Cash for Rent – Can Apartment Communities Refuse?
It has long been considered a “best practice” in the multifamily housing world not to accept cash rent payments. There are many good reasons not to accept rent payments in cash, including reduction in theft potential by both employees and outsiders. However, since cash is “legal tender” in the United States, there are those who believe that a refusal to accept an offer of cash as a rent payment could be construed as a refusal to accept rent, thus negating the obligation of the tenant to pay it.
There are a lot of businesses that refuse to accept cash as part of a business transaction. Airlines often will not accept cash for in-flight purchases of food and drink. Apple announced that it would not accept cash for I-Phones, and would only accept payment by credit card. If cash is legal tender, how can they do this? The answer is quite simple actually; federal legal tender laws do require creditors to accept payment denominated in dollars, but don’t specify the form of payment that is required. In other words, dollars must be accepted, but not cash.
It is actually the term “legal tender” that leads to the confusion. The dollar bill (which is more accurately a Federal Reserve Note) includes the language “this note is legal tender for all debts, public and private.” This makes the currency official. It basically means that a creditor must accept Federal Reserve notes in satisfaction of debt, and cannot require that payment be made by some type of foreign currency.
The “legal tender” statute of the United States says: “United States coins and currency (including Federal Reserve notes and circulating notes of Federal Reserve banks and national banks) are legal tender for all debts, public charges, taxes, and dues.”
In essence, U.S. businesses must accept “dollars,” but do not have to accept “cash.” U.S. notes and coins are a valid and legal offer of payment for debts when offered to a creditor. However, although creditors are legally obligated to accept dollars, they absolutely do not have to accept those dollars in the form of cash. Generally, vendors may place reasonable conditions on the manner in which they will accept dollars, and one of those conditions can be that they will accept dollars electronically (credit card) or, as the U.S. Treasury states on their website, “ Private businesses are free to develop their own policies on whether or not to accept cash unless there is a state law which says otherwise.
I have researched the issue, and have been unable to find any state law that requires the acceptance of cash payments. There actually have been court cases in which the courts rejected challenges to no-cash policies.
As for apartment communities and rent, there is no requirement that rent be accepted in the form of cash. Landlords are certainly free to accept cash if they wish, but it is not a recommended policy. However, to prevent possible challenges to a refusal to accept cash, I recommend that leases clearly state the methods in which rent may be paid. Once the tenant accepts the lease and its provisions, they clearly have no recourse if a landlord refuses to accept cash payments.