Be Precise When Drafting Security Deposit Refund Checks
When returning a security deposit, it’s important to make the check payable to all of the Residents. This prevents one of the Residents from individually claiming the Landlord failed to meet the statutory duty to timely account for the deposit.
The Pay To The Order Of line should list each Resident name and include the connector “and”. Example: “Joe, Sue and Fred”. This verbiage requires all the Residents to endorse the check.
One might reasonably expect that writing “Joe, Sue, Fred” would accomplish the same thing. However, under the interpretive rules of Article 4 of the Uniform Commercial Code, having no connector in the payee line in a negotiable instrument (including a check) is read as if the connector was “or”, meaning any one of the Residents could endorse and cash the check. This would leave the Residents who didn’t endorse the check free to claim they didn’t receive their refund.