Be Careful with Rent Deposits

Do you have your tenants make their payments each month via direct bank deposit? Many landlords think this is the best and most convenient method for collecting rent payments.

  • Tuesday, February 2, 2016

  General   Tips   

Do you have your tenants make their payments each month via direct bank deposit? Many landlords think this is the best and most convenient method for collecting rent payments. What you may not realize, however, are the many dangers of giving tenants your bank account information and simply having them make a deposit.

While direct deposits are certainly easy, giving out your bank account information is dangerous. Without taking precautions, you could become vulnerable to all types of dangers and issues. Using a property management tool like VerticalRent can help protect you from those dangers.

Why You Shouldn't Give Tenants Your Bank Account Information

Among the biggest dangers associated with having tenants make direct deposits is that you have no control and no way to prevent tenants from depositing money. This could be a problem because tenants could actually deposit a token amount of money, even just a dollar, and stop the eviction process if they are behind on their rent. If they do that, you would be forced to begin the eviction process all over again. Many landlords do not realize that by accepting any amount of money during the eviction process, the eviction can be voided. By using an online payment service like VerticalRent, you can prevent this type of problem from occurring.

The eviction process varies among states, but in every state, you are required to provide tenants with a notice of delinquency. The process usually begins by issuing a notice to the tenant informing him or her that they have a certain amount of time to pay the rent. If the tenant refuses to vacate the property or make a payment, the next step is usually to file an eviction case. By accepting only money orders, checks, or cash, you have the option of refusing partial rent payments. That is not the case, however, if you have provided your tenant with your account information and they are able to make partial payments. This is the equivalent of accepting a partial payment, which voids the entire eviction proceeding. The result is usually that you will need to start the process over; meanwhile, the tenant continues to live in your property virtually rent-free.

If you have already provided your tenants with your bank account information, make a point of checking your account on a regular basis. In a situation in which you have already issued a notice informing the tenant he or she must pay or vacate and they have made a partial payment, it is important to notify them of their non-compliance, that you are rejecting the partial payment, and refunding the money. It’s always a good idea to check with your attorney regarding local legalities. Ideally, it’s best to include a clause in your lease, informing tenants that direct deposit is only for tenants who are in good standing.

The easiest way to avoid such problems is to use an online rent collection service, such as VerticalRent.


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