Tip of the Month - April 2007

The Risks of Partial Payments

Source: Steven J. Gordon
(Attorney Neil Neumark)
Lease Issues-Journal of Property Management

What should you do if a Tenant sends you a rent check that covers only part of the amount due?  If you simply return the check and demand to be paid in full, you may be giving up the chance to collect anything from an unreliable Tenant. But cashing or depositing a partial payment check can be risky. You could lose your right to collect the rest of the payment. You could even give the Tenant a permanent rent cut.

The risk of accepting a partial payment is much lower, however, if your Lease has a clause that protects your rights if you accept a partial payment.

Look for a clause saying something to the effect that your acceptance of a partial payment does not mean you have agreed to a lower rent and does not amount to an “accord and satisfaction”.

(Accord and satisfaction, in legal terms, is an agreement to release the other party from the full amount of what is legally owed by accepting something less.)

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This web page was updated on 04/04/2007.