Can Landlords Refuse Cash and Require Check or Electronic Rent Payments?

By Kimberly Rau, MassLandlords, Inc.

In 1978, Massachusetts made it illegal for retail establishments to refuse to accept cash, stating it was discriminatory to allow only certain forms of payment. But, do landlords have to follow that law as well when collecting rent?

A black leather wallet is open against a pale blue background. Multiple hundred dollar bills are peeking over the edge of the section of the wallet designed to hold cash.

Yes, it’s legal for landlords to accept cash payments for rent, but should we? And is it legal to refuse cash entirely? (Image License: Unsplash)

Massachusetts General Laws Part 3, Chapter 255D, Section 10A, specifically states: “No retail establishment offering goods and services for sale shall discriminate against a cash buyer by requiring the use of credit by a buyer in order to purchase such goods and services. All such retail establishments must accept legal tender when offered as payment by the buyer.”

This wording has led some to believe that anyone taking payment for any type of product or service must accept cash if it is offered, but this is not the case. At least some Massachusetts government offices do not take cash payments. For landlords, it actually makes sense to insist on a check or electronic payment for rent, the security deposit and other rental-related payments.

Accepting Cash Can Put You at Risk

If a check goes missing, it can be canceled. If an electronic payment goes awry, the bank or processing agency can look into it. But what happens when cash disappears?

Naomi Richardson, MassLandlords’ community builder and accountant, recalled when she worked for a property management company. The owner of the company would accept cash rent payments, but, more than once, someone broke into the office and made off with thousands of dollars.

Richardson said, with the first break-in, the owner was relatively certain the thief was someone who had been in the office when she took the payment. The cash had been placed in a relatively obscure place (but not locked up), and after the burglary, the only thing missing was the two months of rent that had been paid in cash. Camera footage showed someone entering the building, but did not get a clear image of the person’s face.

“She would have never thought in a million years she would have gotten robbed,” Richardson noted.

After that, the owner got a safe. She also stopped accepting cash payments except for the occasional circumstance when a tenant insisted on paying cash.

“The second time it was just blatant robbery,” Richardson said. In that instance, the theft seemed more random. Computers and other office items had been stolen along with some rent that had not yet been placed in the safe.

Still, the owner was left with little recourse. The cash was gone.

Cash Can Create Opportunity for Misunderstanding

Richardson also said that accepting checks or electronic payments removes any doubt about how much was paid. Imagine your tenant drops off $1,800 in an envelope for that month’s rent. You accept the envelope, but don’t open it immediately. When you count the money, you notice there’s only $1,700 accounted for, but your tenant insists they sent the full amount. Now you’re locked into a he said/she said battle, with no evidence on either side.

Of course, the way to avoid that problem is to count the money in front of the renter. But imagine the many scenarios where that’s not possible. Someone other than the tenant drops off the money, or someone else accepts it because you can’t come to the door at that moment. You write the receipt without counting closely. In a perfect world, this wouldn’t happen, but humans slip up. One mistake could cost you a portion of the rent.

A Paper Trail Protects You and Your Renters

Not only are you not obligated to accept cash for rent-related payments, it’s good practice to require your renters pay by either check (personal or bank check) or electronically, such as through RentHelper. This creates a paper trail (or an electronic record) that shows both you and your tenant when the rent was paid. If nonpayment of rent ever becomes an issue, it will be easy to look back and see what rent was received, and when.

Many banks and credit unions offer their users the ability to see an electronic scan of a paper check when it is deposited against their account. This digital image is also helpful if your tenant ever needs to show you that a rent check was deposited.

Your renter may also have bill pay functionality through their bank. You provide your banking information or address, and the bank will send you their rent payment either electronically or by physical check in the mail.

Checks make sense for renters. A page on student housing from Boston University advises applicants to use checks, not cash, when applying for apartments and other rentals, likely because this protects them if a payment is ever called into question. Paying by check also helps protect the check writer against fraud. When a check is deposited, the bank that accepts the check writes identifying numbers onto the back of it. These numbers identify the depositing bank if there is ever concern that someone fraudulently accepted the payment. How? All banks and check-cashing services are bound by federal anti-money laundering regulations that require them to “know your customer.” This means that someone will know the identity of the person who deposited that check, giving you recourse in the event things turn out to be questionable.

My Tenant Does Not Have a Bank Account. How Should They Pay Rent?

Renters may not have a bank account, or may only have a savings account, for a variety of reasons. Some of these reasons could be red flags (a history of writing bad checks), but others may be neutral, especially if you are renting to students or recent graduates who are just starting out in the working world. Six percent of adults in America do not have some type of banking set up, and quite a few renters who used RentHelper were unbanked.

Three percent of those unbanked tenants using RentHelper enrolled in Netspend and paid their rent that way. Netspend is one example of a company that offers something called a “debitable cash card,” which can be an alternative to a traditional banking setup. The card is purchased at a retailer such as a 7-11 or other convenience store. Your tenant gives the cashier their rent money, who credits the amount to the renter’s card. Your renter can then use the card to pay their rent.

Some unbanked tenants who signed up with RentHelper used different services, including cash apps and other brands of debitable cash cards, to pay their rent.

If your tenant has a savings account, they should be able to set up bill pay from the savings account, or have a bank check drawn up for you.

If your renter does not have any kind of banking set up and is unwilling to explore something like Netspend, you could accept cash, or you could also have your tenant pay the rent through money order. Money orders have some similar risks to cash, but lost money orders can be replaced. If someone other than you tries to cash the money order, you can involve the police and find out who endorsed the back of the money order, and where they cashed it.

Alternatively, they can go to your bank and deposit the money directly to your account with a deposit slip (yes, your account and routing number will be on this slip, but they are also on every check you write and give to someone).

If you go either of these routes, make sure you write your renter a receipt after you receive the money order or see the deposit in your account.

What If I Have to Accept Cash for Rent Payments?

If you absolutely must collect cash for rent, or the security deposit, make sure you write your tenant a dated receipt for the payment every time, and keep a copy for your records. One of the reasons we recommend taking checks or electronic payments is that doing so saves you this step, and allows your tenant to skip paying the rent in person.

If your tenant is inclined to mail you cash, request they stop this practice immediately. Mail gets lost, and unless they send it as registered mail, they will be out of luck if that envelope does not get to you.

Conclusion: Yes, it is Legal to Say “No Cash Payments Accepted.”

However you choose to operate your rental business, we can find no statute stating that you must accept cash for rent-related expenses. You may want to take cash, or make an exception for a tenant, but if you do not, there is no law that compels you to do so. There are a lot of reasons why accepting cash for large sums of money is a risky move, and plenty of alternatives to doing so. We suggest you encourage your renters to utilize them whenever possible.