Can your self-storage operation switch to the “cashless” payment model?

Reproduced with permission from the July 2022 Monthly Legal Minute.

As more self-storage operators shift to contactless rental and automated operation, one of the questions that has emerged is whether it is legal to require renters to pay only by credit cards or electronic check systems. In other words, can a facility refuse cash payments from customers?

Interestingly, no federal law requires private businesses to accept foreign currency or coins as payment for their goods or services. Some people argue that any presentation of “legal tender” must be accepted; however, that is not what the law says. Each operation has the right to establish its own rules on how payments can be made, subject to national or local requirements.

But therein lies the challenge. During the pandemic, a number of cities and states have raised questions about whether it is right for businesses to implement a cashless policy. Proponents of laws against such transactions have argued that a growing number of consumers do not have bank accounts or are unable to obtain credit cards. For example, Massachusetts, Pennsylvania and New Jersey have passed legislation requiring retail establishments to accept cash from their customers.

These “cash buyer discrimination” laws provide that any business offering goods and services for sale must accept legal tender when offered in payment by the buyer. Pennsylvania law goes so far as to state that it is illegal for anyone to “refuse to rent or sell goods or services to an individual on the grounds that the individual does not have a credit card.”

Such cash laws are also appearing in local jurisdictions and can be found in new city ordinances such as the one passed in San Francisco last year. Some also impose restrictions on charging additional fees for customers who choose to use cash rather than credit cards.

The Unattended Management Model

As the use of technology has grown in the self-storage industry, more and more facilities have turned to automation, i.e. unattended, using kiosks, online rentals and mobile rentals with electronic contracts. This has been great for operators and tenants, making accessing storage units easier and more efficient. But a consistent feature of these “unstaffed” properties is that most of their operational systems use credit card processing rather than cash to get payment from tenants.

Self-storage facilities using credit cards as a “condition of rental” in unregulated states may continue to do so. But with this move by state and local lawmakers against cashless services, properties that limit themselves to credit card payments may be held liable for not allowing tenants who want to pay 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 be exerted against facility owners to allow a cash option.

How will this affect facilities that do not have a physical office but otherwise operate a physical store? Current laws do not address these unique circumstances at all and therefore may end up being tested. A cash-paying renter may complain that the unattended business, which only uses a kiosk or virtual/online payment system, is accused of breaking the law, even though it has no desk where rentals can be negotiated.

Self-storage establishments with on-site staff will definitely need to reconsider any restrictions they may 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 on retail businesses, which suggests that refusing customers cash is another form of economic discrimination. Ultimately, before introducing cashless systems into your operation, you should check your state and local laws to make sure that related laws have not been enacted in the last few years.

Scott I. Zucker is founding partner of the Atlanta law firm Weissmann Zucker Euster Morochnik & Garber PC Practicing law since 1987, he represents self-storage owners and managers on legal matters, including real estate development, construction of facilities, preparation of leases, employment policies and defense of consumer claims. tenants. To reach him, call 404.364.4626 or send an email [email protected].

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