Forcing tenants to pay rent online

55 Replies

I was thinking of writing into my lease that tenants are required to pay rent through an online rent collection website. Can I legally require new tenants to pay rent online and that no checks/cash will be accepted?

I imagine you will be fine legally but you may have some problems starting out as tenants learn the system. There will also be those who use the online billing as a excuse for paying late. My computer broke, my internet not working, etc etc.

Overall it seems like a great plan IMo. Especially with more tech savy tenants.

No, you can't refuse cash as it's legal tender, you can refuse checks.

I'd suggest you offer an incentive to pay on line, like ten bucks off and raise rents.

Are you going to tell a quadrapeligic (SP?) he has to use a computer and get special programs to do so? Not a good idea, IMO.

Won't that require a tenant to have a bank checking account, some older people just use cash still and have a savings account like a little old lady I had who didn't trust banks (actually she was correct..LOL)

http://www.rentpayment.com/

Above is the website. Why wouldn't I be able to write this into the contract that the only method of payment is through this company.

Since I am not discriminating against anyone for race, sex, or religion I do not see the legal issue. A paraplegic, old person who does not trust a bank, and a person with no bank account can live elsewhere. These are the terms to live HERE, if that is an issue, go elsewhere...

Sounds tough, but why couldn't you say that?

You are not discriminating to any illegal degree I don't think, it's a burden to some and yes, they don't have to live there.

However, you can not refuse a cash payment. As soon as you show up in court with an eviction and the tenant says his computer went out and offered cash but it was rejected, I'm sure you'll be told to accept the cash, get a tounge lashing and pay the costs, might get nailed for something the judge might hit you with as well.

After all, isn't rent required in terms of so many dollars per month?

While it is an idea I don't think it's a great idea at this time, but I'm sure Edison heard similar comments too. Might be common practice 30 years from now, but it's not now.

I don't know about being required to accept cash. Maybe it would play out as you describe in front of a judge, but I just had a half-serious conversation about the feasibility of paying "cash" (greenbacks, not a wire or cashier's check) for a house and the title company said they will never accept cash. They said it was their prerogative to set acceptable terms of payment.

I know landlords with properties in bad areas that require their non-banked tenants to pay with money orders. The landlord collects the rent in person and the last thing you want is to be on a regular monthly schedule, in the ghetto, with $10K cash in your pocket.

How can you be required to accept cash if you live 100 miles away? Tenant says "I will pay you when you stop by." You come and tenant says "Sorry, could not be there. Can you stop by tomorrow instead?"

I cannot imagine being forced to accept cash. Is there a serious law on the fed or state level that absolutely REQUIRES that?

"Just put $800 cash in an envelope and send it to me" What, you didn't get my letter with the cash? Yea, right

Agreed Tom, a landlord is not a title closing company. I can see that in a high crime area too, but I'll bet dollars to doughnuts that's the way it would play out in front of a judge and I'm sure any good reason for not taking a large sum of cash would be considered......but I haven't heard a good reason for this yet.....

It's becoming very common to use electronic payment. I have tenants who are asking me for it. They are young and do everything online, as I do.

The only reason I haven't done so is from trying to figure out which service to use. I want to debit them automatically from their bank account. This of course is a problem for tenants who don't have bank accounts, but all of mine do.

I think you can legally require that they use electronic payment as long as it's a condition of living there. And there are more and more situations where cash is refused as a means of payment. Title company is a good example.

[b]

Originally posted by Ken Latchers:
How can you be required to accept cash if you live 100 miles away? Tenant says "I will pay you when you stop by." You come and tenant says "Sorry, could not be there. Can you stop by tomorrow instead?"

I cannot imagine being forced to accept cash. Is there a serious law on the fed or state level that absolutely REQUIRES that?

"Just put $800 cash in an envelope and send it to me" What, you didn't get my letter with the cash? Yea, right

Sorry, I did miss the distance issue and no it's a really bad idea to mail cash, but how would you justify turning down certified funds mailed to you?

If you go back in history of the treasury regs and the UCC, based on a test question in finance, long, long ago, that treasury notes were legal tender to pay all debts public and private and any debt can be settled in cash.

Reminds of that story of the guy who paid the IRS with buckets of pennies, I think that was a story.

It would be my arguement that rents could be made in cash and if one had cash in hand in front of a judge he would say....take the cash. A judge might say get a certified check if it were a high dollar amount where a really large amount posed a security risk, but at $800 I'd guess he's say take the cash!

I'll buy Tom's comment as to security concerns, but I doubt you are in the war zone and the property is probably not in the getto. No, I don't know of any seperate law that says a landlord must accept cash, but it is a legal way to pay you. If you require something a tenant is to perfrom in order to pay you and can also see them deducting the cost of such compliance, an argument could be made that you pay if you won't accept cash. Just saying, I can see why you want on line payments, but how usual is that?

My lease specifically states, under Method of Payment, "Unless the parties agree otherwise, Tenant may not pay rent in cash and will pay all rent by check, cashier's check, money order or other means acceptable to landlord".

Tenant agrees to those terms when they sign the lease.

If they can't pay online then allow them to deposit into your bank directly. This could be done with cash or money order mailed to your bank. In any case the result is the same. If they deposit into bank you save fee from website. Isn't that ok?

Maybe I should have rephrased my No answer to say you can contract to do so, but I think my point is missed all together.....
when push comes to shove, you won't be eviting a tenant who has cash in hand...that's all...an opinion...

I used a rather long payment description of Payments including bad checks costs advances, bank fees, etc. I also had restrictions in notes as to the application of funds, additional payments to principal, fees and charges and what constitutes acceptance of payments.....cash was accepted in the office only, but rarely did anyone make a cash payment.

I just think it would come across better if you had rents at $825 and $25.00 credited for on line payments, make-um think it's a deal.

I remember before an investor was burned using pay rents online.

They had it where a tenant could pay and also could deposit money or wire money in.

What happened is the tenant sent in 300 instead of the 600 owed into the landlord's account.The tenant argued in court that the landlord accepted partial payment and was going to work with them on an arrangement.The judge sided with the tenant.

So the moral of the story if you are going to do this is only a set amount is allowed to be paid with no partials.If they try a partial it should reject the payment.

Of course you can work out a payment with them IF YOU want to but you want to control that and not the tenant.

On paying cash when I was 17 I was running low on cash.I went to the gas station at night and put about 11 in gas in the car.

I had the money in coins quarters,dimes,nickels and pennies.It wasn't rolled.The gas station employee refused the money and I told him he had to take it. He said he did not and I had to call someone to bring cash or was going to call Police.

I told him I will call Police for him and save him the trouble.The Police told him over the phone that the money is legal tender and he has to accept it.

He wasn't happy but took the money......

I am not a lawyer, nor do I play one on TV- however, this post on the US Treasury site might help answer your question-

http://www.treasury.gov/resource-center/faqs/Currency/Pages/legal-tender.aspx

The way I understand it- if as a landlord, you are considered a creditor, you MUST accept cash. (How the tenet gets that cash to you is their problem :).

If your rent is not considered a debt, you could get away with it- but since you likely have a 1 year lease and the tenets owe that money to you according to the terms of the lease- you would probably be considered a creditor, and as such, required to accept cash to discharge the debt.

If I go to the grocery store and get a cart of groceries, and then I check out, the store can refuse to accept cash- because I have not yet entered into a contract with them and therefore do not yet owe them anything.

A credit card company also must accept cash, because I have a contract to pay them a debt - but delivering it to them safely might be a bit challenging for most of their customers. There is no law requiring you as a landlord (At least not that I know of) to collect rent in person.

This reminds me of the episode of the British version of The Office when they are talking about how postage stamps are legal tender.

Almost all my tenants that don't live on my property pay through a bank transfer. For some banks, customers may transfer money to another customer's account. It has worked out that, for the 3 different banks I have, that has covered everyone. It is free. The tenants are just logging onto a bank account they already log on to.

I used to use paypal, but they started charging for business transactions.

I feel payment by mail mail creates too many excuses. With electronic, either they made the payment or they didn't.

I'd be interested in a rent collection service if the price were reasonable, but for now I've got everyone covered.

One other thing I would add is if you have a situation where roommates are paying with separate checks, picking up the envelope with all the checks might be the best idea, because it keeps the roommates accountable to each other.

I have tenants in my state and out of it, who pay both online and by depositing the rent directly into my business bank account. I use www.erentpayment.com for the online tenants, and as @Ann Bellamy said, the younger ones are fine with that. I believe 1 tenant doesn't have a checking account, and another one that is leery of online payments. She's a great tenant, so I let her pay at the bank.

I only give my tenants these 2 choices to pay the rent. I have never accepted checks or any payment by mail. This is described in the lease, which I go over with them line by line.

Paying online also helps with tenants who have the same amount of rent. I know exactly who paid and when. Not so with bank deposits.

I recently signed up for an online payment service williampaid.com. They don't charge any fees on either end for bank transfers. They do charge tenant a fee if they choose to pay by credit card. I was planning to offer this as an option to my tenants. Right after I signed up I read a post on BP cautioning about the inability to reject partial payments with such services so I am planning to research if the landlord can set up a fixed payment amount as a safeguard.

Hope that helps

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I think some clarification might help. I think the original poster was not suggesting that tenants pay throught their own on-line bill pay system, but rather using a service that automatically debits the rent from the tenant's account, depositing it directly into the landlord's account.

I have used such a service, called ClearNow, for about 10 years now, and it's great. My tenants love it too. At the risk of sounding like a commercial for ClearNow, I will describe my system and my experience with this form of payment.

I have the direct-draft arrangement written into my rental agreements as the required form of payment. If rent is received in a form other than through ClearNow, there is a $25 penalty charged. It's never been a problem, because tenants love the system. On the rare occasion when a tenant needs to pay otherwise, it's a one-time deal (like changing bank accounts or such), and they're back on track the next month.

ClearNow lets you draft from many sources: bank/savings accounts, pre-paid debit cards, etc.

I have a tenant who has been struggling lately. He always pays me the rent, but he told me in advance that he's having trouble paying by the 5th because of his pay schedule. I verified this with his boss, and I simply let him mail me a money order. Without penalty. Requiring direct-draft payment doesn't mean you can't be flexible now and then. Afterall, you are the boss.

Tenants really like it because they don't have to think about it. Also, there is a very clear paper trail of how the rent has been paid--that's good for both tenant and landlord. Also, ClearNow can report tenant's rent payments to a national credit agency (I think it's Transunion or something--I forget). The tenants have to opt-in if they want this. Most like it because it's a great way to boost their credit score.

It's very cheap for me: $14.95 for each account, which includes the 1st tenant, and then $2 for each tenant thereafter. I have 2 accounts--one to draft on the 1st of the month, and another to draft on the 5th of the money. Tenants like having this option.

Tenants do not have to have a computer to pay rent this way. They CAN set it up and manage it on their computer, if they want. Otherwise, at lease signing, I have them sign the necessary form and attach a voided check, and then I process it for them. If they need to pay with a debit card or such, they simply make a phone call to ClearNow to get it set up. They're very easy to work with.

I am sure there are other such services out there, but this was the best one I could find for the money at the time, and I'm happy to stay with them. www.clearnow.com to check them out.

If you want to try out clearnow, they will give you a 2-month free trial if you say you were referred by someone. Please be sure to tell them that Terri Pour-Rastegar from Blue Sky Homes referred you.

No, I don't work for them--I've used them a long time and really like them. They've simplified a very important aspect of my business.

@Terri

"If rent is received in a form other than through ClearNow, there is a $25 penalty charged. It's never been a problem"

I have a bad feeling that there is something questionable about this requirement. Did your LAWYER vet this? You cannot just put in whatever rules you want to suit your convenience.

I understand about landlords not accepting cash. But I see many questionable aspects about this extra charge and requirement now and in the future such as those "representing the unbanked" or "enforcing" the ADA looking for an opportunity for a case to file (Especially for large complexes), etc..