Tenants paying rent at the bank

[pharcyder]

What is the name of your state (only U.S. law)? California

Hello Everyone! I'm back again!

Here's my question. I recently told all of my tenants to start paying rent at my bank. I provided my bank account number and I updated all leases to say rent should be paid at "Union Bank, Account number XXXX."

I have a few reasons for this.

First, I have about $40,000 in rent incoming every month. This is a safety issue.

I have several properties out of town. They can mail rent directly to the bank instead of to my house.

I have a roommate at my house. I do not trust her. I suspect that she has taken money from me in the past.

Here's my concern:

If I serve someone a 3 day notice to pay or quit and they deposit partial rent directly into my bank account, wouldn't this screw up the entire eviction? How can I avoid this? What are your thoughts?

Thanks again for all the advice!

 

[tranquility]

For $40K a month in rent, get an insured and licensed manager. There is nothing I like about his direct deposit in your bank account idea. Yes, it can screw up evictions. Yes, it can complicate many things. Get a manager.

 

[Just Blue]

For $40K a month in rent, get an insured and licensed manager. There is nothing I like about his direct deposit in your bank account idea. Yes, it can screw up evictions. Yes, it can complicate many things. Get a manager.

Agreed. Or even a P.O. Box.

 

[pharcyder]

If I served a 3 day notice to pay or quit and a tenant paid partial rent, how would I handle the eviction? Would I just return the money and proceed? Or would I have to serve another 3 day notice? What if a tenant just kept depositing $1 every day to screw up my eviction? Thoughts?

 

[FarmerJ]

pharcyder Ive known people who had a depositing accounts EACH tenant( yes individual accounts and it worked well so here is what I suggest , If your going to continue to do this make sure your bank can block any EFT with drawls from this account to anyone but your self , No bank card with it either, just checking only & what you may want to do is daily monitor deposits. Id say talk to your banker, they are in the business of making money so there should be something they can set up for you. As far as 3day notices when its unpaid rent & late fees I would say your best bet is to steer them all into last month being paid in advance as well even if you have to collect it in increments over time. ( you may want to put into all future leases a shorter so called grace period , like if you typically gave tenant til the 3rd to pay you may want to eliminate that and make it clear in your leases that if the rent is not paid to the acct by X then the rent due and any late fees must be mailed usps ( your brand new PO box ) If you have a room mate you do not trust any more or think this person has stolen from you then maybe its time to send that one packing too (romantic or not) We do not allow anyone into our home that we do not trust. cash, antiques, other items no difference. If you absolutely must then by all means a decent real safe that is bolted to the house or set into concrete.

 

[pharcyder]

Thanks FarmerJ!

If my lease says "rent is payable to Union Bank Account XXXX" and I serve a 3 day notice to pay or quit that says "Rent must be paid to PO Box 5288," and the tenant deposits the rent into the bank account anyway, how would I handle that?

Also, why no bank card? Why no EFT? Sounds like a dumb question, but I get notifications every time there's bank activity. Also, big transactions require authorization. Maybe you know something I don't about these?

 

[tranquility]

Thanks FarmerJ!

If my lease says "rent is payable to Union Bank Account XXXX" and I serve a 3 day notice to pay or quit that says "Rent must be paid to PO Box 5288," and the tenant deposits the rent into the bank account anyway, how would I handle that?

Also, why no bank card? Why no EFT? Sounds like a dumb question, but I get notifications every time there's bank activity. Also, big transactions require authorization. Maybe you know something I don't about these?

No, you can't change the terms of the lease on a whim. Yes, that is a partial payment accepted. All the other things has to do with fraud. Have you not heard of Nigerian Princes who want to get the money of the country? All they are looking for is your account number. You're giving it out for free. That's why those who do do this (I read about such things in addition to what my clients do.) give each renter their own number and "sweep" it into another account when rent is due. (They writhe the lease to say rent is paid on the sweep.) Also, there are certain protections for checks that you don't have from deposits. While FarmerJ has shown himself to be a reasonably knowledgeable landlord in this forum, I don't know ANYONE who does things in the manner you want. I know A LOT of landlords as I do taxes and specialize in income property/real property clients. True, some may be because there is a "fee" associated with some types of deposits. (Which may or may not be a problem, depending on the state.)

The thing is, this is new. No one really knows all the legal issues involved and the above are just a few. All those renting things for almost a half-million in cash flow a year tend to be conservative as they would hate to have rentals worth about $10 million to suddenly find to be a big problem. I still suggest a good manager. If not, pay an attorney to rewrite your leases to give you the most protection possible. Do this on the cheap because you're really smart and worked hard to get all this and you deserve all the money and this does not seem that big a problem, and I'd love for you to write back when it blows up in your face. Sure, it is the new wave. The new wave should not be asking questions on the internet.

 

[FarmerJ]

What I see as a reason to have it set up so NO one can transfer a dime out of the acct but you including not having a card has to do with data theft. If someone found a way to use your acct number & withdrew money then you have a huge hassle while your waiting to try to get money back. By having a account set up with out a check card then NO one can get a number if one does not exist, Electronic theft problems are only going to get worse , but with you moving money out of this acct to one that you do use to pay mortgages ins, taxes water bills maint etc out of then with so many having the number at least if the depositing accounts became compromised then by having transferred the deposited funds OUT that could reduce the hassles with coming up with what you would need to pay bills in the short term. AGAIN talk to your banker see what they can come up with.

 

[BL]

You can not change a valid lease without all parties in an addendum ,signed and dated .

New leases can be re-written. Make it clear partial payments will not be accepted and will be returned ,followed by legal proceedings .

Get a PO box to have rent payments sent to.

Do not accept partial payments .Send partial payments back.

Give a 5 day grace period if you wish, it's not required.

 

[ecmst12]

Keep your account number private. Forward your mail to a PO box and do your own banking.