Requiring Credit or Debit Cards for Self-Storage Rentals
Copyright 2014 by Virgo Publishing.
By: Jeffrey Greenberger
Posted on: 07/09/2008



 

If I could offer you a product to substantially increase your ability to easily collect rents every month, with the potential for less “missing” money and mistakes, would you buy it? Ironically, it’s not for sale, and it may be something already in your office, but you’re afraid to use it. What is it? It's a request for tenants to provide credit/debit card numbers to pay rent.

Before you say, “There’s no way renters will pay by credit/debit card,” you’ll want to read the results of our client survey. Moreover, you’ll need to learn the right way to request and get a credit/debit card number.

Jim Chiswell has always called this “the guaranteed no late-fee program,” because you can sell the idea of requiring a credit/debit card two ways. The first is a flat-out requirement that a card number be provided for monthly rental charges. Along the East Coast, the practice has been commonplace for several years. However, you can also take a credit/debit card number under the pretext of protection against late fees (the guaranteed no late fee).

Here’s what tenants are told by managers: “We keep your card number as a service to you. Your credit/debit card is only used if rent is late. Let’s say you get sick or must travel and forget to pay your self-storage bill. Before you know it, you could owe a late fee, maybe an overlock fee, lien check fees, letter fees, you name the fees. The charges are all small, but they add up quickly.”

Some storage owners create a document that explains to tenants “the high price of being late” as another means in which to coax a card number from them. Unfortunately, some facilities may have clientele that does not have or will not give a credit/debit number but, realistically, that population is getting smaller by the day.

Consumers are accustomed to having to provide credit cards for services. Have you tried to reserve a hotel room or rental car? Perhaps you’ve rented a tool from your local hardware store. Not one will rent to you without getting all the necessary information, including a credit/debit card number. Yes, sometimes it’s possible to secure services for a large cash deposit, but for some, that’s not an appropriate measure.

The On-Time Rent Payment

A credit/debit card gives you the closest guarantee to on-time rent payment and, because numbers are programmed into your software, there’s less chance of misappropriation of occupant funds. Software reports reveal how many accounts are charged and the amount deposited each by date, making record-keeping a snap.

In the past, we typically prepared rental agreements with a credit/debit card addendum: a place for the operator to “offer” the occupant the convenience of credit card payment. However, for the last several years, we have actually been requiring a credit/debit card to pay rent or “back up” late payments in the language as an included provision.

As you know, many people signing a self-storage rental agreement have mentally committed to renting from you; the truck may be outside idling, and they need to get property moved in. This is the perfect time to “ask” for the credit/debit card number, as if it is required. Do you have to require a credit/debit card? Certainly not, but you can give the appearance it’s necessary to move on with the leasing of the premises.

Recently, we began informally polling clients using the “built-in” provision for credit/debit cards rather than a separate addendum and have discovered that compliance has jumped dramatically—from 25 to 75 percent—merely by making a provision part of the rental agreement.

The change could be due to the tight economy, increased acceptance of providing credit card information, more sophisticated operational procedures, better software, etc., but it’s possible that by making it a requirement tenants will simply abide. Few people walk away from a rental car counter or hotel because a credit card is needed; the same could hold true for self-storage.

Yes, the added step of collecting card information may be a drag for managers to enforce, so consider rewarding them for every rental agreement they obtain with a valid credit/debit card. Remind them that this one step could save them from late-fee headaches later on. Plus, it frees them up for other activities—marketing and the like.

Consider speaking to your attorney about adding a provision that makes a credit/debit card a requirement to your rental agreement. It’s a simple idea but can be very beneficial.

This column is for the purpose of providing general legal insight into the self-storage field and should not be substituted for the advice of your own attorney.

Jeffrey Greenberger practices with the law firm of Katz, Greenberger & Norton LLP in Cincinnati, representing owners and operators of commercial real estate, including self-storage. He is the legal counsel for the Ohio Self Storage Owners Society and the Kentucky Self Storage Association. His website, www.selfstoragelegal.com, contains his legal opinions and insights into the self-storage industry, as well as an article archive. For more information, call 513.721.5151; e-mail jjg@kgnlaw.com.