The New "Cash" Laws Impacting "Cashless" Self-Storage Operations

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 now even mobile leasing with electronic contracts. All of this has been great for both operators and tenants, making their access to renting easier and more efficient. One unique but consistent element of these unmanned properties using all of this technology is that these systems use credit card processing rather than cash to obtain payment from the tenants.

Initially, establishing the use of a credit card as a “condition of tenancy” was accepted and not challenged. But recently, with a flood of state legislation, self-storage properties that are limited to credit card payment processing may be facing fines and ever greater liability for not allowing their tenants who want, or otherwise don’t have access to credit, to pay in cash.

Three states have recently enacted “cash” laws that provide that retail establishments (arguably including self-storage facilities) must accept cash payments from their tenants. 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. Such laws were recently passed in Massachusetts, New Jersey, and Pennsylvania. The Pennsylvania law goes so far as to state that it was 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 recently passed in San Francisco, where the law explains that “millions of Americans do not hold bank accounts or otherwise fall outside the non-cash financial system,” referencing that “17 percent of all African-American households and 14 percent of all Latino households in the U.S. had no bank account”. As such, the law seeks to protect citizens of San Francisco who are limited to the use of physical cash as payment for goods and services. The law additionally places a restriction on charging any additional fees for those customers who choose to use cash.

These laws will have a direct and significant impact on the developing growth of unmanned facilities that rely on credit card processing for their payments and further for those facilities that have elected to make the use of a credit card a “condition” for tenancy. It appears, as these new laws indicate, that notwithstanding the practical application of credit card use for self-storage rentals that 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 not have any 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 that suggest that denying cash customers is another form of economic discrimination.