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Credit Card payments

When tenant’s sign their tenancy agreement they are also asked to pay the first month’s rent and deposit at the same time. Some tenants will elect to make this payment by credit card despite any handling charges. We are then usually contacted when the credit card company has clawed back the money leaving the agent out of pocket.

Rent
There is nothing in law which prevents a tenant making a rental payment by credit card. However, agents may well have a contractual provision in the tenancy agreement which limits the way payments can be made and they are perfectly entitled to enforce this. Where such a provision exists, it is important to note that by accepting a payment in another form to that stated in the tenancy agreement, will be a variation of the agreement and entitle the tenant to use that method in the future.

The main problem with taking rental payments by credit card is the possibility of the money being clawed back by the credit card company in the event of a dispute. In practice, most credit card companies will take back a payment if their customer asserts that it should not have been paid leaving the agent out of pocket if they have already forwarded this money to the landlord. Despite the agent’s misfortune they might find it difficult to recover the money paid to the landlord especially if the tenant has moved into the property. Contractual provisions in the Terms of Business between the agent and landlord will make recovering the money easier should the matter need to be referred to the courts.

More practically, an agent may question the ability of a tenant to pay the rent if they are reliant on a credit card to do so.

Deposits
As with rent there is no legal provision which prevents a tenant making a deposit payment by credit card. But the issues raised above will also apply here.

Furthermore, where a deposit is paid by credit card the payment is being made by the credit card company by way of a separate arrangement with the tenant (the credit card agreement). This fits the definition of a relevant person within the tenancy deposit protection provisions of the Housing Act 2004. Therefore, arguably, the card company should be served with the Prescribed Information regarding the deposit. If this is not done, then the tenant could make a claim for the usual financial penalties for failing to serve the Prescribed Information. In addition, it may not be possible to serve a section 21 notice on the tenant. Needless to say, serving Prescribed Information on a credit card company tends to lead to confusion on the part of the card company and politely baffled letters by return. Whether a tenant would be successful in claiming the financial penalties or arguing that a Section 21 notice is invalid before a court remains to be seen but it is certainly something that should be considered.

As with the rent an agent might also be wary of a tenant who was reliant on a credit card to pay their deposit.

Comment
Undoubtedly, agent’s will want to be flexible in taking money from tenants. After all, this is a fundamental part of their business! However, there are risks associated with credit cards and some may feel that the risk is too great.

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