Tenant Resisting Autopay

Rental Property Investor · Austin, TX · Member since 2016 · 40 posts · 17 votes

I purchased a property with existing tenants. Currently, each of them puts their rent in a dropbox. We changed this method to an online system. All of our tenants have signed up except one, who refuses to use the system. (He also pays using money order, which is less than ideal since we have to go to the bank to deposit it).

Is there a way I can legally make the tenant use the online system before his current lease is up, or will I just need to wait it out?
Thanks!

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Ned CareyPro Member

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Investor · Baltimore, MD · Member since 2008 · 17k+ posts · 13k+ votes

You can gve them stamped envelpopes to mail you the money, then use a phone app to make the deposit. There is no need to go to the bank

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Ray Harrell
Investor · Chicago, IL · Member since 2016 · 1k+ posts · 930 votes
8y
I don't think you can legally demand a certain method or mode of payment. You can request it, but not demand it. If a tenant shows up with cash and you reject it, you can't charge them for late rent while they go get a money order. Maybe they don't have a computer or cell phone, or they don't trust electronic payments. I hope you aren't considering non-renewal on the basis of payment method.
3 Reply
Hattie Dizmond
Investor · Dallas, TX · Member since 2014 · 2k+ posts · 1k+ votes
8y
Since there is a legal contract in place, you can't force the change on him, during the term of the lease, unless there is specific language in the existing lease to give you that flexibility, which is unlikely. Here's the reality. Yes, having to go to the bank to make a deposit is a pain. However, you have guaranteed funds.
If he is ever late, you might have a bit of latitude. Otherwise, you're getting guaranteed funds, on time, every month. Just be patient and go with it. Write the requirement into your next lease, when he renews.
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Ned CareyPro Member
Moderator
Investor · Baltimore, MD · Member since 2008 · 17k+ posts · 13k+ votes
8y
You can gve them stamped envelpopes to mail you the money, then use a phone app to make the deposit. There is no need to go to the bank
6 Reply
Michael Kling
Lexington, KY · Member since 2014 · 2 posts · 1 vote
8y
In my experience, Money Orders are not compatible with most banks online check deposit technology.
1 Reply
Kyle J.
Rental Property Investor · Northern, CA · Member since 2012 · 5k+ posts · 5k+ votes
8y
@Jennifer Jackson This can be governed by the existing lease, and in some cases the state law where the property is located. For example, in my state (California), the law actually says the landlord must allow at least one other form of payment other than "electronic funds transfer" (online payment). So I could (and do) offer online payment as an option, but I couldn't require it to be the only option.
Even if you don't have a law like that where you're at, since his current lease allows him to make payments via other methods, you likely wouldn't be able to change it on him mid-lease.
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Jennifer Jackson
OP
Rental Property Investor · Austin, TX · Member since 2016 · 40 posts · 17 votes
8y
Thanks for the replies everyone! Lots of good info I didn't know.
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Frank Chin
Investor · Bayside, NY · Member since 2017 · 1k+ posts · 1k+ votes
8y
I use exLandlordforms.com to create my leases and the way it works is the lease it creates conforms to local and state laws. For payment methods, they advise I cannot force the tenant to make online payments.
This subjects been discussed often on this board. One method involves getting ATM cards to tenants so they could make deposits for you at a local ATM machine.
See:
This way, the tenant uses the card to deposit the money order directly into your account. BTW, I never used this method myself. Apparently, it's safer that giving the tenant your account number and preprinted deposit sips to your account, for them to make deposits for you, as they can perpetrate bank fraud knowing your account number.
Another way is to make remote deposits by your cell phone though I haven't tried money orders.
I have tenant's paid in cash with no bank accounts and when I tell them I don't take cash, they go buy money orders.
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Jill F.
Investor · Akron, OH · Member since 2016 · 2k+ posts · 4k+ votes
8y
In Ohio, there is no statute that would prevent a landlord from requiring online payments in the lease contract, but if you buy a property with tenants under lease, you have to honor the existing lease for the term unless the tenant breaches or agrees to new terms. Your state law may be different. In any event, it seems very short sighted for a tenant to refuse to cooperate unless he is planning on moving at the end of the term anyway.
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Colleen F.Pro Member
Investor · Narragansett, RI · Member since 2013 · 8k+ posts · 4k+ votes
8y
First find out why. If they dont have a bank account you need a direct deposit solution. i think the money order locations can also transfer electronicallly. If they do have a bank account then send them to the bank with the needed info. It may be harder for them to do it themselves then a more tech savy person. Are they a good tenant, if so I would be more flexible.
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Jill F.
Investor · Akron, OH · Member since 2016 · 2k+ posts · 4k+ votes
8y
Originally posted by @Colleen F.:
First find out why. If they dont have a bank account you need a direct deposit solution. i think the money order locations can also transfer electronicallly.

We require online payment.
For tenants with no bank accounts, there are prepaid debit cards that will provide both a rounting and account number (which is different from the card number). Netspend cards, available at most drugstores and 7-11 convenience stores will provide the account number needed. Walmart pay cards also work.
Tenants receiving government benefits on the Direct Express card, do not have access to an account number so they can't autopay via ACH debit on our system-- they can pay using their Direct Express card as a credit card but the fees are much higher. We cannot in good conscience recommend that tenants with Direct Express switch to a netspend card, because in most other respects, the (government negotiated) fees are so much lower. We are currently suggesting Simple Bank as an alternative for these tenants.
For tenants that do not have internet and do not own a smart phone, these are mostly older people who do have bank accounts, we have an ACH debit permission form which they can fill out to do "Automatic Rent Payment"; They fill out the form, provided us account and routing number and then we set up the ACH debit for them.
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Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
8y
Originally posted by @Jennifer Jackson:

Thanks for the replies everyone! Lots of good info I didn't know.
I suspect the money order tenant does not have a bank account or cant get one.. quite common actually.
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Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
8y
Originally posted by @Jill F.:

Originally posted by @Colleen F.:
First find out why. If they dont have a bank account you need a direct deposit solution. i think the money order locations can also transfer electronicallly.

We require online payment.
For tenants with no bank accounts, there are prepaid debit cards that will provide both a rounting and account number (which is different from the card number). Netspend cards, available at most drugstores and 7-11 convenience stores will provide the account number needed. Walmart pay cards also work.
Tenants receiving government benefits on the Direct Express card, do not have access to an account number so they can't autopay via ACH debit on our system-- they can pay using their Direct Express card as a credit card but the fees are much higher. We cannot in good conscience recommend that tenants with Direct Express switch to a netspend card, because in most other respects, the (government negotiated) fees are so much lower. We are currently suggesting Simple Bank as an alternative for these tenants.
For tenants that do not have internet and do not own a smart phone, these are mostly older people who do have bank accounts, we have an ACH debit permission form which they can fill out to do "Automatic Rent Payment"; They fill out the form, provided us account and routing number and then we set up the ACH debit for them.
well you can tell I collect zero rent LOL. never heard of half of these things.. but I still go to my bank to get cash and never have had a debit card.. I guess I am old school.
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Kevin Wattenbarger
Real Estate Broker · Panama City, FL · Member since 2015 · 38 posts · 15 votes
8y
@JayHinrichs I understand where you are coming from. Since we've switched to an online PM platform and accept online rent payments its a much more efficient process. Another idea that might be a middle ground for you if the tenant does not have a bank account and only uses money orders. In the past, I've had special deposit slips made for the tenant using a simple Word document) and the tenant directly deposits into my account (they can use the night drop box too). I use a local credit union and the slips will include a memo like "Jane Doe's XXXX Main Street Rent payment", then the credit union's representative types in the memo with the deposit. It is not perfect and requires checking the account and crediting the tenant's ledger prior to late fees being posted but it is more efficient than making a trip to the bank. I use this same process for collecting mortgage payments on some private loans too.
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Bjorn AhlbladPro Member
Investor · Shelton, WA · Member since 2017 · 6k+ posts · 6k+ votes
8y
Most of my tenants use a drop box in the common laundry area. Perfectly OK as I drain the machines monthly anyway. I have some tenants in duplexes-they pay by autopay. One of the duplex tenants skipped out under cover of darkness-she was on autopay. Conclusion for me is how they pay is not as important as how they behave.
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Charles M.
Montgomery, AL Investor · Member since 2018 · 171 posts · 56 votes
8y
Good Content
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Eric Adobo
Member since 2018 · 509 posts · 211 votes
8y
I hate it when tenant pays his rent. Let the guy BE.
If on lease renewal he objects have him pay rent on-time to someone else.
2 Reply
Chris SeveneyBusiness Member
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Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes
8y
I do not believe you can force a tenant to use a specific type of system. Be fortunate your getting paid
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Michael Hayworth
Contractor · Fort Worth, TX · Member since 2015 · 379 posts · 740 votes
8y
You can certainly require a tenant to use the sort of payment system you want. At least, you can in Texas, where the OP is located.
However, it has to be part of the lease terms, and if you inherited the tenant, you're bound by the existing lease. Change it on renewal.
We don't absolutely require electronic payment, but we say our stated rent includes discount for electronic payment. If you want to pay cash, money order or some other crap that requires more work on my bookkeeper's part, it's $50 extra per month. This is a business. If a tenant is making more work for you, it should cost them more.
1 Reply
Christina CareyPro Member
Real Estate Broker · Dayton, OH · Member since 2010 · 245 posts · 186 votes
8y
I'm with @Michael Hayworth. We charge a fee for payments made by any method other than their online portal (we're using Appfolio). Also, no cash, ever.
I can't attest to TX law, but I suspect you'll have to tough it out until the lease expires.
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Andrew SyriosPro Member
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Residential Real Estate Investor · Kansas City, MO · Member since 2014 · 10k+ posts · 5k+ votes
8y
I'm pretty sure you can't legally demand they do an online pay and you certainly can't if it's not in the lease. But there are systems many banks have for depositing checks and money orders remotely, so you may want to inquire about that.
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Will Karstetter
Rental Property Investor · Tulsa, OK · Member since 2017 · 41 posts · 34 votes
8y
The terms of the existing lease should stand; however, you could always require him to drive to your bank to make the deposit. Eliminate the drop box and eliminate your problem i.e. make it his problem.
I feel your pain though... my partner and I have numerous tenants who insist on mailing us money orders. So every month we are stuck taking inventory and making a trip to the bank. Ohh well, this is one of the better problems to have after all.
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Jerel Ehlert
Attorney · Austin, TX · Member since 2014 · 888 posts · 759 votes
8y
If your problem is that you don't want to run to the bank to make deposits, you are in the wrong business.
Rent is paid, property stays in relatively good condition.
1 Reply
Mark H.
Richmond, VA · Member since 2016 · 215 posts · 129 votes
8y
@Jerel Ehlert I was thinking the same thing. Bundle all the checks up and make one trip. It's not that hard or even time consuming. Especially if your bank has a drop box.
1 Reply
Jerel Ehlert
Attorney · Austin, TX · Member since 2014 · 888 posts · 759 votes
8y
@Mark H., if you get that many, use a check reader for scanning and uploading. Don't have to leave the office.
1 Reply
Anthony Angotti
Real Estate Agent · Pittsburgh, PA · Member since 2015 · 1k+ posts · 846 votes
8y
@Jennifer Jackson in most cases I don't think you can force them to pay one particular way if it's not established that way in the lease.

As most have said I'd focus on why they are paying this way. I'd deal with it depending on how good of a tenant they are otherwise. If they aren't that great of a tenant then find a new one when the lease expires if the electronic payment is important to you.
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