The Landlord lost the Tenants Money Order for Rent, Who is At Fault?
Question
One of my tenants mailed her money order for this month’s rent two weeks ago, but it was lost after it reached our office. I immediately called the tenant and explained to her what had happened and asked her to cancel the money order and have a new money order issued minus any fees she might incur. The tenant said that she would do that, but as of this post she hasn’t sent a replacement money order and she is not returning any of our calls. What should/can I do?
Answer
For reasons discussed below, since you acknowledged receipt of the money order and the money order being lost is your fault you may have to take a loss.
Consider what would have happened if she had paid in cash and you had given her a receipt or otherwise acknowledged payment. If the cash disappeared you would almost certainly have no recourse except against whoever made it disappear.
If she had paid by personal check, you might have a better chance of getting her to stop payment on the check and writing a new one. However, even then there might be a problem because banks do not usually guarantee that a stop payment order will be effective, as it can depend on timing. If the check writer doesn’t maintain enough of a balance to cover both the original check and the replacement check he/she would suffer a large bank fee if both hit the bank. Another of the problems with “stop payments” is that, even if the issuing entity catches it before paying, it may have passed through a number of “holders-in-due-course” before reaching the issuing entity. Accordingly, each of these holders will be impacted, creating expense and potentially other problems for a number of innocent parties.
A bank cashier’s check might actually be easier to deal with, but, in my experience, a refund might still likely require weeks. This may not be an issue for a tenant with sufficient cash reserves to able to cover an extra month’s rent for the time required to receive a refund. However, the tenant would still have a risk of not ever receiving the refund.
You must understand from her point of view that she would be foolish to replace the money order until after a long period of time, probably months.
Money orders (MOs) can be the worst type of funds to deal with. This is because there are a very large number of companies of all sizes who issue MOs and they are sold in all types of locations including supermarkets, drugstores, etc. There are also Postal MOs which will have their own procedures. Many MO issuers will strongly resist agreeing to any “stop payment” and those who will do so will usually not provide a refund for a long time, sometimes many months. The seller (e.g., supermarket) will likely not itself ever refund money, but may either help file a claim with the issuer or provide information required for the buyer to do so on her own.
The bottom line is that if I were the tenant or if I were a judge deciding a dispute regarding the matter, I would consider that you must absorb the loss unless the refund is actually eventually received by the tenant. You would likely have to depend on the honesty of the tenant regarding receipt and if the tenant proved that a refund would not be given, based on written policy information or correspondence from the issuer or the seller of the MO, you would almost certainly have no recourse.
Had you not received her money order it would have probably been an entirely different matter because she would not have paid her rent.