Personal checks from tenants

[Bienes Raices]

Do I have this right: Only take cash or money order for the security deposit and first month's rent, but then it's okay to accept personal checks from then on?

(This rental is not in a low income area, so I assume most people will have a checking acct)

[Steve Babiak]

If you are going to accept personal checks, be aware that they will bounce every now and then. One thing you can do is open your rental property's own checking account at the same bank as the one that the tenant used for the personal check. Then, when you get the rent check, you make out a deposit slip and ask the teller to "see if the check will clear before putting the deposit through". I quoted that because those are the exact words I use every month. This past month, the check did not clear in the morning; I called the tenant; the tenant at lunch put in the money; after 3PM I went back and completed a deposit that did not bounce. The bank actually puts those deposits in as "cash" when it has enough money to clear.

A bit of a hassle maybe, but you know you did get paid in full that way.

The credit report will probably be a good indicator as to how bad they will be when paying by check. The banks have some system they use to identify if an applicant for a new checking account has been a bouncer of checks, so that they can refuse to create accounts for those people.

Lastly, I would not accept a personal check from anybody who bounces them too frequently. So you must set a limit as to how many you will allow to happen in your agreement before all payments must be made in one of: cash / postal money order / certified bank check / etc. And you remind them that it is a crime to tender personal checks when there aren't sufficient funds in the account to cover the check.