How should landlords handle bounced rent checks?

Handling Bounced Rent Checks in Delaware: A Guide for Landlords

As a landlord in Delaware, managing rent collection efficiently is essential to maintaining a healthy rental business. One of the challenges landlords often face is handling bounced rent checks. A bounced check, also known as a dishonored or NSF (non-sufficient funds) check, occurs when a tenant’s bank refuses to honor the payment due to insufficient funds or a closed account. Addressing this issue properly helps protect your rights and maintain a positive landlord-tenant relationship.

Understanding Bounced Rent Checks in Delaware

In Delaware, when a rent check bounces, it effectively means the rent has not been paid. This can disrupt your cash flow and may impact your ability to cover mortgage payments, maintenance, and other obligations related to your property. Delaware law does not specifically prescribe unique procedures solely for bounced rent checks but requires landlords to follow general rent collection and eviction procedures as outlined in the Delaware Code.

Steps for Handling Bounced Rent Checks

1. Confirm the Bounced Check

• Contact your bank promptly to confirm the reason why the check was returned.
• Check the returned check notice for any specified return reason (e.g., insufficient funds, closed account).
• Notify your accounting records to reflect that the rent payment has not been received.

2. Notify the Tenant Immediately

• As soon as you confirm the check has bounced, notify the tenant in writing.
• The notice can be sent via certified mail, email (if agreed upon), or hand-delivered to ensure receipt.
• Include the following information in the notice:

- The amount of rent due and the date it was originally due. - Notification that the tenant’s check was returned unpaid. - A request for immediate payment by an alternative method (e.g., cashier’s check, money order, or electronic payment).

*Sample wording:*
“Dear [Tenant Name], this letter is to inform you that your rent check dated [date] for the amount of [amount] was returned unpaid by your bank. Please remit payment immediately to avoid further action.”

3. Assess and Charge Bank Fees

• Delaware law does not specifically limit landlords in charging tenants for bounced check fees.
• It is common and advisable to include a bounced check fee clause in your lease agreement.
• Typical bounced check fees in Delaware range from $25 to $50, reflecting bank penalties and administrative costs.
• If your lease includes such a fee, include the bounced check fee in the tenant’s outstanding balance.

4. Request Payment in Certified Funds

• To avoid further bounced payments, request that the tenant make rent payments by certified funds.
• Acceptable forms include cashier’s checks, money orders, or electronic transfers.
• Consider limiting personal checks until the outstanding balance is resolved and rent payments are current.

5. Send a Formal Demand for Payment

• If the tenant fails to pay the outstanding rent plus any fees after your initial notification, send a formal demand letter.
• State the total amount due, including rent, late fees, and bounced check fees.
• Set a clear deadline for payment, usually within 3 to 5 days from receipt of the letter.
• Keep a copy of this letter for your records, as it may be needed if you pursue legal action.

6. Consider Your Legal Options: The Delaware Eviction Process

If the tenant does not remedy the bounced check and fails to pay rent, you may need to take further action:

• Notice to Quit for Non-Payment of Rent: In Delaware, landlords must provide a 5-day written Notice to Quit for non-payment of rent. This notice informs the tenant that they must pay rent or vacate the premises within 5 days.
• Filing for Eviction: If the tenant does not comply with the Notice to Quit, you may file a Landlord/Tenant complaint in the Justice of the Peace Court. The court will schedule a hearing to determine whether the tenant must pay or move out.
• Bounced Check as Evidence: The bounced check and related correspondence serve as evidence of non-payment.

7. Maintain Thorough Documentation

• Keep copies of all bounced checks, bank notices, tenant communications, and any request letters.
• Document all conversations and attempts to collect payment.
• Maintained records protect your interests should legal proceedings become necessary.

Preventative Measures to Reduce Bounced Checks

• Screen Tenants Carefully: Conduct thorough credit and background checks to assess the tenant’s financial responsibility.
• Require Electronic Payments: Where possible, encourage or require electronic rent payments which minimize the risk of bounced checks.
• Include Lease Provisions on Payments: Detail acceptable payment methods and consequences for bounced checks within lease agreements.
• Communicate Early and Often: Address missed or bounced payments promptly to prevent escalation.

Summary

Handling bounced rent checks in Delaware requires prompt, clear communication and adherence to proper procedures. As a landlord, you should:

• Confirm the bounced check with your bank.
• Notify the tenant immediately in writing.
• Charge reasonable bounced check fees if outlined in your lease.
• Request certified payment methods for future rents.
• Send formal payment demands if necessary.
• Utilize Delaware’s eviction process if the tenant fails to pay.
• Keep detailed documentation throughout.

By following these steps professionally and consistently, you protect your rental income and uphold your rights under Delaware landlord-tenant law.