Tenant Resisting Autopay

26 Replies

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!

Updated almost 3 years ago

FYI: the autopay software I've been using is Cozy and I highly recommend!

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.

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.

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

@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.

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: Making ATM deposit

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.

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.

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.
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.

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.

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. 

@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. 

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.

I do not believe you can force a tenant to use a specific type of system. Be fortunate your getting paid

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.

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.

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.