Worthless Check Procedures
by Michael Geo. F. Davis, Attorney at Law


Worthless checks are constant problem to all businesses, including the residential rental business. Property managers may limit their exposure to such checks, collect service charges to offset the additional administrative time, and proceed to evict for nonpayment. However, property managers may also unwittingly charge illegal fees or undermine their own eviction cases. Although dealing with worthless checks is a common problem, it should not be taken for granted.

Refusal of Checks

The personal check is an acceptable form of payment under Florida law. If the property manager wishes to limit payment methods, that right must be based on a lease provision. If the property manager reserves the right in the lease to change or restrict permissible payment forms, then the resident must be given prior reasonable notice. Absent a lease provision dictating the required notice time, a reasonable time would be thirty days. Of course, any such restriction on a particular resident should be based on some objective criteria, such as a prior worthless check, to avoid discriminatory claims under fair housing laws.

Third-Party Checks

A third-party check is a check made payable to someone else and endorsed by that person to the resident. It is an open question as to whether a third-party check is acceptable under a lease permitting payment by checks. Since a third-party check is a check, and if the lease does not limit checks to the resident's personal checks, it would appear to be an acceptable form of payment. Again, this is subject to the property manager's right to prohibit such forms of payment by appropriate notice to all residents, as provided in the lease. If the property manager can help it, it is never a good idea to take third-party checks. The resident's usual defense will be that he assumed the check was good and had no idea that it would be unpaid by the bank. The resident will ask for additional time to pay, and some judges will feel that if the resident was acting in good faith, he is also a victim of the bad check and should be given additional time to pay.

Insufficient Funds, Account Closed and Stop Payments Checks

Although the vast majority of checks returned are for insufficient funds in the account, worthless checks, whether returned for insufficient funds ("NSF check"), because the account was closed or because payment was stopped, are not payment to the property manager. The resident is responsible for any late charges, just as if no payment was made at all.

Notices to Use

As indicated above, the NSF, account closed or stop payment check is not a payment. If the check was given in payment of rent or an amount defined as additional rent in the lease or addenda, the property manager should serve the resident with a Three-Day Notice to Pay Rent ("Three-Day Notice"). If the check was given in payment of a deposit (security deposit, pet deposit, etc.), the property manager should serve the resident with a Seven-Day Notice of Noncompliance with Opportunity to Cure ("Seven-Day Cure Notice"). If the check was given in payment of an amount owed under a Three-Day Notice or a Seven-Day Cure Notice, the property manager can proceed with the filing of a nonpayment eviction or the serving of a Seven-Day Notice of Noncompliance without Opportunity to Cure ("Seven-Day Termination Notice") respectively, just as if no payment was made at all. It is not necessary to serve a new Three-Day Notice, UNLESS the property manager has accepted other good payments from the resident since the serving of the first Three-Day Notice.

Conflict between the Three-Day Notice and the Bad Check Letter

Many property managers send a bad check letter for payment in response to a worthless check. This usually proves to be a fatal error to any eviction proceeding. The bad check letter customarily gives the resident a certain number of days to make good the worthless check. The days allowed to make the check good in the bad check letter differ from a Three-Day Notice or Seven-Day cure notice, and also in the content of the demand. Courts consistently hold that when a resident receives two inconsistent payment demands, the Three-Day Notice or the Seven-Day Cure Notice is void. NEVER SEND A BAD CHECK LETTER FOR A WORTHLESS CHECK.

Resident Has Vacated

If the resident has vacated, the resident is liable for the worthless check amount, which becomes part of the balance owed. If thirty days has not elapsed since the resident vacated, and the property manager is still in possession of the security deposit, the property manager can include the worthless check amount as a deduction on the Notice of Intent to Impose Claim on Security Deposit, or can send an amended Notice of Intent to Impose Claim on Security Deposit claiming the worthless check amount. If more than thirty days has elapsed since the resident vacated, and the property manager has already returned any balance of the security deposit, the property manager can send a letter or statement showing a balance due the landlord.

Worthless Check Service Charges

The property manager may charge a service charge or administrative fee to the resident for a worthless check, whether it is a NSF, account closed or stop payment check, if the lease provides for the imposition of such a charge or fee. This fee can be charged to a current resident's ledger or deducted from the security deposit of a resident who has vacated. Note that the charge or fee should be reasonable, or it risks being set aside by a court as a prohibited penalty. If the lease does not provide for such a charge or fee as additional rent, or there is no lease, then the property manager has no contractual basis to impose the charge or fee on a Three-Day Notice. In a civil suit, Florida Statutes provide for a service charge for a worthless check. Many property managers follow this schedule of charges as presumptively reasonable, and most judges tend to agree. As of 2011 the statutory service charges are: $25 if the check is $50 or less, $30 for those checks exceeding $50 up to $300, $40 for those checks exceeding $300 up to $800, and 5% of the check amount for those checks exceeding $800.

Bank Fees

If the lease permits recovery of the landlord's bank fees, then they too can be charged to the current resident's ledger or deducted from the security deposit of a resident who has vacated. Again, if the lease is silent on the recovery of such fees or there is no lease, then such fees may not be passed through.

Property Manager Bounces Checks

The landlord may bounce its own checks or incur bank charges because the Resident's check was worthless. It is unlikely that these amounts are chargeable to the Resident. The property manager is responsible to allow sufficient time for deposited checks to clear before relying on them.

The NSF Civil and Criminal Statutes

It has already been indicated that the property manager should never send a bad check letter, but instead should rely on the Three-Day Notice or the Seven-Day Cure Notice to respond to a worthless check. However, some property managers may wish to pursue a resident who has vacated under the Florida civil or criminal NSF statutes. Property managers are advised that this may be a great deal of work for little if any return. They are usually better off referring resident accounts to a reputable collection agency or collection attorney. For the sake of completeness, a brief explanation of the Florida NSF civil and criminal statutes is included in this article.

Account Closed and Stop Payments Checks

Although the civil statute covers a check returned because the account is closed and a check returned due to a stop payment, there is an additional proof requirement with these checks. The property manager must show that it was the resident's intent to defraud the property manager. The difficulty of proving the subjective intent of the resident makes using the civil statute for account closed and stop payment checks problematic. The criminal statute does not appear to cover account closed or stop payment checks. Thus, the civil and criminal statutes are practically or statutorily limited to NSF checks.

NSF Civil Penalties

Florida Statute 68.065 is the civil NSF statute and provides for civil penalties. Before the property manager can recover civil penalties, a written demand in the form set forth in the statute must be delivered to the resident, giving the resident 30 days to make payment. The property manager can demand not only the amount of the check, but also a service charge. The property manager must send the demand notice either by certified or registered mail with a return receipt, or by first-class mail with an affidavit of service. The notice can be mailed to the address on the check or to the resident's address at the time the check was given, or the last known address. If the demand is paid, the matter is ended. The statute doesn't provide for the recovery of any bank fees unless suit is filed. Bank fees cannot be included in the statutory demand notice. The property manager has to be satisfied with the statutory service charge. If the demand goes unpaid and a lawsuit is filed, the resident is liable for the amount owing on the check, plus the service charge, plus statutory damages equal to treble the amount of the check with the minimum damages being $50. The resident is additionally liable for any court costs, as well as all attorney fees and collection costs. In the lawsuit the resident is also liable for any bank fees incurred by the property manager. As of 2011 the statutory service charges are: $25 if the check is $50 or less, $30 for those checks exceeding $50 up to $300, $40 for those checks exceeding $300 up to $800, and 5% of the check amount for those checks exceeding $800.

NSF Criminal Penalties

Florida Statute 832.05 is the criminal NSF statute and provides for criminal penalties. If a property manager is thinking of pursuing criminal penalties for NSF payments, he should first call the sheriff or the state attorney's office for the county in which the rental is located, to ascertain what procedure or forms are needed. Some offices have established procedures and particular forms for their county. A review of the appropriate websites may provide the needed information and forms. The criminal statute may not be used in certain instances: if the check is postdated, or if the property manager has been notified or otherwise knows that the check is worthless. For instance, the property manager can't deposit the check and allege a crime, if after giving the check the resident tells the property manager that the check is going to bounce. Before referral to the prosecutor's office, Florida Statute 832.07 requires that a demand notice, which is similar but not identical to the civil demand notice, be sent to the resident, either by certified or registered mail with a return receipt, or by first-class mail with an affidavit of service. The notice demands payment of the check amount and a service charge within 15 days. The service charge is currently the same for the criminal statute as it is for the civil statute. The notice can be mailed to the address on the check or to the resident's address at the time the check was given. If the demand is paid, the matter is ended. If the demand is not paid within 15 days, the property manager can refer the resident to the state attorney's office for prosecution. What causes difficulty for many businesses is the identification information required for criminal prosecution. The statute requires the identity of the resident must be established when the check is sent to the prosecutor's office for prosecution. The statute requires that if the check was given in person, then the check must have the person's license number or state identification number written on it. Alternatively, the property manager can obtain the resident's full name, residence address, home and business phone numbers, place of employment, sex, date of birth and height. If the check is received by mail, then a copy of the lease contract must be sent with the check to the prosecutor's office. A check received in a drop box or slid under/through the door may not be covered by the criminal statute. Another weakness in the criminal statute is that it makes no provision for the recovery of the property manager's bank fees. The property manager must rely upon the prosecutor's office to include bank fees in requiring restitution. If the required restitution is only the face amount of the check, the recovery of bank fees or other costs must be done pursuant to the civil statute

The Bad Check Diversion Program

If the property manager is able to navigate the requirements for a successful referral to criminal prosecution, then in all likelihood the prosecutor's office will refer the resident to the county bad check diversion program. Think of the bad check diversion program as the threat of prosecution, requiring the resident to pay the check amount to avoid an actual prosecution.

Final Warning

It is emphasized again that the property manager should leave the collection of resident accounts to professionals. The property manager can easily stumble into a countersuit by the resident for the property manager's unwitting violation of state and federal laws concerning debt collection.


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Renter's Insurance and the Property Manager
by Brian P. Wolk, Attorney at Law


It is crucial for a property manager to obtain a basic understanding of the concept of renters insurance. Many, if not most property managers fail to have a solid grasp of the components of this wide ranging topic. On the bright side, if the property manager will spend some time learning the basic principles of renters insurance policies, an adequate understanding can be obtained in a relatively short amount of time. The number of renters has increased dramatically over the last seven years. However, according to some studies, less than half of all residents have renters insurance. That may seem like a reasonable percentage. However, keep in mind that only a tiny percentage of homeowners fail to have homeowners insurance. One would expect that renters, like homeowners, would also have an interest in protecting against personal property loss. Also, there are other good reasons for the resident to obtain renters insurance.

Read the renters insurance policy

The resident should carefully read the renters insurance policy in order to ascertain what is and what is not covered, based on the cause of the damage or loss. If the landlord requires a certain level of insurance coverage, the property manager should also carefully examine the policy to determine whether required coverage has been obtained. The renters insurance policy will itemize which perils will be covered. Many residents all too often mistakenly believe that they do not need renters insurance because they believe that the landlord's insurance policies will cover them for their property loss, which is actually often not the case. Therefore, it is important for the property manager to effectively communicate to the resident the benefits of renters insurance, even when coverage is not mandatory.

Items not typically covered by renters insurance policies

A number of events which may lead to the resident's property loss are usually not covered by renters insurance policies. For example, flooding from storms, sewer back-ups, power failures, and negligent or intentional acts of the resident normally are not covered. Even worse for the resident, the landlord's insurance policies likely will not provide coverage for the resident's property loss.

Items typically covered by renters insurance policies

A careful reading of the renters insurance policy will allow the property manager to figure out what events leading to the resident's property loss will be covered under the policy. Generally, many renters insurance policies cover lightning damage, theft, fire, explosions, vandalism and overflow of water from plumbing or air conditioning systems.

Cash value

Assuming the event which caused the property loss to the resident is covered under the renters insurance policy, one still must understand the amount of money the insurance company will reimburse the resident. Some policies call for the resident to receive the actual cash value of the item. Therefore, the resident in that case would be reimbursed the depreciated value of the item. Thus, if the damaged item, for example a computer, was very old, then the insurance company may be reimbursing the resident only a minimal amount of money.

Replacement value

Many renters insurance companies allow the resident, for a slightly higher fee, to have replacement cost coverage. That simply means that in the event the peril was covered under the policy, if the damaged item, such as a television, was very old, the resident would still be reimbursed the actual cost to replace the set, and would not be penalized for depreciation.

Loss of use

Often, when there is property damage to the apartment home due to a peril, the resident is unable to reside in the unit. Many renters insurance policies allow the resident to pay for loss of use coverage. Therefore, if the resident is forced to move temporarily into a motel, the renters insurance policy would reimburse the resident for the additional living expenses incurred.

Personal liability

Many renters insurance policies also allow the resident to pay for personal liability coverage. This coverage is important, because the resident can be held liable for injuries to guests. Also, residents that have accidents which cause damage to a neighbor's apartment home can be held liable.

Protection of the income stream

Residents who fail to obtain renters insurance may quickly become delinquent rent payers, and the reason is simple. If the resident's unit is damaged, the resident will need to spend money replacing personal contents like clothing, which may leave little or no monies left over to pay the rent. Likewise, if there is an accident inside the apartment home and a guest is injured, the resident may be liable to the guest for significant amounts and may be spending large amounts of money on legal bills, which would adversely impact the resident's ability to pay the rent. Thus, renters insurance with personal liability coverage protects the income stream of the landlord.

Waiver of Subrogation

It is highly recommended that the landlord require the insurance carrier to add a waiver of subrogation endorsement to the policy. With no waiver of subrogation, the insurance carrier could file a legal action against a third party who causes the loss to the insurance carrier. For example, suppose the renters insurance policy provides that all proceeds will be payable to the landlord, and that the resident is the cause of an accident in the apartment home. Without the waiver of subrogation clause, the insurance carrier would pay the landlord and then turn right around and sue the resident for reimbursement of the amount of the claim that was paid. That would not be a good result from the standpoint of the landlord (or the resident).

Fallacies held by landlords

A common fallacy held by landlords is that the landlord is not responsible for property loss if the resident has obtained renters insurance, and there is property loss due to an item such as a pipe breaking inside the resident's apartment home, causing a flood. More than likely there would have been a preexisting condition prior to the resident moving in, and so the resident would not be held responsible. Additionally, the renters insurance company may disclaim coverage, or if the damage claim is paid by the renters insurance company to the resident, the renters insurance carrier may then bring a subrogation claim against the landlord.

Landlords requiring residents to obtain renters insurance

Landlords are not prohibited from requiring residents to obtain renters insurance as long as a court would deem the requirements to be reasonable. For example, the coverage limits should not be excessive, and the renters insurance lease language should be straightforward and easy for the resident to understand, so that key coverage, such as liability coverage and personal contents coverage, are readily understood. The lease should also require that the resident not only obtain renters insurance, but also maintain the renters insurance and provide proof of coverage to the landlord.

Consult with your corporate office

Property managers must not neglect to obtain advice from their corporate headquarters, as great care must be undertaken before rolling out the renters insurance program, as complex issues are presented. The property manager should consult with the risk management department and the corporate attorney. It is also recommended that advice should be obtained from the landlord's insurance carrier. Selling insurance requires a license

Selling insurance requires a license in Florida. Residents must be given the opportunity to choose the insurance carrier of their own choice. If the property manager is mandating which insurance company is to be used, then the landlord is essentially selling insurance and possibly engaging in antitrust activities, both of which are illegal.


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Proper Execution of Corporate Lease and Guaranty Agreements
by Brian P. Wolk, Attorney at Law


It is essential that property managers use heightened scrutiny before executing any leases or guarantee of lease agreements with a corporate entity. At first blush, a property manager under pressure to increase occupancy at the apartment community may become very excited at the prospect of filling multiple apartment homes with a corporate resident. However, the property manager must remain diligent throughout the leasing process to make sure the landlord is protected. Corporations are in business to make money. Thus, the corporation's in-house attorneys are more than happy to limit or fully insulate the corporation from liability for any lease obligations. Therefore, the property manager must make sure the lease and guaranty agreements are properly signed, so that it is clear who is legally obligated to pay the rent or be responsible for the rent payments in the event rent is not paid. In addition, there are unscrupulous applicants who have no intention of paying rent and will submit bogus corporate names that do not exist.

The corporation is the resident

When the corporation is listed as the sole resident on the lease, no individual person is responsible for the rent or any other obligation under the lease. Basically, the corporation is treated like a person during the term of the lease and the eviction or collection process. For example if the rent is not paid, the property manager would name the corporation as the resident on the Three-Day Notice, and the subsequent eviction would be filed against the corporation.

Verifying the corporation exists

The first step that a property manager must take before ever signing a lease with a corporate resident is to verify that the corporation actually exists exactly as the name would appear on the lease; the property manager should also verify principals of the corporation and their designations, typically a specific officer or designated manager. The Secretary of State maintains these records, and it is fairly easy to look up that information online at www. Sunbiz.org. In some cases, it is advisable for the property manager to obtain the articles of incorporation. Never trust the information provided to you by the corporate contact with whom you are dealing. It is vital that the property manager investigate and verify that the information provided is correct.

Reason for investigating the corporate resident prior to lease signing

If the corporate entity does not exist, then the landlord jeopardizes its ability to collect any amounts owed, and this can also complicate and jeopardize the eviction process, since the entity you are attempting to evict does not exist.

When the corporate entity is not active

Often a property manager will find that the name of the exact name of the corporation exists in the records maintained by the Secretary of State. However, the corporation may have voluntarily dissolved or was administratively dissolved for failing to pay the annual fees to the Secretary of State. The property manager needs to be aware that a corporate entity that is dissolved does not have any power to enter into residential leases or any other contracts, including lease guaranty agreements.

Drafting the lease for the corporate resident

The corporate resident's name on the lease must be a mirror image of the name on file with the Secretary of State. This requirement is absolute. Even if the names do not match up by only one letter, the lease will be improperly drafted. Lease should state the actual names of the occupants

Virtually all well run apartment communities run criminal background checks on their residents. Many corporate residents operate like halfway houses or residential drug treatment programs that may place convicted, violent criminals on the grounds of your apartment community, if given the chance. When entering into a lease with a corporate resident, the actual names of the occupants should be listed, or else the apartment manager has no way to verify if those occupants have a criminal history. In addition, without listing the actual names of the occupants, the corporation could have an endless steam of people moving in and out of the apartment home, requesting keys, and wreaking havoc in general.

Signature block on the corporate lease

The signature block on the corporate lease must identify exactly the name of the corporate entity that will be named as the resident under the lease. Additionally, the signature block must list the name of the representative with authority who is signing on behalf of the corporate resident.

Verifying that the listed corporate representative has authority to sign the lease

It is essential that the corporate representative's name and exact title be listed on the lease when that representative signs the lease. The proper way would be "John Doe as President of XYZ Corporation." The President is signing the lease in a corporate, representative capacity. The property manager would need to verify this information with the Secretary of State by utilizing www.sunbiz.org. The property manager should never assume that the person signing the lease has legal authority to sign the lease on behalf of the corporation. The corporate representative will have no individual liability and would not be named on the eviction complaint, as that individual has signed the lease in the capacity as agent for the corporation.

Consequence of failing to list the corporate representative properly on the lease

The presumption under Florida law is that if a lease is signed without the designation of the person signing in a corporate representative capacity, then that person is signing the document in an individual capacity. For example, if the signature block lists John Doe and the name of the corporation, but does not indicate that John Doe is signing in a corporate, representative capacity, two very bad results may then occur. First, since the intent of the parties was that the individual was to sign in a corporate capacity, a judge may prevent the property manager from holding the individual personally liable. Likewise, because the landlord did not prepare the lease properly, the corporation may avoid liability for any obligations under the lease. This is truly a horrible scenario for the landlord and the property manager. At the very least, confusion will arise over who should be sued, and the landlord may guess incorrectly.

Proper execution of guaranty agreements involving corporate residents

Unless you have examined the finances of the corporate applicant, or the corporation has a proven track record of paying its bills, and you know with absolute certainty that the person signing the lease has the authority to sign on behalf of the corporation, it will be advisable to have an individual guarantee the lease obligations. The person signing the guaranty would be responsible for all amounts owed under the lease if the corporation defaults on its obligations to the landlord. The guaranty agreement must have precise language to that effect. However, if the individual signs the guaranty of lease agreement and includes any reference to the company or corporate title, then the guaranty will likely be of no use, because it will not be enforced against the individual. A judge will likely find that a lack of clarity exists as to whether that individual intended to be personally liable. Also, if the property manager wishes to include the individual on the lease itself, then the signature block for example should state the following: "John Doe signing in his individual capacity."

When the corporation signs a guaranty of lease agreement

Often, the property manager will not be in a position to approve an applicant unless the applicant obtains a guarantor. On occasion, the guarantor will be a corporation. Therefore, in order to enforce the guaranty agreement against the corporation, all of the rules for proper execution which apply to the lease signing process will also apply in this case. The property manager must verify that the corporation exists, the guaranty of lease agreement must list the name of the corporation exactly as it is listed with the secretary of state, and the person signing the guaranty of lease must have the authority to do so. Finally, the signature block must contain the name of the corporate representative and that individual's exact title.


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Law Offices of Heist, Weisse & Wolk, P.A.
Phone: 1-800-253-8428 Fax: 1-800-367-9038

Serving Florida's Property Managers with main office in Fort Myers Beach. Available by appointment in Orlando and Clearwater

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