The perils of the third party rent platform
Agents are no doubt aware of a new player in the residential tenancy market, namely companies which offer a payment platform pursuant to which tenants pay their rent to a third party, by credit card, in return for earning rewards points and frequent flyer points.
Other advantages promoted are that tenants might use their interest free period on their credit cards when paying their rent and that, by subscribing to the scheme, tenants receive an automatic reminder in respect to the payment of the rent and are obliged to merely click "yes" on their mobile phones for the rent to be deducted from the credit card held by the third party platform.
For agents, the scheme is promoted as relieving agents from the tedium of chasing up rental payments, offering an assurance in respect of the security of rental payments drawn from a stored credit card and having the advantage that tenants are incentivised to pay their rent.
Of course, nothing is free. And what the promotion of these third party rental platform schemes often do not deal with on their websites are the fees levied by the platform. Someone has to pay for this service; either the landlord or the tenant.
The third party rental payment scheme was recently the subject of criticism by the popular financial adviser, Scott Pape - The Barefoot Investor - who highlighted to tenants that, in outsourcing rent collection to a third party, tenants might not be aware that the fees levied by the third party platform might be passed on to the tenant, without the tenant's knowledge.
While such schemes may be of interest to tenants, and beneficial to landlords and their agents, agents must be aware that, in Queensland, the Residential Tenancies and Rooming Accommodation Act 2008 (Act) provides, in section 83(4), that the rent must be paid under a residential tenancy agreement in an "approved way", which comprises payment by:
c) deposit to a financial institution nominated by the Lessor;
d) credit card;
e) an EFTPOS system;
f) deduction from pay, pension or other benefit; or
g) another way agreed on by the provider and the resident.
The payment facilitated by a third party provider falls within section 83(4)(g) of the Act.
While it is a matter for landlords and their agents to decide whether farming out rent collection to a third party provider is financially advantageous and administratively expedient, and while tenants might value the convenience of the automatic deduction of rent from a stored credit card, and earning associated benefits by using their credit card to pay their rent, agents must, in advancing such a proposal to a tenant, ensure that they comply with section 84 of the Act.
That section provides that, if one proposes another way of paying the rent - such as through a third party platform - the tenant must be afforded the opportunity of at least two other approved ways for the payment of the rent, under section 84(4)(a) to (f).
Furthermore, the tenant must be informed of any costs associated with the use of the platform of which the tenant would not be reasonably aware and of which the landlord or the agent knows, or could be reasonably expected to ascertain. That is, by way of example, the tenant must be:
- offered the chance to pay the rent, say, by direct debit from the tenant's pay or by cash or by using the third party platform; and
- informed of, and agree to, the third party platform fee, if that fee is to be passed on to the tenant.
There are similar provisions, under sections 98 and 99 of the Act, governing rooming accommodation agreements.
Therefore, while the third party rent platform may have the benefit of relieving property managers from a routine task, incentivising tenants to pay their rent, and providing some level of rental security to the landlord by access to a stored credit card, nothing is free and the fees which will be levied by the third party platform must be disclosed to and agreed to by the tenant, if it is proposed to pass those fees onto the tenant.
Tenants are better informed than ever, and more willing to assert their rights, which means that the obligation upon agents to ensure compliance with the Act is greater than ever.
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