In the modern electronic age, more and more management companies allow residents to pay rent either online through their websites, or by submitting electronic payments over the Internet. This is obviously a great service and convenience for residents. Given the increasing number of rent payments made online, we have started to see the effect of online payments on evictions. However, most management companies have not thoroughly evaluated the potential effects of online payments on evictions.
Under Colorado law, if you are evicting a resident for rent, and you accept any rent after posting the three day, you waive your right to evict the resident based upon that three day demand. Thus, if you accept rent after you post, you have to repost for any remaining balance. This rule applies to any payments, including online payments.
Most communities have one or more policies regarding the acceptance of payments after posting of three-days. Many communities won’t accept partial payments period. Some communities will accept partial payments, but then will immediately repost for any balances. If a three-day has expired and sent to us for eviction, all communities require the resident to pay the rent, late fees, and attorneys’ fees as a condition to accepting the resident’s payment. Most communities won’t accept any rent from problem residents. For example, if a resident has consistently violated his lease but the lease violations have been difficult to prove, the community won’t accept the resident’s rent if the resident didn’t pay within the three days after posting of a demand. Evicting the problem resident for rent is much simpler than dragging other residents in to court to testify about the problem resident’s noise violations.
What happens with online payments is that the resident is given the ability to make payments that you would not accept based on your rent collection policies. Two scenarios will illustrate the problem. First, a resident doesn’t pay rent. The three day expires. You start an eviction. The resident then pays half the rent online. Because online payments after the posting of three days aren’t being monitored or refused, the resident can successfully argue in court that you waived the right to evict on the three-day. The resident is right. You now have to start over. Second, a problem resident doesn’t pay his rent. You just want him out, but haven’t been able to prove his lease violations. The three-day expires. The resident then pays his rent online. Again, because online payments are not monitored, you have now waived your right to evict the problem resident for non-payment of rent.
Online payments are a critical and necessary service that competitive communities should offer to their residents. However, you must be aware that online payments can affect your ability to evict residents. Every management company should evaluate how online payments are made and tracked. If you allow residents to make online payments, you should have the ability to shut off or refuse online payments under certain circumstances. Under what circumstance your community should shut off or refuse online payments depends on your rent acceptance policies.