Why don’t more landlords accept rent payments via direct deposit?
I’ve seen several answers from people that have a view similar to mine. I also have to strongly disagree with the answer that claims any landlord who doesn’t accept rent via direct deposit is “living in another century.”
I’m going to include an overview of some of what we have to do when a tenant does not pay rent. That part of my answer will be longer and may have more details than you might want to read, but I’d rather make it clear just what’s going on than give a brief or flippant answer.
Direct deposit does not allow control over whether you can refuse a rent payment. This may seem like an odd thing for a landlord to want, but it can be important in some cases. Unfortunately, since this is only an issue for 1–2% of tenants, it creates a problem for 100% of tenants.
Most tenants pay their full rent and pay it on time each month. It’s the tenants that don’t do that who create the problems that lead to some landlords avoiding direct deposit. When tenants don’t pay their rent and it becomes necessary to take action against them, there’s some papers that have to be written up and court actions to be filed.
What happens when rent is not paid:
In my state, if I have a tenant who pays $1,000 in rent and they don’t pay by the fifth of the month, it’s considered late. I can send them a late notice at that point and, in a few more days, start with legal proceedings. Overall, it takes 60 days to evict in this state. (First, give a late notice, then file court papers for a hearing to get an unlawful detainer, then, if that doesn’t help, file papers for an eviction and, if that is granted, wait until the assigned date when a deputy shows up and you can evict.)
During this 60 days, the landlord is out $2,000 in rent. For some landlords, they can handle that. For others, smaller landlords, they have mortgages on many of their rental properties and count on the rent income to pay those mortgages. So they’re out $2,000 in income and have to go into savings or rebudget to cover the mortgage on that property. Plus they’ve paid lawyer fees, court costs, taken time to be in court (and, for many landlords, that means taking time out from their full time job), so they’re out even more than the $2,000 in rent.
The laws work differently in different states. Some landlords are reluctant to evict and will send out late notices but stall or procrastinate when it comes to taking legal action. So “professional deadbeats” know the system, so once they get a subpoena for the unlawful detainer (or whatever the first court hearing is in their state), they’ll pay a small amount. In many states, once the landlord accepts this payment, the eviction is no longer valid and they have to start over again.
Some tenants will wait as long as possible, say a few days before eviction, and pay $100 or so, enough to say they made a partial payment. The clock is reset. If that was on day 57 out of 60 days, then it’s going to be another 2 months before the eviction and the landlord is now out almost $4,000 for rent ($3,900, actually, plus late fees), as well as having to deal with the costs and issues of court hearings again.
If the landlord can refuse rent payments, this issue is avoided.
