Collecting rent - best practice

Landlords today demand speedy and accurate rent collection. Are you still buried in a pile of personal cheques from tenants paying rent, or worse still, cash that needs to be banked and reconciled?  

Over the past 10 years technology has helped provide new products and services to make the rent collection process more efficient. From Deposit Books to BPay, Internet Transfers, EFTPOS and other merchant facilities there are now numerous ways to collect rent. The most sophisticated of all of these are supplied by Rent Card or Payment Service providers, who generally provide all of these options at a very low cost to the agent.

Our rent collection systems are much more sophisticated than those overseas. For example, In the US, the main method of rent payment is still via personal cheque. Property managers (who can afford to) have an “Electronic Cheque Scanner”. The cheque is fed into the scanner and then turns the data into an electronic payment and sends it to the bank. Those that can’t afford one still process everything manually including dishonours and tenants in arrears.

Firstly, they offer tenants a convenient and secure way to pay rent, 24 hours a day, 7 days a week. Most offer multiple payment options, such as Direct Debit, Credit Card, BPay and over the counter options (usually Australia Post) all shrink wrapped in to one small convenient card.

For the agent it’s the freedom to say “good-bye” to unidentified payments appearing mysteriously in the trust account and bank fees which can seriously eat into your already tight property management margins. 

The really big benefit, though, is that it should also reduce rental receipting and reconciliation time to about five minutes per day, leaving more time to manage assets and do more productive things, like growing the rent roll.

Usually, tenants register for a rent card with a third party provider and pay their rent through their chosen payment channel.  The provider then aggregates all the payments destined for that agent and makes only one deposit into the agent’s trust account.  

With this deposit the agent will usually receive two other electronic files, one file to be imported into their property management system (machine readable file) and a human readable report to be able to quickly view who has paid and who has not.  

Sounds great, doesn’t it? There is absolutely no doubt that using rent cards provide some great time and cost advantages, but you need to be mindful of the way you implement the solution in your office. With an increased focus on consumer protection, it is vital for property managers to know their rights and obligations when offering rent cards as a payment option to tenants.

Significantly, some state consumer protection bodies offer guidelines (generally similar in nature) to ensure the smooth implementation of rent card systems. Other state bodies leave the onus of compliance on the agent.  

1.  Explain the solution referencing the rent card provider.

Explain to tenants how the rent card solution works including the role of the administering company, charges that apply, and processes for dealing with the disputes as well as the advantages of the card.

Property managers should explain that the rent card provider operates the service on behalf of the office and that the rent card provider charges certain fees for use of the service. One way of effectively explaining the role of administering companies is to explain that banks charge their customers a fee for use of their various “payment services” such as cheques and cash withdrawals from ATMs. Rent collection service providers simply provide a payment service to tenants just as banks do, and charge a fee accordingly.

2. Offer Tenants a reasonable choice of rent payments.

Property managers should not “require” a prospective tenant to buy any one service, such as a rent card, as a condition of entering into a tenancy agreement. This would be regarded as “Third Line Forcing” and is illegal under the Trade Practices Act.  

The easiest solution, therefore, is to offer reasonable and genuine choices to the tenant. For example, if a property manager wishes to avoid handling cash, they could nominate methods such as a rent card with alternatives of money order, or bank cheque.

3. Highlight Conditions of Use.

When registering tenants for a rent payment service you need to ensure tenants carefully read information they receive, including the Conditions of Use, for the rent card before they register.

Rent card solutions providers will require tenants to agree to these conditions which will include any fees associated with the rent card.  Ensuring that tenants read and understand these Conditions of Use will minimise any potential disputes in the future.

These days – probably not! There are fees for over the counter transactions, fees for using ATM’s, fees for using Bank Cheques or Money Orders and Transaction Fees on Bank Accounts. It really doesn’t matter which method is used, a fee will likely be paid somewhere along the way – how much will depend on the type of account that the person is using.

OK - so you’ve signed up to a rent payment solution and you’re keen and enthusiastic to get all your tenants on board and make the office more efficient. You need to know that you cannot unilaterally vary the terms of an existing lease without both the landlord and the tenant’s agreement. 

Here is an example: John Smith, tenant, has been paying rent via direct deposit into the agent’s trust account as specified in their original lease.  The agent decides to start using a rent payment service and writes to the tenant specifically asking them to change to the new system, instead of using his current method of payment. This is not allowed under the Residential Tenancies Act in any State. The new rent payment method must always be optional and there must be agreement to change by both the landlord (or landlord’s agent) and the tenant.

Instead of telling the tenant what you want them to do, the simple answer is to sell the benefits of using the solution and let them make the choice.

Take the time to explain to tenants why you feel the change is necessary (eg improved security, not accepting cash in the office, streamlining your processes, eliminating unidentified payments) and you will get a much better response than telling them they “must” to do something. Remember, you cannot force tenants to change and if you attempt this approach you will likely get tenants’ complaints - which can cost you more time and effort than you thought you might have saved in the first place!

There are also lots of ways that you can “excite” your tenants so they will want to use the service. Some offices will offer to refund their tenants first fee (short term cost for long term gain), and some will offer other rewards for using the rent card. For example, we have recently entered into a partnership with Ambassador Card, so that every tenant who signs up to pay rent to their agent on our card service receives a free Ambassador card which can save them money on fuel, groceries, dining out and more.

In conclusion, rent card systems can create a lot of efficiencies in rent collection. Offices can reduce administration time and costs substantially by not fragmenting rent collection methods. Our experience has shown that if an office offers reasonable and genuine payment choices and follows with the above guidelines this should simplify the management of rent collection and lead to an improvement in the efficiency and profitability of their property management department.  

[BIO]Samantha McLean has a background in IT & Telecomms and has held senior positions with British Telecom, Cisco and Optus before joining Corum eCommerce as General Manager. Corum is a leading provider of payment solutions to corporate and the real estate industry, with products such as RE Connect oneCard, LJ Hooker Priority Card and Raine & Horne PayCard.