As more and more facilities move to contactless rentals and unmanned facilities, one of the lingering questions has been whether it is legal for a self-storage facility to require that their tenants pay only through credit cards or ACH (electronic check) systems. In other words, can a facility reject cash payments from their tenants?
Interestingly, there is no federal law mandating that private businesses must accept currency or coins as payment for their goods or services. Much has been made of the argument that any presentation of “legal tender” must be accepted. However, that’s not what the law says. Each business is entitled to establish its own rules for how payments can be made, subject to state or local law requirements.
And that is where the new challenge has occurred. During the pandemic, a number of cities and states raised the issue of whether it was fair for businesses to implement a cashless policy. Proponents of laws against “cashless” businesses argued that a growing number of consumers either had no bank accounts or were unable to secure credit cards to meet this obligation.
States such as Massachusetts, Pennsylvania, and New Jersey each passed “cash” laws that require retail establishments (arguably including self-storage facilities) to accept cash payments from their customers. These “Discrimination Against Cash Buyers” laws provide that retail establishments “offering goods and services for sale” must accept legal tender when offered as payment by the buyer. The Pennsylvania law goes so far as to state that it is unlawful for any person to “refuse to rent or sell property or services to any individual for the reason that the individual does not possess a credit card.” Such “cash laws” are also popping up in local jurisdictions and can be found in new city ordinances such as one passed in San Francisco last year. Some of these laws additionally place restrictions on charging any additional fees for customers that choose to use cash over credit cards. Other cities, such as New York, Chicago, and Washington, D.C., proposed certain cash laws, but those were not passed.
Over the last five years, as the use of technology has blossomed in the self-storage industry, more and more self-storage facilities have shifted to unmanned properties, utilizing the opportunities for kiosk services and mobile leasing with electronic contracts. All of this has been great for both operators and tenants, making their access to renting units easier and more efficient. But one consistent element of these unmanned properties, using all of this technology, is that the majority of these systems use credit card processing rather than cash to obtain payment from the tenants.
Facilities using credit cards as a “condition of tenancy” in non-regulated states can continue to do so. But with this continued movement by state and local legislation against cashless services, self-storage properties that are limited to credit card payment processing may be facing liability for not allowing their tenants who want, or otherwise don’t have access to credit, to pay in cash. As these laws indicate, notwithstanding the practical application of credit card use for self-storage rentals, more pressure may arise against self-storage owners to provide for a cash payment option.
How will this affect storage facilities that don’t have a physical office but otherwise operate a “brick-and-mortar” rental facility? These current laws do not address those unique circumstances at all. As such, these laws may end up being tested in situations where a cash paying tenant complains that the unmanned facility, using only a kiosk or virtual/online payment system, is alleged to be in violation of the law, even though they do not have a brick-and-mortar office where rentals can be transacted.
Facilities with live managers will definitely need to reconsider any restrictions they might currently have against operating with cash. A manned facility conducting rentals with live managers may have no choice but to accept cash as an alternative to credit cards, based on the language of these new laws and the pressure being mounted against retail businesses, which suggest that denying cash customers is another form of economic discrimination. At the end of the day, before introducing any cashless systems into your business operations, you must verify your state and local laws to ensure that cashless statutes have not been enacted in the last few years.
Stay safe and happy storing!