My Property Management FAQ's > Rental Payments > My tenant bounced their rent check - what should I do?
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If you own property and rent or lease it to others, chances are one day your bank will return the payment of your tenant for insufficient funds, or perhaps in error, at least once during your ownership. When that happens, what should you do?
First, look at your rental agreement with your tenant. If you have a good rental agreement, the agreement will spell out what happens. Most rental agreements will allow you to charge a reasonable fee to reimburse you for the cost of the returned item that your bank will charge you, and perhaps a bit more to cover the value of your time in dealing with the returned item, documenting the return, processing the replacement payment or going to the bank for the replacement deposit.
It is likely if you have a good agreement, you will be required to notify your tenant in writing of the returned item. Don’t wait for them to contact you. Send the letter immediately and if you have the resident’s email address, send a copy of the letter to them by email. Advise them they need to provide a replacement payment to you immediately and that they should include the agreed upon fee for the returned item. Let them know they will have only a limited amount of time (for example three days) to submit the replacement payment before you will take action to protect your legal rights. And let them know it does not matter why the payment was returned the returned item charge is due and owning to you. If their bank made an error by returning their payment, direct them to their bank to collect the returned item charge due and owing to you.
Remind them that timely rental payments is a credit obligation and one to be taken seriously. Remind them late payments are subject to late fees and your acceptance of a late payment is not a permanent modification of the due date. (An excellent returned item notification letter and a reservation of rights letter to protect yourself from an inadvertant change of the due date can each be purchased for less than $10 from the Lightner Property Group store.)
Let your resident know if they are experiencing economic problems, they should contact you to discuss their payment options. Reassure them that you will be open and understanding. If they are having a problem, it is best to find out about it sooner than later. If you work together chances are you can together prepare for the difficulity ahead, rather than playing the cat and mouse game of avoiding calls, or making up stories about the check being in the mail.
With luck your replacement payment along with the additional fee will be submitted to your office the next day. And it can be deposited into your checking account within a business day or two of your receipt of the returned item notice from your bank. If they do not tender a replacement check or make arrangements to pay late, you will need to take appropriate action. (Another Q&A.)
But it all starts with you taking immediate action and notifying the resident in writing the payment has been returned!
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Last updated on October 13, 2008 by Merrie Turner Lightner