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What to Do If A Rental Check Bounces?

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One of the most difficult parts of managing a rental property is collecting rent each and every month. As a landlord, your income is entirely dependent on the reliability of your tenants. While most residents will be timely and responsible when it comes to paying rent, you may come across some people who are unreliable or downright uncooperative. Perhaps you have a tenant who is constantly asking for an extension or, even worse, someone who pays with a check that they can’t fulfill. What should you do in these situations? How do you handle a check that has been returned?

First things first, approach the tenant that gave you the check. More often than not, it is simply a mistake. Perhaps they had intended to transfer money to their account before issuing the check, or perhaps the bank is slow in processing their transfer request. Always assume the best before jumping to conclusions. If it was not a mistake, then the tenant cannot afford rent that month, and you must move forward according to the procedures outlined in your rental contract.

After you have cleared up any possibility of simple misunderstanding, you should officially notify the tenant that their check bounced. Depending on their track record and the terms of your agreement, you may issue a grace period of a set number of days. The tenant will have to produce the funds necessary to cover their rent, as well as any late fees that you may have accrued as a result of the inconvenience. Be sure to document all communication with the tenant so that the expectations are clear and there’s no room for misinterpretation.

For future payments, consider setting up an online collection program. Rent collection programs can be set up to make direct deposits from a linked debit or credit card to your own bank account. The transfer takes place automatically at the specified time every month. This way, you’ll always receive payments on time and you don’t have to hound your tenant for money.

So, to summarize, here’s what you should do if you receive a bounced check:

  1. Approach the tenant to see if it was a mistake.
  2. If not, issue an official notice and give them a set period of time to produce the funds.
  3. Record any communication with the tenant, including dates, times, and binding agreements.
  4. Consider online payments to protect the future of your business.

For more tips when it comes to real estate and rental properties, follow the Talley Properties blog.

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