Direct Deposit Disadvantages

The Danger of Allowing Tenants to Direct Deposit Rent into Landlord’s Bank Account

The Danger of Allowing Tenants to Direct Deposit the Rent in Ohio

I come across many landlords in Ohio who, for the sake of convenience, give their tenants the information needed to directly deposit the rent into their bank accounts. The arrangement works rather well until the tenant stops paying the rent in a timely fashion or otherwise violates the lease agreement. To see the nature of the problem, let’s look at a hypothetical.

The tenant starts disturbing the neighbors with loud parties, unauthorized occupants, and a large dog in violation of the no pets clause. The landlord gives notice to the tenant to stop with all of this nonsense, but the tenant refuses.

The landlord then posts a three day notice to vacate upon the door to get the eviction process rolling. The tenant does not leave and the landlord files for eviction with the court. A few days before the hearing and after the three day notice has been posted, the tenant pays the rent. Then at the hearing, the tenant argues that since the landlord accepted rent after posting the three day notice, the landlord has waived the three day notice. The Court will dismiss the eviction at that point since the landlord cannot accept rent after the posting of the three day notice to vacate without waiving the three day notice to vacate.

It is no good to argue that the landlord did not accept the rent. Had the tenant mailed a check to the landlord, the landlord could have mailed it back to him/her. Had the tenant arrived at the landlord’s door with cash, the landlord could refuse to accept the cash. But once the money goes into the account, that is acceptance of the rental payment after the three day notice.

The only way for the landlord to stop this from happening would be to close down the account for which the tenant had the information and that way there can be no acceptance of the rent after the posting of the three day notice. But what if other tenants at the building make deposits into that account? What if that account is used by the landlord to accept direct deposits from an employer or to make regular monthly payments like the mortgage, utility, or insurance payments? This could become a giant hassle.

So think long and hard about entering into a system where the tenant can direct deposit the rent. If you insist upon such a situation, make sure that the account you have set up for that purpose is used only for that purpose so that it can be closed down without much trouble if the tenant needs to be evicted.