Forcing tenants to pay rent online

58 Replies

I worked at Entrata (Property management coputer software) for a few years, so although I'm not a legal professional, I know this issue more than the average bear.

Basically you can't REQUIRE it, but you can strongly encourage it.  You have to give them an address to be able to send a check, but you can eliminate a dropbox on the property (mostly used at large apartment complexes). 

You will find that the biggest barrier to somebody actually using the online payment process are the fees (Can be minimized by ACH, or online check, because cc processing fees are pricey) and the knowledge of how to do it (Training).  If you give them an ACH option, and teach them how to do it, your chances of them actually using it go up by a lot.

Food for though.

I gave my tenants the choice of going to the bank to deposit their rent, or paying online through my Buildium portal. All but one older tenant happily switched to using the online payment method. The feedback I've received from tenants (both new and long term) using the online payment method is entirely positive. No more needing checks, stamps, envelopes, or having to drive to the bank to wait in line. They have the option to pay from their smartphones, or set up recurring monthly rent payments. 

Originally posted by @Carlis Robins :

John, I'm not sure where you and your property are based, but in California, no, you absolutely cannot. Cal Civil Code Section 1947.3 states that a landlord and tenant can agree rent may be paid through an electronic deposit process, but only if the landlord allows an alternative method of payment.

That you may have drafted a rental agreement stipulating electronic transfer only means very little. In California, the statute declares any such condition in a rental agreement to be void and unenforceable. Section 1947.3 defines "electronic transfer" broadly, essentially any transfer of funds not initiated by a check or other paper "instrument," including transfer via computer, telephone or point-of-sale contact or direct deposit permitting a financial institution to debit your account. This statute preserves your right to pay rent by check or some other old-fashioned method. 

Hope that helps.

* See also Nolo and the L.A. Times

Thanks for your links.

I read section 1947.3 https://leginfo.legislature.ca.gov/faces/codes_dis...

(1) It seems like a very awkward and backwards way of saying that checks (OR "another form of payment that is neither cash nor electronic funds transfer"?) must be allowed. The big question is: What is another conceivable form of payment that is not cash or electronic? Gold bullions? Postal service stamps? 

(2) Your Nolo link https://www.nolo.com/legal-encyclopedia/what-types... stipulates that "Cash means currency and does not include cashier's checks or money orders, which the landlord can require in the lease or rental agreement."

Question: Can I offer electronic payment, cash, or money orders/cashier's checks (but exclude personal checks), to make it more difficult for the tenant to pay with paper instruments? Would that comply with "at least one form of payment that is neither cash nor electronic funds transfer"? For money orders/cashier's check, they would have to make a trip to their bank, right? Could I then also have them make a trip to my bank to deposit it into my account (like if they were to use cash for rent payment)?

(3) Am I allowed under the law to incentivize electronic payment by offering a rent rebate of e.g. $5 representing my reduced handling and processing cost of paper checks? (I assume that I would not be allowed to add a fee for paper payments.)

What are your opinions?

Why am I asking these questions? Like many of the commenters above me, I hate dealing with periodic manual tasks. I'm a computer guy and like to automize stuff. Also, I might be traveling or whatever and not be at home on every 1st of the month. Plus, nowhere else in the developed world but the U.S. is it common to send little pieces of paper across the country and to/from banks to make payments. What a retarded legislation.

I'm in CA and my leases show two ways in which tenants can pay rent.

1.  Online via ACH through their tenant portal.

2. In person at a physical location (7-11 or CVS Pharmacy) which is set up to accept cash and post the payments directly to my property management software, Appfolio.

No more dealing with cash, checks, money orders or cashiers checks.

Originally posted by @Jessica Leandre :

In case anyone needed information for New Jersey, it was recently passed that it is now illegal to force electronic payments. Doing so will result in fines.

https://www.google.com/amp/s/w...

Ridiculous. I'm not surprised though with this state. I dont want tenants who can't pay someway electronically though. Thanks for posting that. 

 

I don't think you are required to accept cash if your lease specifies how tenants are to pay. The thing about online payments are charge backs. I like to have an alternative for when someone is a scammer or might be evicted. Buildium has a deal with pay near me that allows tenants can pay cash at 7-ll, CVS, or Ace Cash express for a fee of $3.99 and there are no charge backs.

With respect to the treasury requirements that you take cash, Since rent is paid in advance, I doubt you'd be considered a creditor by the treasury department, and the tenant would be in violation of the terms of the lease if he refused to pay as agreed. However, practically, with a m2m tenant you'd probably be wise to take the cash and then non-renew to  avoid the entire eviction process.  With a term lease tenant I'd get the money however I could and then not renew the term lease.