Can I Deposit This Check?

Can I Deposit This Check?

“Can I deposit this check,?” is a question we receive several times a month.

A delinquent owner has written a message on the memo line of the check that is questionable. For example, the owner is in arrears and has written “August condo fees” in the memo line. The question is whether this check must be applied only to the August condominium assessment. The memo the unit owner has written is insufficient to serve as a directive and the payment should be applied as a partial payment to the oldest outstanding balance on the account. However, writing “payment in full” on the check raises more serious questions as the owner may be trying to effect an accord and satisfaction.

Whether an accord and satisfaction has taken place is a question of fact that must be asserted by the debtor.

An “accord” is a mutual agreement between a debtor and creditor where the creditor agrees to accept a lesser amount of the debt owed. The debt is then satisfied when the debtor actually performs. Cox Engineering Co v. R.F. Cox Associates, Inc., 46 Mass.App.Dec. 185 (1971).

Whether an accord and satisfaction has taken place is a question of fact that must be asserted by the debtor.

Under G.L. c. 106, § 3-311, the individual asserting an accord and satisfaction must prove:

(a)(i) that person in good faith tendered an instrument to the claimant as full satisfaction of the claim;

(ii) the amount of the claim was unliquidated or subject to a bona fide dispute; and

(iii) the claimant obtained payment of the instrument.

The claim is discharged if the check or an accompanying letter contained a “conspicuous statement” claiming the payment constitutes full satisfaction of the claim and the creditor accepts and cashes the check. Conspicuous, as defined in § 1-201(10), is if “it is so written that a reasonable person against whom it is to operate ought to have noticed it” upon examination of the check. Subsection (c)(1) acts as a limitation on discharge of a claim if the claimant is an organization, such as a property management company that has monthly payments sent to a designated office or bank where employees or machines process payments and provides notice of where all disputed debts, including claims of satisfaction in full are to be sent. Subsection (c)(2) also prevents inadvertent accord and satisfaction by providing the claimant 90 days to reject the payment or tender repayment.

Despite the adoption of § 3-311, numerous Massachusetts courts have held that the common law principles originally set forth in the 1913 case of Whitaker Chain Tread Co. v. Standard Auto Supply Co., 216 Mass. 204 (1913), still apply. Under these cases, they cite three elements of accord and satisfaction:

(i) that there has arisen between the parties a bona fide dispute as to the existence or extent of the liability;

(ii) that subsequent to the arising of that dispute the parties entered into an agreement under the terms of which the dispute is compromised by the payment by one party of a sum in excess of that which he admits he owes and the receipt by the other party of a sum less in amount than he claims is due him, all for the purpose of settling the dispute; and

(iii) a performance by the parties of that agreement”. Rust Engineering Co. v. Lawrence Pumps, Inc., 401 F.Supp. 328 (1975).

The main difference between § 3-311 and the common law is that good faith is replaced by the requirement of a mutual agreement between the parties. Applying this to the condominium realm, we have the additional issue that a condominium lien is a statutory lien and is a covenant that runs with the property. As held in Blood v. Edgars, 36 Mass.App.Ct. 402 (1994), owners have an absolute statutory obligation to pay assessed condominium common expenses: ”absent a prior judicial determination of illegality, a unit owner must pay its share of the assessed common expenses.” A unit owner must pay the common expenses due and owing in full under protest and bring a separate legal action to determine the legality of the assessment. Further, under .G.L. c. 183A, § 7, “no owner shall be entitled to an offset, deduction or waiver of common expenses or other charges levied or lawfully assessed by the organization of unit owners.” Consequently, absent the presence of a mutual agreement between a unit owner and a condominium trust, accord and satisfaction should not be available to the unit owner.

While the defense of accord and satisfaction may not be available to a unit owner, remember that whether it exists is a question of fact, and therefore, condominium trusts still need to exercise due caution and have procedures in place when checks are received that contain questionable language. As mentioned, stating “August condo fees” on the memo line of a check does not require a condominium trust to specifically apply the payment to the August condominium assessment – the condominium trust still needs to apply the check to the oldest outstanding balance as done in the normal course of business. Unit owners are not allowed to make swiss cheese out of their ledgers. More concerning are cover letters or checks that contain language in the memo line or endorsement side of the check, or are accompanied by correspondence stating that the condominium trust shall only apply the payment as instructed or that the payment constitutes payment in full of all amounts due and owing. Absent a prior agreement between the parties, such checks should be immediately returned to the owner with a request for resubmission in an acceptable form. Should the account be in collection, collection counsel can send correspondence to the owner advising that the payment is being applied as a partial payment only, and to contact collection counsel for a refund of the payment should the owner object to its treatment as a partial payment and not payment in full.

An accord and satisfaction may legitimately arise should the condominium trust issue a clean 6(d) Certificate. By the statutory language of G.L. c. 183A, § 6(d), the statement is acting as a discharge of any amounts due and owing. Should a condominium trust accept payment in exchange for a clean 6(d) Certificate it will be unable to collect later on any fees or other amounts it failed to include in the payoff.

The following are recommended in order to prevent possible disputes or legal actions with unit owners, both under § 3-311 and common law:

1. Do not specify on owner ledgers how a payment is being applied. Owners should see a ledger that simply lists charges, payments and the balance due and owing;

2. Whether the condominium trust issues monthly statements/invoices or makes account information available to owners online, include conspicuous language (bolded and/or larger font will constitute conspicuous) on the account that all payments are applied to the oldest outstanding balance on the owner’s account and that any payments submitted for less than the total shown as due and owing on the statement shall be accepted as partial payments only. Should the account be in collections with trust counsel, a final payoff of the amounts due and owing must be obtained from said trust counsel in order to effectuate payment in full. Such conspicuous language should defeat any argument of mutual agreement. However, the trust should still have the policy in place that any checks stating “payment in full” be returned to the owner;

3. With assistance of condominium counsel, record changes to the Rules and Regulations of the condominium trust which fully, clearly and transparently set forth in writing to all unit owners and all future unit owners exactly what the trust’s policies are as to the trust’s collection policies specifying when payments are due, where to send payments, how payments shall be applied, late fees and other charges and when an account shall be referred to legal counsel.

As always, if in doubt, never hesitate to call us and ask, “Can I deposit this check?” We are always here to answer that question for you.

A special thank you to Madeleine Laffitte for her legal research for this article.

Laura Brandow Condo Law Blog

Should you have any questions regarding this article, please do not hesitate to contact Laura Brandow at 781-817-4900 or by email at

Laura Brandow