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Legal Q & A Bad Checks and Cash Payments – by Franco Simone, Esq.

Posted on 01. Nov, 2017 by in all

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Q: My tenants have paid by personal check for the last year. I prefer for my tenants to pay in cash so I do not have to go to the bank. Can I demand that the tenant pay me in cash?A: No, you cannot demand the tenant pay you in cash solely because it is your preference.

Q: My tenant paid their rent with a personal check for October’s rent. A few days later when I tried to cash their rent check, the teller told me that there were insufficient funds. What do I have to do to demand the tenant pay the rent in cash?
A: When a tenant pays you with a dishonored check you can demand a cash payment for the following three months from the date the check was dishonored if your lease or rental agreement provides for cash payment. In order to demand a cash payment, you must serve the tenant with a notice in writing and provide a copy of the dishonored check.  [See AOA’s form #138 – Notice for Rent to be Paid in Cash Only.] 

If your lease or rental agreement does not address dishonored checks, then you are required to provide and serve the tenant with a thirty-day notice of change in terms of tenancy for the notice to become effective.  For example, on October 1st your tenant gives you a rent check, on October 8th you try to cash the check and you cannot because of insufficient funds. Your lease does not address how to deal with dishonored checks so on October 9th you give the tenant a thirty-day notice stating the check was dishonored and the tenant must pay the rent in cash for the next three months along with a copy of the check.  In this situation, the tenant could still pay their November rent by check because the 30 days has not expired. The tenant would have to pay the rent for December, January, and February in cash.

Q: My tenant wrote me a bad check for the first time this month. I want him to pay in cash for the next three months and charge him a $75 dishonored check fee. Can I charge him the $75 dishonored check fee?
A: No, you cannot charge him a $75 dishonored check fee.  Your lease or rental agreement must state that you can charge a returned check fee, and the agreed upon fee must be reasonable, before you can charge the tenant the fee. A $75 dishonored check fee may be deemed unreasonable since agreed upon fees are usually based on a reasonable estimate of costs the landlord will accrue as a result of a late payment. A reasonable amount would be the amount that the bank charges for a returned check plus the costs to the landlord because of the late payment.

In California there is a bad check statute that governs the amount that can be charged for a returned check in a rental agreement or lease. The statute allows landlords to collect a service charge instead of the dishonored check fee. Since this is the tenant’s first instance of writing a “bad” check, you can charge them up to $25 as a service charge, and $35 for each subsequent dishonored check. [FS1]

Q: My tenant pays her rent every month in cash on the first day of the month. This month, she asked me for a rent receipt. Do I have to give her a rent receipt?
A: Yes, legally you are required to give the tenant a written receipt upon receiving the monthly rent. The receipt should include the tenant’s name, address, date rent was received, amount of rent paid, type of payment and the outstanding rent owed if any. Further, in addition to providing your tenant with receipts for payments received, you should also keep an updated ledger of all rent payments received.  Both the receipts and the ledger can be useful evidence in any future disputes you may have with your tenant about payment of rent.

 

Attorney Franco Simone, of Simone & Associates and The Landlords’ Legal Center has been doing evictions for over 20 years.  He is also an adjunct law professor at the University of San Diego.  Mr. Simone’s office is open Monday – Friday from 9:00 AM to 5:00 PM.  Tel: 619-235-6180, website: www.landlordslegalcenter.com or email info@simonelawfirm.com.


 [FS1]I didn’t even know about this.