It’s a landlord’s worst nightmare: getting a call from the bank saying a tenant’s check has bounced. Now what?

Here’s the first thing to do:

Check your rent agreement. Make sure it includes step-by-step what consequences the tenant will face as a result of writing a bad check. After all, your first line of defense against all bad tenant behavior will always be your lease.

Now, if done correctly your lease will entitle you to charge a reasonable fee that should cover your bank’s bounced check charge, and then a little more for hassle of dealing with the problem.

It’s possible your tenant will have an excuse – such as, “it was a bank error”, or they might beg you to be more understanding of a financial hardship for this month. If it’s truly an error, they should still pay you the rent and bad check fees in full, and then seek reimbursement from their bank on their own time. You should not be forced to eat the fees.

If the tenant wants you to be understanding of a personal financial crisis, then you still should be firm with slapping them with a penalty fee in order to prevent this from becoming a regular pattern. While your tenant might truly be having a hardship, there should be verbiage in the rent agreement that says writing a bad check could be cause for eviction and being reported to a credit bureau. Perhaps if they think of you as a creditor from now on, and less like a sympathetic person, it will help them to prioritize monthly rent payments.

When determining your bounced check fee, consider this: On average, a bank will charge YOU about $30 for a bad check, so you should charge a penalty of $35-$50. Why? Because it’s likely you will be (or you should, anyway) immediately sending out notice to the tenant regarding the bad check. So, there’s your time lost to sending a mailing, and cost of postage, and perhaps gas money out of your pocket – all just trying to claim the rent.

A letter to the tenant should include a request for the rent payment and late fees in full immediately. Your rent agreement can even stipulate that late rents must be received in cash or certified money order, to insure the money you receive is legitimate.

Are you a landlord or property manager thinking about revising your rent agreement documents and policies? Are you looking for a fast and reliable tenant screening service? Check out American Tenant Screen’s comprehensive packages  for more information.