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Recovery of Treble Damages for "Bad Checks"

By Lawrence B. Leff, Mark K. Payne, Suzanne M. Leff, Stan V. Jezierski

Bad checks, also known as bounced checks, non sufficient funds, insufficient checks, and dishonored checks, can be a big problem for an Association.  In Colorado, the law allows the recovery of damages for those who receive checks that are subsequently returned for non sufficient funds. Under Colorado Revised Statute 13-21-109, the 'maker' of a check (i.e., the person who wrote the check) can be liable to the 'holder' (i.e., the Association) of the check if that check is not paid upon its presentment to the bank or other depository.

Under the statute, the Association can choose from one of three options to measure its damages. The first measure is simply the face amount of the check, plus actual damages (as statutorily defined). The second measure is the face amount of the check, plus the amount of any reasonable posted or contractual charge not exceeding twenty dollars (i.e., a returned check fee). The third measure is three times the face amount of the check (treble damages), but in no case less than one-hundred dollars. The Association must strictly comply with the statute's notice provisions to be eligible for treble damages. Not only does the written notice have to be delivered in a certain fashion, the notice must also contain specific statutory language. Failure to strictly comply with the notice provisions of the statute precludes collection of treble damages. If notice is given in accordance with the statute and payment is not received within fifteen days from the date the notice was given, the Association can bring a civil action. If the court finds the Association is the prevailing party, the Association may be able to recover three times the face amount of the check plus court costs and reasonable attorneys' fees.  It should be noted that under this third option, the maker has several statutory defenses that if raised and established, may relieve the maker from liability of damages.

If you have any questions regarding a check that your Association received that was returned for non sufficient funds, or other matters related to bad checks written by a homeowner, please contact us at (303) 863-1870. 

Full post as published by Colorado Homeowners Association Law Blog on March 15, 2011 (boomark / email).