Tip of the Month-March 2005


Source: Journal of Property Management

By: Steven J. Gordon

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, says Chicago Attorney Neil Neumark. You could lose your right to collect the rest of the payment. You could even give the Tenant a permanent rent cut.

Here are two potential trouble spots if you accept a partial rent payment:

#1 Lose the right to balance due. If you sue the Tenant for the unpaid amount, a Court could decide you gave up your right to collect the full rent by accepting the partial payment. (says Attorney Neumark): That's especially true if the Tenant has written "payment in full" or similar language-what Lawyers call a conditional endorsement-on the check.

#2 Permanently cut future rent. If you accept a partial payment once, you may find that you no longer have the right to object when the Tenant again makes a partial payment. (warns Attorney Neumark): And if you repeatedly accept partial rent payments, the Tenant may be able to convince a Court that the rent has in effect been lowered for the balance of the Lease.

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This web page was updated on 03/04/05.