The Property Management Shop

No Excuses for Bounced Checks

by Marc Wilson

Q. One of my tenants habitually bounces her rent checks. Normally, I call the tenant and then redeposit the check. In most cases, her check clears the bank on the second deposit. Her last check did not clear on the second deposit. What should I do?

A. I loathe dealing with bounced checks, and I have no sympathy for people who bounce checks. Why? Because I consider bouncing checks to be an intentional act, regardless of the circumstances. There is absolutely no excuse for bouncing a check. I have never bounced a check in my entire life, and I never will. Virtually all financial institutions have some variation of over-draft protection. When a tenant bounces a rent check, the tenant either intentionally wrote a bad check or the tenant has intentionally failed to procure over-draft protection. One way or the other, the tenant’s’ actions are intentional, calculated and probably fraudulent. What in the world is the difference between tendering a bad check and tendering an envelope that has no contents? If you can’t pay your rent, then do not pay your rent. Don’t make me walk down to the bank with an empty envelope, for this is a ridiculous waste of my time. I resent anyone who intentionally wastes my time.

Most property owners do one of three things when a rent check bounces: they either (1) call the tenant, have copious verbal interaction regarding the bounced check and then continue to redeposit the check until, God willing, it finally clears the bank; or (2) issue the tenant a form known as a Notice and Demand Regarding Dishonored Check, available from SFAA or (3) serve the tenant with a Three-Day Notice to Pay Rent or Quit.

Calling the tenant is always a bad idea. What is there to talk about? How can you possibly remedy a bounced check via verbal interaction with the tenant? You, as the property manager, should have two goals: the receipt of the past-due rent money and, most important, a reasonable guarantee that you will not deal with this problem in the future. Verbal interaction with the tenant, coupled with repeated efforts to deposit the bad check, will give your tenant the wrong impression. These actions do not portray a zero-tolerance posture when it comes to bad checks. Verbal interaction and multiple efforts to deposit represent a dysfunctional owner/tenant relationship. By now, you know how much I hate dysfunctional relationships.

Similarly, I do not recommend issuing the Notice and Demand Regarding Dishonored Check form. This form is too ambiguous and limited in scope to be of much use. All this form does is inform the tenant that her check has bounced. Believe me—the tenant is painfully aware that her check has bounced.

When a rent check bounces, do the following:

mail the bounced check back to the tenant with a Three-Day Notice to Pay Rent or Quit;
include a cover letter that indicates the tenant’s check bounced and that, pursuant to item No. 7 of the PPMA Residential Tenancy Agreement, you will no longer accept personal checks for rent payments; and
make sure the notice and cover letter are properly served. Remember that item No. 7 clearly states that the “owner reserves the right to demand payment of rent by certified funds…for all future payments in the event of any such returned check or any other monetary default.”

You are simply not obligated to accept any future personal checks after the tenant has bounced a single, solitary rent check. Take my advice—you should have absolutely zero tolerance for bounced checks. You need to make an immediate and definite stand against future bounced checks. Do not accept personal checks at any time in the future. Tenants do not usually bounce just one check. Left unchecked, the errant tenant could and, in all probability will, become a habitual check bouncer. You do not need to feel guilty about terminating the tenant’s right to pay with a personal check. Have some respect for the value of your own time and for the contents of your rental agreement. Avoid giving your tenant the impression that you do not care about bounced checks.

These same lessons apply toward late rent payments. Never call the tenant if you do not receive her rent check. The tenant knows that she has not paid her rent. The only question is what are you going to do about it? If you do not receive a timely rent payment, then serve the tenant with a properly prepared Three-Day Notice to Pay Rent or Quit. I cannot tell you how many owners in this town deal with habitually late rents and habitually bounced checks for years and years. Do not be one of these owners. Always insist on your rights relative to your rental agreement. Life is way too short for dysfunctional relationships.

opinions expressed in this article are those of the author and do not necessarily reflect the viewpoint of SFAA or the San Francisco Apartment Magazine. Marc Wilson is the president of SFAA. He has been managing and selling San Francisco apartment buildings for 20 years. He can be reached at 415-229-1275. Copyright © 2005 by the San Francisco Apartment Magazine. All rights reserved.