Recently, a friend of mine signed a two year rental agreement with a small mom and pop rental place. At the time of signing, they offered credit cards as a way of paying, but a credit card is not explicitly mentioned in the contract as a method of payment. However, three months ago, they notified my friend that they are no longer accepting credit cards as a payment method for rent (their processor changed rules or something). They switched entirely to ACH drafts only.

However, my friend doesn't want to use ACH drafts as he already authorized them to charge his credit card. And he refuses to give them his ACH information, despite repeated notifications from the landlords.

He claims that they stopped collecting rent, not that he stopped paying it.

This brought into my mind some very interesting financial and legal questions.

His entire premise is:

  • He entered into a contract to pay because he liked the payment methods offered
  • That payment method is still authorized, but the company no longer accepts it
  • Therefore he authorized a payment, but the company isn't collecting
  • Therefore he is off the hook for repayment AND doesn't need to add a new method of payment

My question is:

  • Is the onus for repayment on the lessor or the lessee? aka Is a lessee required to repay a lessor in a manner the lessor accepts? Or must a lessor accept any payment method from the lessee?
  • Is not liking the payment methods accepted a valid reason to expect to be let out of a lease contract?

I feel like my friend is in the wrong here, but I'd love case law or US law examples to prove that he still owes the money!

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    "a credit card is not explicitly mentioned in the contract as a method of payment." What does the contract say? "I'd love case law or US law examples" It all starts with what the lease agreement actually says. – RonJohn Nov 1 '17 at 21:08
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    This certainly required a country tag. And really it should have a state tag too. Real estate laws differ greatly by state. It's not a personal finance question if you want case law and law examples. The personal finance answer is that he will eventually have to pay via some method. – Brythan Nov 1 '17 at 23:14
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    This sounds sort of like the spurious arguments that if the flag in a courtroom has a fringe then it is an admiralty court and does not have jurisdiction. – zeta-band Nov 1 '17 at 23:22
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    Giving a standing ACH authorization to your landlord is generally a pretty terrible idea. Has he considered using checks, or even a cashiers check instead? – Bailey S Nov 1 '17 at 23:25
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    I'd just like to quickly point out that landlords are people too. The landlord's rental income is his income, and by denying it you are potentially causing financial difficulties for him. That doesn't really seem fair. Sometimes we feel that the landlord is the evil man behind a curtain, but they are normally just trying to make an honest living. – Tim Nov 2 '17 at 0:05
up vote 26 down vote accepted

This situation is exactly why we have the concept of legal tender. Legal tender is a form of payment that must be accepted to settle a debt. Your friend is entitled to insist on paying the rent in cash — accepting any other form of payment is at the landlord’s discretion.

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    Unless the contract explicitly states how the money would be paid. – Vality Nov 1 '17 at 22:07
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    Nope. Cash has to be accepted for a debt, but rent is payable in advance not as a debt. The rules for debt might apply to rent that's very late, and by the time it becomes debt you're in serious trouble (and probably being required to "accelerate" rent payments for the entire rest of the contract term). – Ben Voigt Nov 1 '17 at 22:18
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    @BenVoigt He might have reached that point - in fact the moment that he misses a payment he is in debt. – Tim Nov 2 '17 at 0:01
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    @BenVoigt No, if he's contractually obligated to pay the rent in advance then it's a debt like any other. If the contract doesn't specify specific payment methods then then legal tender laws means the landlord must accept cash as payment. – Ross Ridge Nov 2 '17 at 0:50
  • Accepting this as the best answer for the question. It answers that the lessor must accept USD fiat currency for a debt (past due rent is a debt) and also shows that, even if you don't like the payment options, cash in hand is always accepted for debt, which would at least bring my friend up to a "current" status in his account. Only thing that is missing is who holds the onus for collection/payment. – Adam Link Nov 4 '17 at 21:48

If your friend thinks he can live there for free due to his unique interpretation of contract law, he is mistaken. He'll get evicted if he doesn't pay rent, and likely end up with a judgement against him for unpaid rent.

At its core, a rental agreement ensures that in exchange for paying rent, he may occupy the property. You can argue up and down about payment methods, but the fact remains he must pay rent in order to live there.

Your friend MAY have an argument that he could move out and not be subject to penalty for breaking the lease because the payment terms changed. He'd have to give notice and would still owe for the time he occupied the property.

There's just no way he can live there for free. He may find this out the hard way.

He entered into a contract to pay because he liked the payment methods offered

He entered into a contract. Full stop. End of story.

Therefore he is off the hook for repayment AND doesn't need to add a new method of payment

Your friend needs to look at the contract (or better, have someone who actually understands contracts look at it for him). He needs to understand not what he thinks it says or what he wants it to say or whatever farcical interpretation of contract law he's talked himself into, but what it does in reality say. Which, in every such contract I've ever seen, has never, ever, said "you will pay in the manner you choose and if we choose not to accept it then gosh darn you win and get to live here for free!".

I suspect your friend is in for a lot more very bad outcomes in life if he thinks this is how contracts, and life in general, works. :-)

  1. __________ _________ ____________

  2. Therefore, I get the outcome I want.

The human brain must think: it can't stop. If you don't believe me, try meditating.

The mental process of putting stuff in those blanks is called rationalization. This is a bored mind who wants something. If that mind is not particularly well disciplined, those things will get pretty unrealistic.

That is what has happened to your friend.

Landlords do not like drama. They do like money. Generally a landlord will be happy to take your money any reasonable way that they can achieve. It sounds like either your landlord lost the ability to do credit cards, or he got sick of paying the 3% overhead, or some other overhead costs that may be higher because he does not have the right credit card merchant service. For instance PayPal Here charges 2.70% flat, but a traditional swiper can cost up to $2000 a year in trumped up fees and charges.

As soon as the landlord calls the rent a debt, he has to take cash. But in most places, rental is at-will, and the landlord can evict for any reason or no reason at all (except race, creed, color, national origin, family, running a daycare center and a few other protected reasons)... and there's not a whole lot you can do about it. Even for a lease he can trump up a reason.

Your friend would be wise to have a meeting of the minds with the landlord about how he'd like to pay. Business is done by mutual consent, not non-consensual legal tricks. I agree, I wouldn't do ACH either.

One problem with ACH (or credit) is the landlord can charge anything he pleases, and that's when they start sneaking in devious surcharges for things. Once he's pulled the money out, you're really at a disadvantage to argue, since he already has the money. And it's really difficult to do a chargeback on part of a payment, so you end up having to chargeback the entire rent check, and now he can evict you.

There are probably specific laws that control landlord/tenant rent disputes. But your friend's argument assumes that there aren't. Let's assume that there aren't.

So there are two possibilities. Either the contract directly addresses this issue or it doesn't. If the contract directly and specifically addresses this issue, then that controls. Your friend is not claiming that it is specifically addressed.

So the general principle is this -- when something occurs within a contract that wasn't explicitly discussed by the parties, courts will try to figure out what the parties likely would have agreed to had they discussed the specific issue (without changing the agreed terms of the contract). This should produce the result that is fair to both parties.

Your friend is arguing then that had he and the landlord discussed the issue, the landlord would have agreed that in the event he is no longer able to accept credit cards easily, your friend could live there rent free.

That doesn't seem right to me. Does it seem right to you?

Much more likely they would have agreed that he might have some leeway to work out a new payment scheme and maybe some late rent should be forgiven if he made an attempt to pay on time but couldn't make arrangements. But I don't see more than that being reasonable.

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