Proceed with Caution When Owner Checks Come with Endorsements

You’ve probably seen it before — an owner adds some type of restrictive endorsement in the memo portion of a check in hopes of pulling a fast one. This week’s article explains how a condo association in Ohio has now spent years in court as a result of such an endorsement.

The case provides some valuable guidance on how to handle owner checks that come with restrictive language in the memo section.

In April 2012, the owner was late in paying his $302.79 monthly assessment. As laid out in the association’s collections policy, he was assessed a $25 administrative late fee.

The association’s bylaws included a provision stating that the association “shall credit” payments from owners in the order of priority set out in the Ohio condo association law:

1. interest,
2. administrative late fees,
3. collection costs, attorneys’ fees, and paralegal fees incurred by the association, and
4. the principal amounts the owner owes for the common expenses or penalty assessments chargeable against the unit.

The association therefore applied the owner’s May payment of $302.79 first against the late fee and then to the principal due for that month’s assessment, leaving an unpaid principal balance due of $25. The June assessment levied against the owner reflected the $25 deficit, with a total balance due of $327.79.

The owner responded by submitting a June check for $302.79 with an endorsement stating “Tendered for June 2012 maintenance fee only, not for late fees or any other purpose …” The association’s property manager returned the check and notified the owner that it couldn’t accept any checks with restrictive language in light of the order of priority for allocating payments set out in the bylaws.

The owner continued to submit checks on a monthly basis with similar restrictive language. The association returned them, and the delinquency mounted month after month.

To learn how the case turned out and how you should handle checks with endorsements, read our new article, Association Can Return Owner Checks with Restrictive Endorsements.

Best regards,
Matt Humphrey
President