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I'm undecided as to whether this question belongs here on in the Money & Personal Finance SE, so apologies in advance if it should be migrated.

I'm facing a situation where my landlord had previously collected rent through an online service, in which I had to initiate the payment each month and specify the amount. That service has since been discontinued. As a result, the landlord is now asking all tenants to sign a modification to the lease agreement that specifies two actions:

  • The ownership of the rental property has changed names to a different LLC.
  • The rent will be collected through automatic monthly ACH payments from a bank account that I would furnish. This form authorizes the LLC to withdraw funds from my account as determined by my rental agreement and any future addenda to this agreement, until I move out.

My first question is not so much a legal one, but a plea for advice: is this something I need to worry about? If I agree to these terms, would I be exposing myself to financial risk?

Second, is this type of contract legally enforceable under California housing law? I know I haven't provided the verbatim wording or additional details (mainly to preserve some sense of anonymity), but this whole thing smells fishy to me and I cannot imagine how an arrangement in which a landlord has direct access to my bank account is permissible as a condition of rental.

I am not able to move on such short notice. For the previous month, I wrote them a check, and it went through, so their request isn't out of an absolute need to have this arrangement, but it appears to be for their convenience. For what it's worth, the property owners have been very gracious to me and we get along extremely well, but I have learned not to confuse the personal with the professional. This whole thing smells to me.


Update: I spoke to my bank and was informed that by signing the ACH authorization form, I would be giving my landlord complete access to funds in my checking account. The representative told me that they would not need subsequent authorizations. It's similar to scheduling automatic payment of utility bills, but this is obviously unacceptable to me for such large transactions on an account where I get my paycheck deposited.

While it is true that my account number and the bank routing number are printed on paper checks, the critical difference is that I have to sign each check I write, and that instrument can only be used once. The form I am being asked to sign permits repeated withdrawals without further intervention on my part.

I have also found the relevant portion of California law, in Civil Code Section 1947.3. Because I have never been delinquent/late in paying rent, I not obligated to sign this request, nor can the landlord force me to sign it as a condition of remaining on this property. Moreover, I would tolerate paying in cash if necessary despite the monthly inconvenience, as the issue is about control of my funds. But in the meantime, I will try to negotiate some other arrangement. I've also discovered that I've been overpaying my rent for the last 8 months.

  • What are the exact rules around these planned automatic withdrawals? In Germany, automatic withdrawals are very common ("Einzugsermächtigung") - however, you can unconditionally reverse a withdrawal if you don't agree with it, so there is little risk. How does it work here? – sleske Sep 15 '16 at 8:16
  • Not an answer, but a warning: Their access isn't particularly any more direct than writing a check. You write a check, they have your routing and account number already - it's right there on the check. If they really wanted to do fraudulent things, they could probably do some damage with the information they already have. If you're worried about that kind of thing, you should be paying in cash, money order, or via a 3rd-party service like Google Wallet or the many variations thereof. Never a check. – animuson Sep 16 '16 at 2:54
  • @animuson I don't think that's right. If ACH is the same thing as Direct Debit in the UK, and what I call Lastschrift in Germany, then the landlord has the ability to pull $100 this month, and $10,000 next month. It is a bigger deal than handing over account details (on a cheque). OTOH, the banks usually only allow bigger "responsible" organizations to set these things up. – Martin Bonner supports Monica Sep 13 at 14:34
  • @MartinBonner There are no such limitations. ACH is essentially a network that allows banks to transfer money between each other more quickly - it doesn't actually have anything to do with the consumer side of things - allowing them to handle eChecks with more ease. In fact, a lot of US stores now send paper checks through a machine to automatically convert them to electronic check payments. You only need a person's bank account and routing numbers, name, whether it's a checking or savings account, and a business on at least one side of the transaction. – animuson Sep 13 at 15:06
  • Does your bank allow you to set up a fixed recurring payment out of your account? (they're called standing-orders here) That seems more appropriate for paying rent. e.g. every 2nd of the month, $500 is sent to account X until you stop it. – bobsburner Nov 25 at 10:42
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As noted in your update, Cal. Civ. Code section 1947.3 says

(a) (1) Except as provided in paragraph (2), a landlord or a landlord's agent shall allow a tenant to pay rent and deposit of security by at least one form of payment that is neither cash nor electronic funds transfer.

Paragraph 2 related to cases of recent bounced checks, and it sounds like you don't have that problem.

From the personal finance angle, if you liked the convenience of the online service but don't trust the new ACH agent, your bank may have an "online bill pay" service where they can withdraw money at a designated time each month and send it. Chase has such a service, no charge, they do an electronic transfer if the payee accepts them and otherwise mail a paper check.

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