We are a material supplier and our customer (a subcontractor) has a large, past due balance with us. After speaking with the general contractor, a joint check was issued. Payable to our customer and us. For some strange reason, none of the banks in this area will accept joint checks for deposit any longer. The GC , understandably would not waiver on their issuance policy. Our customer endorsed the check and sent immediately to us. They were also aware that we are unable to negotiate the joint check. The only way a local bank would even consider accepting a joint check would require our customer to make a trip to their bank, have a signer on their account endorse the check and then have that endorsement guranteed by their bank, then mail it back to us. Next, we go bank to our bank, governed solely by their whim, it seems, if they will accept or not for deposit. If they will not, we must endorse and solely go on "good faith" with our customer, who will endorse and deposit it. Next, after the funds are released by their bank, they will send us a replacement check. Our customer knows we want to get paid, they have no qualms about replacing the joint check with one of their own for us. The reasoning behind Joint checks; ensuring that all parties get paid, and providing safe guards on parties with questionable payment pratices. I do not want to send a letter with the check that will release any obligations or things like that. what do you suggest?
Hello Pam,
I am a bit perplexed by the local banks not accepting joint checks for deposit. My clients have not run into similar issues and I am hoping this is not a trend to come!
In any event, the GC may be able to revisit their policy (and get similar protection) by having its subcontractor sign off on an acknowledgment and agreement of a single party check to your company in the agreed upon amount. Otherwise, the only safe practice is for the joint check to be sent to your customer for endorsement first and then sent to your company for deposit. There is too great of a risk by endorsing first and sending on to your customer for deposit as if your customer does not end up forwarding the funds to you, you will have been deemed paid and all you have is an unsecured claim.
I would double-down on finding a new bank and if you cannot find one, advise your customer that it will have to get their endorsement guarantee as an ongoing practice. The last alternative is to have the GC only single party checks with the written acknowledgment from your customer mentioned above.