In an ongoing series of how tenants can pay rent and the potential pitfalls of demanding rent and how it is paid, it gets interesting when we talk about accepting online payments.

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No doubt, the digital age has transformed rental relationships by making it seamless for tenants to pay rent and for property owners to get paid. We caution owners, however, that while paying rent online can be offered as an option, it cannot be the only option. If the Internet-savvy tenant wants to pay online, great. But paying online cannot be the exclusive option.

Rent payments can come in the form of mailing a check, inserting it in a rent box, directly depositing it in the landlord’s account, delivering it to a resident manager, and so forth.

We are personally big fans of AppFolio and Zelle, but there are a plethora of other online platforms to pay rent. Also known as “peer-to-peer” payment services, individuals can use a bank account or a credit/debit card to conveniently, safely and securely pay from anywhere.

Yet technology is no panacea.

Every so often, we have to remind clients that once an eviction action is started, the landlord cannot accept a penny because whenever money exchanges hands, it re-establishes the tenancy; we have to start over.

One potential issue arises when the tenant who is the defendant in an eviction makes an online payment. Their landlord did not take any action to deposit the funds; the tenant made the transfer unilaterally, without the landlord’s knowledge. In this scenario, the landlord should refund the money online if possible and if not, mail a refund with a note kindly informing the tenant that the funds are not accepted.

Another thing to be watchful of is who is making the online rent payment. 

Is the tenant himself or herself making the transaction, or is it a third party? If someone other than the tenant is making a rent payment, they can later claim that they are entitled to occupy the premises and enjoy all of the tenant protections afforded in the jurisdiction at hand.

Oftentimes, we see this occur when a tenant passes away and their caregiver or family member embeds themselves in the unit, perhaps to take advantage of below-market rates.

As we explained in an earlier article, landlords can be dismayed to learn that by accepting third-party payments, they have inadvertently created a tenancy. This can be avoided if there is a firm groundwork laid out before there is any financial transaction.

Bornstein Law has a document prepared for the third party to waive any claims that they are entitled to possession of the tenancies and remember, if someone paying rent on behalf of another person refuses to agree to these terms, the landlord or their agent can say “no thank you” and decline the payment.

Factors to consider

Small “mom and pop” landlords who live in or near their rental property - say those who own a duplex or a triplex - normally have little quandary in how to accept rent payments. Yet when a landlord has a large portfolio of properties and units, it is imperative to be organized and have a carefully choreographed system to collect rents, preferably without the physical transfer of multiple payments every month.

We also recognize that some property owners are not tech-savvy and may be intimidated by learning how to accept rent payments through online platforms like PayPal, Venmo, and the like. This is a time for self-assessment.

There is nothing wrong in taking a paper check and making a trip to the bank. Some of you, in fact, enjoy the experience. Ultimately, when it comes to payment methods, rental property owners have to do what is best for themselves while trying as best they can to accommodate their renters.