Return Check: Simple and Effective Strategies

It’s legal in all states to charge the tenant an extra fee for a return check. No matter which state you are in, my free residential lease for your state contains a provision that enables you to collect a fee for a returned check.

Go ahead. Click your state from the menu on the left and look at my free residential lease for your state. Look at the "Rent" provision. It's usually labeled as number 3.

You'll find a provision that reads something like this:

"In the event that any payment by Tenant is returned for insufficient funds ("NSF") or if Tenant stops payment, Tenant will pay $_________ to Landlord for each such check, plus late charges, as described above, until Landlord has received payment. Furthermore, Landlord may require in writing that Tenant pay all future rent payments by cash, money order, or cashier's check."

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There are several important points that you will want to pay attention to in that language.

You can charge a reasonable fee for a bounced check. What's a reasonable fee? Here's a quick rule of thumb. Charge what your bank charges you plus 50% for your trouble. For example, if your bank charges you $20, charge your tenant 50% more, $30.
Don't forget that while your tenant's hot check is bouncing around between banks, his rent is not being paid. Don't forget to assess late payment fees when you receive a return check.

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There's an old saying, "Hurt me once, shame on you. Hurt me twice, shame on me." Once your bank sends you a returned check, consider making the tenant pay all future rent by cash, cashier's check, or money order. Problem solved.

Here's another idea. Consider instructing your bank as follows "Do not redeposit rent checks that bounce. Return bad checks immediately."

Take a look at all of my FREE RENTAL FORMS

Why?

Getting a bounced check back quickly alerts you to the fact that the rent is unpaid much sooner than if the check is resubmitted and returned for nonpayment a second time.

Use this time to ask the tenant to make the return check good immediately. If the tenant doesn’t come through, you can promptly serve the necessary paperwork to end the tenancy.

Thanks for visiting my website.

Steve

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