Reprinted with permission from the July 2022 Legal Monthly Minute.
As more and more self-storage operators move toward contactless rentals and automated operation, one of the questions that has emerged is whether it’s legal to require that tenants pay only through credit cards or electronic-check systems. In other words, can a facility reject cash payments from customers?
Interestingly, there’s no federal law mandating that private businesses must accept currency or coins as payment for their goods or services. Some folks argue that any presentation of “legal tender” must be accepted; however, that isn’t what the law says. Each operation is entitled to establish its own rules for how payments can be made, subject to state or local requirements.
But that’s where the challenge lies. During the pandemic, a number of cities and states raised the issue of whether it was fair for businesses to implement a cashless policy. Proponents of laws against these operations argued that a growing number of consumers had no bank accounts or were unable to secure credit cards. For example, Massachusetts, Pennsylvania and New Jersey passed legislation that requires retail establishments to accept cash from their customers.
These “discrimination against cash buyers” laws provide that any business offering goods and services for sale must accept legal tender when offered as payment by the buyer. The Pennsylvania law goes so far as to state that it’s 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 passed in San Francisco last year. Some also place restrictions on charging any additional fees for customers who choose to use cash over credit cards.
The Unattended Management Model
As the use of technology has blossomed in the self-storage industry, more facilities have shifted toward being automated, aka unattended, using kiosks, online rentals and mobile leasing with electronic contracts. This has been great for operators and tenants, making access to storage units easier and more efficient. But one consistent element of these “unmanned” properties is most of their operational systems use credit card processing rather than cash to obtain payment from tenants.
Self-storage facilities using credit cards as a “condition of tenancy” in non-regulated states can continue to do so. But with this movement of state and local legislators against cashless services, properties that are limited to credit card payments may face liability for not allowing tenants who want to pay in cash—or those who don’t have access to credit—to do so. Notwithstanding the practical application of credit card use for self-storage rentals, more pressure may arise against facility owners to allow a cash option.
How will this affect facilities that don’t have a physical office but otherwise operate a brick and mortar store? The current laws don’t address those unique circumstances at all and may, therefore, end up being tested. A cash-paying tenant may complain that the unattended business, which uses only a kiosk or virtual/online payment system, is alleged to be in violation of the law, even though it doesn’t have a front office where rentals can be transacted.
Self-storage properties with onsite staff will definitely need to reconsider any restrictions they might have against cash. They may have no choice but to accept it as an alternative to credit cards based on the language of these new laws and the pressure being mounted against retail businesses, which suggest that denying cash customers is another form of economic discrimination. At the end of the day, before introducing any cashless systems into your operation, you must verify your state and local laws to ensure related statutes have not been enacted in the last few years.
Scott I. Zucker is a founding partner in the Atlanta law firm of Weissmann Zucker Euster Morochnik & Garber P.C. Practicing law since 1987, he represents self-storage owners and managers on legal matters including property development, facility construction, lease preparation, employment policies and tenant-claims defense. To reach him, call 404.364.4626, or email firstname.lastname@example.org.