It is common in the Philippines to use post-dated checks (PDCs) especially when buying or paying in installments. It is commonly used when leasing a property. Whether you are renting a residential unit, a commercial space, or a condominium. This will allow buyers to manage their finances more easily. This kind of check is usually issued with a future date written, indicating when a payment should only be cashed or deposited.
For example, you have found a perfect condominium unit and the only thing you need to do next is to settle your payment. Instead of paying in cash or upfront, you decided to issue several post-dated checks for your future payments. It simple as that.
While this payment method offers flexibility, you should also be aware of its risks and considerations. We will discuss in this article how PDCs work, the potential risks, and how you will avoid and protect yourself legally.
What is a Post-dated Check?
A post-dated check or postdated cheque is a type of check issued by a bank that has been written with a future date. This way, the payee cannot cash or deposit the check until the specified date. The PDCs are a convenient way of paying dues in advance without actually realizing the amount until the indicated date on the actual checks. For instance, if you don’t have sufficient funds, this check will allow you to have more time to arrange your funds while giving an assurance of payment to the receiver.
How to Write a Post-dated Check and Use It?
If you’re making a payment using a post-dated cheque, you just need to make sure that you have the updated check. It is like writing a check normally, just include a future date that you’d prefer the check be deposited or cashed. Make sure that you have a sufficient balance before the encashment date to avoid cheque bounces. If you would want to cancel fund withdrawal, you must send a written letter or email instructing your bank to not clear the payment.
What is the Validity of a Post-dated Cheque?
As the general rule, post-dated checks are valid if they contain essential elements such as the date, payee’s name, amount, and the signature of the person issuing the amount or pay. In accordance with Negotiable Instruments Law (Act No. 20231), the date issued on the check indicates the time when it is payable, not when it was issued. Under the Banko Sentral ng Pilipinas Circular No. 681, checks, including post-dated checks, are valid for six (6) months from the indicated date on the check. If not encashed or deposited within this period, the check becomes stale and can no longer be accepted for payment. A reissuance of another check between parties must be implemented.
What are the Implications of Bouncing Post-dated Checks in Lease Agreements?
A bouncing check, or dishonored check, happens when there are insufficient funds in the tenant’s account to cover the check on the specified date. According to Section 138 of the Negotiable Instruments Act, all checks with a future date fall under legal tender. It means that if your check bounces, you will be facing legal penalties.
The landlord may impose penalties or additional charges, as stipulated in the lease agreement. Worst-case scenario, issuing a check that bounces is a legal offense that may lead to imprisonment for a minimum of one (1) and maximum of two (2) years.
Additionally, the issuance of bouncing checks repeatedly can damage your credit rating, affecting your ability to secure leases or other credit arrangements.
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