Tenant Payment Issues

[Brandon Hutslar]

Hi everyone! I currently have a tenant in Washington that was 13 days late on her rent payment. We have her paying through RentRedi. We got a notice from RentRedi's underwriting team that they are holding the funds due to potential fraud. Here's the message from RentRedi: 

"During a routine review, our payment processor came across a transaction that they must do additional verification on.
There was a transaction (#20) under cardholder name XXXXXXX  (amount: XXXXXXX).
As this cardholder name doesn't match the tenant name (XXXXXXXXXXXX), further information is required about the cardholder:
- Lease agreement
- Cardholder name:
- Billing address:
- Cardholder phone number:
- How the cardholder is associated with the tenant:

Once this information is provided, I will relay this to the payment processor for review." 

When asking the tenant about this, she said its her family-friend. She claims she is unable to get a bank account due to "legal reasons" and needs to use her friend's bank account and said her friend doesn't even have a phone number. How do we approach this? Do we have enough to let her go? They won't release the rent payment to us until its resolved. 

[Greg Scott]

Read and understand your lease.  It likely says that payment is due on day X. It also likely puts the onus on tenant to ensure payment arrives.

Assuming your lease is solid, "let her go" is not the correct process.  You will need to provide a notice of pay or quit and typically your lease allows you to apply late fees at that time.  Ten days after the pay or quit notice, you can file for eviction.

[Nathan Gesner]

Quote from @Brandon Hutslar:

My rule: if rent is late, it must be paid in certified funds. No ACH, no credit card. They hand me cash, money order, or cashier's check so I know the funds are good and immediately available.

She's trying to scam you. Make her pay in certified funds within 72 hours or move out.

[Theresa Harris]

Why not just have her pay with a certified cheque or money order?  Give her notice to pay and don't get sucked into whatever her problems are.  Have her drop off the cheque at a set location and time halfway between where you live and the rental (or her work) or go by the house to pick it up.  Going by the house will also allow you to check on the place at least from the outside and doorway.

[Michele Fischer]

Is this a new tenant?

You are getting good input.

Does your lease designate how they need to pay?  If so, you may be stuck.  If not, agree they need to pay you with a different more verifiable method or you start the eviction process.

I have had so many tenants with no bank accounts.  It is a pain but not insurmountable.  But electronic options don't normally work in those cases.  Our preferred method was to have them deposit the money in our bank account, we gave them deposit slips.  The downside there is that they could pay partial rent and you would be stuck.  Going to the property is also a great way to keep tabs on the condition of the property.

[Wesley W.]

My lease requires that tenants have to pay rent directly to a predesignated bank account:

A. You agree to pay the monthly Rent indicated above via deposit to the following checking account at XYX Credit Union: account # 123456; routing # 123456  (nearest branch is 123 Main Street, CITY). Rent is due in advance and in full on or before the 1st day of each month without deduction or set off. Time is of the essence. Payment may not be made by third party checks. If rent is not paid physically at a branch (i.e. it is paid online or via bank transfer), the date of payment will be considered the date when funds reach our account. Your record of this deposit (via teller slip or online transfer) will be your receipt of payment.

This elimates complextity and the additional steps/rules that come with using a third party to collect rent.

I get an email alert when a tenant makes a deposit, and each rent amount is unique so I know who has paid in case they don't have the teller add a memo to the payment.

They can transfer funds online, or walk in to a local branch with cash, personal check, wampum, etc.  The teller's slip is their receipt.  There are teller notes on all my rent payment accounts alerting bank staff not to provide a balance on the slip if it is not the account owner making the deposit.

I have used this system for 10 years with multiple buildings and dozens of tenants without any issues.

[Gil Wildridge]

Quote from @Nathan Gesner:

Quote from @Brandon Hutslar:

My rule: if rent is late, it must be paid in certified funds. No ACH, no credit card. They hand me cash, money order, or cashier's check so I know the funds are good and immediately available.

She's trying to scam you. Make her pay in certified funds within 72 hours or move out.

 This. Decently likely she's trying to pull one over on you, and even if she's not, collecting rent by card in general comes with a lot of things that could wrong and hardly any upside except convenience. With a card, there's a third party involved in the payment, which means chances of something going wrong have just gone up 33%. 

[Suzanne Reinbold]

Quote from @Wesley W.:

My lease requires that tenants have to pay rent directly to a predesignated bank account:

A. You agree to pay the monthly Rent indicated above via deposit to the following checking account at XYX Credit Union: account # 123456; routing # 123456  (nearest branch is 123 Main Street, CITY). Rent is due in advance and in full on or before the 1st day of each month without deduction or set off. Time is of the essence. Payment may not be made by third party checks. If rent is not paid physically at a branch (i.e. it is paid online or via bank transfer), the date of payment will be considered the date when funds reach our account. Your record of this deposit (via teller slip or online transfer) will be your receipt of payment.

This elimates complextity and the additional steps/rules that come with using a third party to collect rent.

I get an email alert when a tenant makes a deposit, and each rent amount is unique so I know who has paid in case they don't have the teller add a memo to the payment.

They can transfer funds online, or walk in to a local branch with cash, personal check, wampum, etc.  The teller's slip is their receipt.  There are teller notes on all my rent payment accounts alerting bank staff not to provide a balance on the slip if it is not the account owner making the deposit.

I have used this system for 10 years with multiple buildings and dozens of tenants without any issues.

What a marvelous solution. That keeps it simple for both sides of the transaction. And no middle-entity  scooping out a percent fee. How do your tenants feel about it? Any push-back?

[Wesley W.]

Not at all.  It's in the lease.  It's a prerequisite for tenancy.  I do not personally handle any rent payments.  No knocking on doors, no "the check is in the mail."  If the money is not there by the end of the grace period a rent demand notice gets posted on the 6th.

[Brandon Polcawich]

Lots of great advice especially for someone just starting out like myself.