As the use of technology has blossomed in the self-storage industry, more owners have shifted to operating unmanned facilities, using self-serve kiosks and even mobile leasing with electronic contracts. All this has been great for operators and their tenants, making the rental process easier and more efficient. One unique element of these automated properties is they often use credit card processing rather than cash to collect payment from tenants.
Initially, establishing the use of a credit card as a “condition of tenancy” was accepted and not challenged. But recently, with a flood of state legislation, self-storage properties that are limited to credit card payment processing may be facing fines and ever greater liability for not allowing tenants who prefer to pay in cash or otherwise don't have access to credit.
Three states—Massachusetts, New Jersey and Pennsylvania—have recently enacted laws related to discrimination against cash buyers. They provide that retail establishments (arguably including self-storage facilities) must accept cash payments from customers. If they offer goods and services for sale, they must accept legal tender when offered as payment by the buyer. The Pennsylvania law goes so far as to state that it was 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.”
Cash laws are also popping up in local jurisdictions and can be found in new city ordinances such as one recently passed in San Francisco. The law explains that “Millions of Americans do not hold bank accounts or otherwise fall outside the non-cash financial system,” referencing that “17 percent of all African-American households and 14 percent of all Latino households in the U.S. have no bank account.” As such, the law seeks to protect citizens who are limited to the use of physical cash as payment for goods and services. It also places a restriction on charging any additional fees for those customers that choose to use cash.
These laws will have a direct and significant impact on the developing growth of unmanned self-storage facilities that rely on credit card processing for payments as well as those that have elected to make the use of a credit card a condition for tenancy. It appears that, notwithstanding the practical application of credit card use for self-storage rentals, more pressure may arise against owners to provide for a cash-payment option.
How will this affect storage businesses that don't have a physical office but otherwise operate as a brick-and-mortar site? The current cash laws don’t address those unique circumstances at all. As such, they might end up being tested in situations where a cash-paying tenant complains that the unmanned facility using only a kiosk or virtual/online payment system is alleged to be in violation of the law, even though it doesn’t have a physical office where rentals can be transacted.
Operators with onsite managers will definitely need to reconsider any restrictions they might have against operating with cash. A manned facility might not have any choice but to accept cash based on the language of these new laws. The pressure being mounted against retail businesses suggest that denying cash customers is another form of economic discrimination.
Note: This article was originally published in the author’s “Legal Monthly Minute” Newsletter.
Scott I. Zucker is a founding partner in the Atlanta law firm of Weissmann Zucker Euster Morochnik & Garber P.C. and has been practicing law since 1987. He represents self-storage owners and managers throughout the country on legal matters including property development, facility construction, lease preparation, employment policies and tenant-claims defense. He also provides, on a consulting basis, advice to self-storage companies in the areas of foreclosure and lien sales, premises liability, and loss-control safeguards. To reach him, call 404.364.4626; e-mail email@example.com.