Paying rent in cash can be risky for both landlords and tenants. Many landlords accept cash payments nonetheless, and some even insist on it. In general, tenants are better served by other methods such as checks or online bank payments. If you do pay the rent in cash, make sure you get a receipt so you have a paper trail proving you paid the rent.
Paying rent in cash isn’t the worst thing in the world, though, so long as you’re careful about it. If you want to avoid trouble, here’s what to watch out for when paying rent in cash, as well as steps you can take to keep yourself in good shape.
Why a Landlord Might Allow Cash Rent Payments
Landlords might allow tenants to pay rent in cash for a variety of reasons. First, the transaction is incredibly simple and very direct. There’s no doubt whether the payment will ultimately clear. That provides a landlord with a lot of peace of mind.
Plus, they don’t have to deposit your rent to use it. Cash can be spent nearly anywhere, so they don’t have to head to a financial institution to make a deposit – and potentially wait even longer for a payment to clear. It’s usable immediately as-is.
Additionally, cash may be better for unbanked or underbanked tenants. Not everyone has a checking account, so accepting rent in cash may be easier for those individuals.
Most landlords that allow cash rent payments don’t require it. It’s purely one mechanism they are open to, along with other traditional approaches, like checks and money orders, or modern online solutions like Flex. By accepting cash, they are merely giving tenants a choice.
However, paying rent in cash comes with risks. Whether the landlord is trying to make it mandatory, or it’s simply an option you can exercise, it’s critical to know about red flags and potentially harmful missteps.
What to Know If Your Landlord Requires Cash
It’s important to note that requiring rent in cash isn’t legal in all situations. For example, California Civil Code Section 1947.3 prohibits landlords from making cash payments mandatory unless the tenant has either previously had a check bounce or issues a “stop payment” on a check, money order, or cashier’s check. Even then, they can only make that method mandatory for up to three months following the payment issue.
Other states may have similar tenant protections in place. As a tenant, it’s wise to do a little research about rent laws in your state, including whether a landlord can make one payment option mandatory.
If you live in an area where demanding cash isn’t permitted, you can let your landlord know and work with them to find a legal payment method that works for both parties. If you haven’t signed the lease yet, you might want to reconsider – they’re either ignorant of local landlord/tenant law, or intentionally trying to deceive you.
While rare, landlords asking for cash might be trying to avoid claiming it as a source of income. Cash generally isn’t traceable. If a landlord wanted to dodge taxes on rental income, requesting payments in cash would make committing that kind of fraud easier for them. That won’t necessarily fall back on the tenant, but it’s still a cause for concern – what other laws would they be willing to break?
However, their reasons for taking cash aren’t always nefarious. Sometimes, it’s the simplicity that makes it appealing. And, if going cash-only is legal, then they aren’t shirking the law inherently, especially if they are providing receipts for a paper trail.
What to Watch Out When Paying Rent in Cash
Even if requiring cash payments is allowed, or you’d prefer to use that approach, there are plenty of other things to watch out for that could indicate a problem. For example, refusing to provide a record of the payment (such as a simple dated receipt) is troubling. Without a receipt, a landlord may claim you didn’t pay, and you can’t necessarily prove otherwise.
Similarly, not giving you the ability to pay cash rent in-person is a bad sign. Sending cash through the mail is incredibly dangerous, as anyone could potentially intercept it and spend the money. Plus, it could end up late through no fault of your own, or could get lost in transit.
Ideally, if a landlord wants your rent in cash, they should coordinate a pickup time with you in advance. That way, they can retrieve it in-person, and provide a receipt immediately, all without you being unduly inconvenienced. The only exception may be managed properties with on-site offices that maintain traditional business hours. In many cases, requesting cash be brought to that office isn’t out of line.
Additionally, the cash-only approach should only be mandatory if it is legally permitted. If not, then they need to present a reasonable alternative based on local law.
Alternatives to Paying Rent in Cash That Might Work
As mentioned above, some landlords ask for rent in cash because it guarantees they’ll get the payment. If a landlord has been burned severely in the past, they might use this payment approach because it feels safer to them.
However, there are other options that can work a lot like cash while limiting risk to both parties. For example, cashier’s checks and money orders are reasonable alternatives. They can’t bounce like a regular check. Plus, they create a paper trail for all parties, which is great for recordkeeping, and are very secure. Money orders are even accessible to the unbanked. The only difference between these choices and cash is that it is possible for a tenant to request a stop payment on cashier’s checks or money orders.
ACH Transfers, also referred to as bank-to-bank transfers, are also incredibly secure. Additionally, they can typically only go through if the tenant actually has money in the account to support it (or a suitably large overdraft limit). That may give a landlord peace of mind, as well.
Some landlords also accept credit cards or online payment platforms such as PayPal. But many landlords are wary of these options due to payment process fees, and landlords that do accept these platforms often pass those costs onto the tenant.