he purchased the money order (which can then be made out to anyone) but I cannot prove that I didn't get and cash it. Sorry this is so long-winded. Thanks in advance for any wisdom you guys have to offer. -Peter
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Jon Holdman
Rental Property Investor · Mercer Island, WA · Member since 2008 · 22k+ posts · 14k+ votes
9y

For one, your requirement should be that you receive it by the due date, not that its postmarked.  That eliminates the ambiguity in this situation.  You didn't get it, its late, tenant pays late fees.  Your mortgage company, credit card companies, utilities and pretty much everyone except the IRS have long ago moved away from postmark dates.

Second, get away from mailing rent at all.  Sign up for one of the various electronic collection processes.  Some of these allow money to be "sent" at local stores.  Some, like "Chase quick pay" work with bank accounts.

If he really has the money order receipt, he can use that to find out what happened.  Hopefully, he gets his money returned.  In any case, you should not just eat the lost rent.  You didn't get your rent.  

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  • Jake ThompsonPro Member
    Rental Property Investor · Albany, OR · Member since 2015 · 312 posts · 136 votes
    9y

    @Peter Crabtree Have the tenant cancel the money order and hand deliver a new one. I would try to look into setting up some form of online payments or a way to discourage tenants mailing their checks. It sounds like in this case it really did get lost in the mail, since he has the receipt and has been prompt every other month. But who knows for sure. Ask him if he'd like to choose a different payment method in the future.

    3Reply
  • Jon Holdman
    Rental Property Investor · Mercer Island, WA · Member since 2008 · 22k+ posts · 14k+ votes
    9y

    For one, your requirement should be that you receive it by the due date, not that its postmarked.  That eliminates the ambiguity in this situation.  You didn't get it, its late, tenant pays late fees.  Your mortgage company, credit card companies, utilities and pretty much everyone except the IRS have long ago moved away from postmark dates.

    Second, get away from mailing rent at all.  Sign up for one of the various electronic collection processes.  Some of these allow money to be "sent" at local stores.  Some, like "Chase quick pay" work with bank accounts.

    If he really has the money order receipt, he can use that to find out what happened.  Hopefully, he gets his money returned.  In any case, you should not just eat the lost rent.  You didn't get your rent.  

    4Reply
  • Jake ThompsonPro Member
    Rental Property Investor · Albany, OR · Member since 2015 · 312 posts · 136 votes
    9y

    @Account Closed Very true. Some options, such as direct bank to bank transfers typically don't have fees. Some have the option to structure a 100/0 split or 50/50 split and are very reasonable. Here is a link to a BP article on ways to pay rent online.

    2Reply
  • Jake ThompsonPro Member
    Rental Property Investor · Albany, OR · Member since 2015 · 312 posts · 136 votes
    9y

    I also agree with @Jon Holdman, the rent needs to be received, not postmarked by the necessary date.

    0Reply
  • Thomas S.
    Member since 2016 · 13k+ posts · 12k+ votes
    9y

    I also agree with @Jon Holdman. Rent must always be received by the due date which should be the 1st of the month. Why ever allow any tenant to pay late.

    IN this case the problem is not yours. He is responsible to pay his rent and in this case the late fee as well unless your lease state payment lost in the mail is not subject to a late fee.

    He takes the risk of paying late by mail, he pays the price when it doesn't work out. 

    Not your problem, no need for compassion. Rent is late, inforce your lease or remove late from your lease language.

    2Reply
  • Jon Holdman
    Rental Property Investor · Mercer Island, WA · Member since 2008 · 22k+ posts · 14k+ votes
    9y

    My lease spells out that if the tenant does choose to mail the rent, and I don't get it on time or at all, that it is the tenants responsibility. If its a MO and the tenant has the receipt, it can be tracked down.  Same for a check.  If they sent you an envelope full of cash, then there could be an argument that you're just pocketing it and claiming you didn't get it.  With a check or MO, that's not the case.  Even with cash, a judge may well say "that was dumb, your problem, tenant."

    2Reply
  • Peter Crabtree
    OP
    Investor · Jefferson City, TN · Member since 2016 · 24 posts · 7 votes
    9y
    Jake Thompson, Jon Holdman, John Anderson Thank you so much for the input. I am not familiar with money orders, but from what I had read they are non-refundable. I guess I should have researched a little further. Setting up electronic rent payment has been on my to do list for awhile now. I guess I need to move it up the list. Jake Thompson, thanks for the article link. I am still learning and fine tuning as a continue to scale. I can't tell you how much I appreciate advice from experienced folk like ya'll.
    1Reply
  • Kim Meredith HamptonBusiness Member
    Real Estate Broker · St Petersburg · Member since 2014 · 2k+ posts · 2k+ votes
    9y

    @Peter Crabtree if the tenant still wants to pay with cash, he can pay at 7Eleven with Pay Near Me, you just need to set it up with the company, than you can provide him with a Bar code that they scan at 7 eleven and the money goes directly into your account.

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  • Wesley W.
    Rental Property Investor · The Vampire State · Member since 2013 · 2k+ posts · 2k+ votes
    9y

    Here's how my lease speaks to payments:

    2. RENT:

    A. You agree to pay the monthly rent indicated above via deposit to the following checking account at BANK: account # 123456; routing # 12345678  (nearest branch is BANK ADDRESS). Rent is due in full on or before the 1st day of each month without deduction or set off. Time is of the essence. Payment may not be made by third party checks. If rent is not paid physically at a branch (i.e. it is paid online or via bank transfer), the date of payment will be considered the date when funds reach our account. The banking institution and/or account to which rent must be paid may be changed by us after giving you at least 30 days notice as described in Paragraph 12.

    Tenants walk into the bank and can pay by personal check, cash, wampum, whatever the bank will take, OR they can pay it online via bank-to-bank transfer.  There is NO COST for any of these methods.

    I think you are working too hard running to the PO Box looking for checks, and collecting the rent physically - what is this, 1950?  Who has time for that?  Especially when you have to go back to collect A SECOND TIME because (insert tenant excuse here).  I've found my system is very efficient and puts the responsibility on the tenants.  I even have it set up for me to get an email when a deposit is made.

    3Reply
  • Jon Holdman
    Rental Property Investor · Mercer Island, WA · Member since 2008 · 22k+ posts · 14k+ votes
    9y

    Not too long ago you could have tenants deposit directly into your account.  Chase would even give out "deposit only" ATM cards.  That's been stopped, as part of some federal anti-money laundering effort.  Chase told me they could only deposit into my account if they were named on the card and had their social attached to the account.  Use a service like Pay Near Me or Chase Quick Pay.

    0Reply
  • Michael Plante
    Deland, FL · Member since 2017 · 2k+ posts · 1k+ votes
    9y

    Funny story about money orders in Florida 

    Check you state laws to see what is true.  Consulting with an Atty would be a good ideal as well

    a tenent paid 3 months on time with money orders 

    Then we received a notification from the bank they had withdrawn $1,000 from our account because there was a chargeback on a MONEY ORDER!?!?

    called the bank fortunately the manager was a friend of ours. He said yes it was true and the renter would or probably be doing the same with the other two.    He said most people do not realize a person can claim they lost the money order and it is basically like retroactively putting a stop payment on a money order   

    He advised me to withdraw my money and close the account.   I did and then evicted based upon nonpayment of rent 

    I now have a separate account for each renter and transfer all money out the day their rent payment hits the account 

    1Reply
  • Michael Plante
    Deland, FL · Member since 2017 · 2k+ posts · 1k+ votes
    9y
    Originally posted by @Jon Holdman:

    Not too long ago you could have tenants deposit directly into your account.  Chase would even give out "deposit only" ATM cards.  That's been stopped, as part of some federal anti-money laundering effort.  Chase told me they could only deposit into my account if they were named on the card and had their social attached to the account.  Use a service like Pay Near Me or Chase Quick Pay.

    Yes we had the same problem with Chase 

    Now  All of our renters and mortgagors  make counter deposits to our our accounts at Bank of America

    0Reply
  • Bettina F.
    Investor · Post Falls, ID · Member since 2016 · 606 posts · 699 votes
    9y

    The money order may not be lost.  I have an elderly tenant who mails in a money order to our PO Box.  He pays on time like clock work. His rent did not arrive one month.  We could not figure out what happened.  He sent in another money order.  WEEKS later the first money order was returned to the tenant.

    His handwriting had gotten so frail and spidery that it could no longer  be read. Luckily the post office was able to read his return address.  We now supply him with pre-printed mailing labels.  Problem solved.

    1Reply
  • Rafael Norat
    Investor · Lodi, NJ · Member since 2013 · 487 posts · 179 votes
    9y
    Peter Crabtree The tenant can call and verify is the money has been cashed abd when. If is hasn't, they can cancel the money order and refund the tenant within 30days. I've dealt with this in the past. It is the tenants responsibility not yours. Either way, rent is due as along as you provide what you agree to you should get paid. If the tenant has good rent history, I'd consider a payment plan to catch up quickly. If not, I'd give them till the 15th to pay otherwise proceed with the eviction process.
    1Reply
  • David Tiemann
    Investor · Hereford, TX · Member since 2016 · 53 posts · 42 votes
    9y
    I once lost or my wife washed (I'm not sure what I did with it) a money order. We contacted the bank and explained the situation. We had to wait 90 days and they then issued a new money order to me. I am assuming that the bank's money orders are only negotiable for 90 days. I was relieved that I wasn't just out that money.
    0Reply
  • Philip Williams
    Rental Property Investor · Rockford, IL · Member since 2014 · 385 posts · 702 votes
    9y

    Hey so I noticed some of you stating that a tenant does not have the ability to deposit in your bank account. While that is true with most of my banks CHASE BANK does still allow tenants to deposit into a business checking account. I have had tenants call me on the phone from chase saying they couldn't deposit. I explain to them to tell them it is a business account and i'm depositing rent, I have yet to have a deposit denied. Although once I had to call the branch myself and talk to the manager before they would allow it. I hope this helps some of you, it's possible this rule is not the same everywhere but I can't imagine a bank like chase would have different rules for different states. FYI I am in illinois if that helps hope this saves someone some trouble, with all the chase branches around it's pretty hard to make an excuse to not be able to find one!! @Peter Crabtree

    1Reply
  • Deanna McCormick
    Minneapolis, MN · Member since 2013 · 2k+ posts · 1k+ votes
    9y

    The renter can go on line get a money order trace form to submit to find out if the money order was cashed,, if not it can be reissued.  takes a bit to get it verified, but we did have a holiday weekend..in Sept..

    Rent is due on the 1st.. must be postmarked by the 1st.. or it's late. 

    0Reply
  • Joe SplitrockPro Member
    Moderator
    Rental Property Investor · Sioux Falls, SD · Member since 2015 · 9k+ posts · 18k+ votes
    9y
    Originally posted by @Account Closed:

    @Jake Thompson That sound good as long as the landlord agrees to pay any extra fees the tenant is charged for paying through a 3rd party.

    There are free services, like Cozy, which I use. Money orders aren't free, so they are already paying something. There is no reason a landlord should incur costs to collect rent.

    4Reply
  • Greg H.Pro Member
    Moderator
    Broker/Flipper · Austin, TX · Member since 2013 · 4k+ posts · 4k+ votes
    9y

     A stamp cost money.  Gas to the post office costs money.  Gas to purchase a money order cost money.  

    I have a tenant that has sent via Western Union every month for 3 years by their choice.  It costs them $12

    As long as a landlord is upfront about their policy upfront and it is agreed to in the lease, what could possibly be the issue ?

    1Reply
  • John Pate
    Investor · Georgetown, TX · Member since 2017 · 11 posts · 11 votes
    9y

    I was having problems collecting on time from one of my renters. He told me that rent was literally the only check he writes. We agreed to let him pay via Venmo instead. 

    0Reply
  • JD MartinBusiness Member
    Moderator
    Rock Star Extraordinaire · Northeast, TN · Member since 2015 · 10k+ posts · 16k+ votes
    9y

    Easy solution for the future: we don't accept payment by mail or in person. We have 2 online options and one local bank option, and the acceptable methods of payment are spelled out in the signed lease. 2 of the 3 options are free, one has a nominal cost. This allows the tenant to pick the one that suits them but also works for us. 

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  • Joe SplitrockPro Member
    Moderator
    Rental Property Investor · Sioux Falls, SD · Member since 2015 · 9k+ posts · 18k+ votes
    9y
    Originally posted by @Account Closed:

    @Joe Splitrock There is no reason a tenant should incur cost to pay rent.

    It doesn't even look like you own rental properties based on your profile. It says you buy under-performing bank notes. Do you charge any fees in your business? I am sure paying $3 for online bill pay or $10 for a money order is nothing compared to fees in your business. That is fine in my opinion. It is common practice in the bill pay world to have fees for processing. Like I said in my original post, there are FREE services which I use. If the tenant chooses to get a Money Order, then they need to pay the fees for it. What is your logic for thinking otherwise?

    0Reply
  • Charles Kennedy
    Rental Property Investor · Philadelphia, PA · Member since 2015 · 213 posts · 160 votes
    9y

    @JD Martin Could you explain those details?

    @Wesley W. Isn't giving your tenant the account # and Routing # effectively allowing them access to your account? Couldn't they potentially take money from that account then?

    0Reply
  • JD MartinBusiness Member
    Moderator
    Rock Star Extraordinaire · Northeast, TN · Member since 2015 · 10k+ posts · 16k+ votes
    9y
    Originally posted by @Charles Kennedy:

    @JD Martin Could you explain those details?

    @Wesley W. Isn't giving your tenant the account # and Routing # effectively allowing them access to your account? Couldn't they potentially take money from that account then?

     Sure. We offer:

    1. Automated or individually scheduled payment through Cozy.co, no charge.

    2. One-time payments through erentpayment.com, $3 charge.

    3. The ability to directly deposit cash, check or money order into our business account. We provide deposit slips. 

    To answer your question, the only way they're taking money out of your account is if the bank illegally lets them make a withdrawal. That is on the bank. If you give anyone a check, they have your account number and routing number. But to hedge our bets, when rent is deposited into this account, it is immediately transferred out into another account. So that gives you the best of both worlds. 

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  • Charles Kennedy
    Rental Property Investor · Philadelphia, PA · Member since 2015 · 213 posts · 160 votes
    9y

    @JD Martin Thanks for the explanation! I will look into Cozy. Would you mind going into more detail about your how your structure handling bank accounts to account for rent payments, CAPEX, maintenance, etc.?

    Do you allocate some certain amount from all your properties into a single account for CAPEX? Separate accounts for each property? Do you have a way that makes it easier for you to track expenses during tax season?

    What about security deposits? Do you simply deposit them in a savings account to accumulate some interest?

    Thanks in advance!

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