Don’t misunderstand me, I love Venmo but you really ought to think twice before using it in legal real estate applications. Let’s take a look.
What a good payment system looks like
First things first, let’s outline some of the characteristics of what landlords need from a payment system. When you think of it, there are some really specific points of functionality that are required.
- Electronic rent collection
- Feasible price structure
- Easily produces accounting reports
- Systematic record collection for easier tax reporting
- Enables tenant automatic payments
- Security for sensitive information
- Ability to deny partial payments
- Ad-hoc payments
Given what we have outlined for what a landlord needs. Let’s compare that with what Venmo offers. Now keep in mind that Venmo doesn’t even sell it self as a business solution but rather Venmo bills its self as:
“Venmo is a free digital wallet that lets you make and share payments with friends. You can easily split the bill, cab fare, or much more.”
Why is it so popular for landlords?
Well, let’s be honest, Venmo is an incredibly convenient, easy-to-use free technology. As a result when you start to use it you can come up a lot of scenarios where it could make your life easier. However, with housing laws and the needs of landlords using Venmo is overreaching really what it was intended to be used for.
Legal consequences and tenancy implications
Consider a scenario where a tenant is late in their payment. As the landlord you are accruing late payment fees and or are proceeding with eviction. Well if you have a precedent of accepting payment via Venmo, which is a pay-on-demand system, then the tenant can just pay you any amount for rent and you automatically accept that payment. As a landlord if you accept a payment from a tenant that is partial or incomplete you lose the ability to enforce the terms of your lease because of your acceptance. In effect, when using Venmo tenants can force you take payments from them and you lose legal standing to enforce late payment fees or evictions. In essence you lose a large part of your control over tenancy in your property.
Its easy to see if an issue comes up as a landlord you could lose the ability to turn over a tenant at the expiration of a lease, force payment of late fees, or lose the legal right of eviction. All of these scenarios could wipe out months or years of cash-flow profitability.
However, if you have a payment system that enforces the payment processes as outlined in the lease you retain control of denying partial payments and control over tenancy. In the end, as a property owner you have to protect yourself against large downside risks that could undermine the profitability of your investment!