People like to try cute things in hopes they can get away with them. One that some "smart" tenants will try is to mark their payment check to you "Paid In Full", when they know good and well it isn't. Most commonly, they'll pay late and not include the late fees. In essence they want you, by accepting the check, to enter into a new agreement declaring that they are current. They figure you will do this rather than return the check - tempting you with a bird in the hand so to speak. However, you have another, better, option.
The Uniform Commercial Code is something that every person involved in business transactions (which is nearly all of us) should become at least superficially familiar with. It was an effort by private organizations (the American Law Institute and the National Conference of Commissioners on Uniform State Laws) to create a basis for easier commerce between the states. It was the work of a number of legal scholars and was originally published in 1952. The UCC isn't itself law, just a suggestion of how states should establish business and contract laws. It becomes law when a state legislature adopts the UCC as such - which all 50 states have done to some degree (individual states have some variations, usually minor). § 1-308 of the UCC says this:
(a) A Party that with explicit reservation of rights performs or promises performance or assents to performance in a manner demanded or offered by the other party does not thereby prejudice the rights reserved. Such words as "without prejudice," "under protest," or the like are sufficient.
(b) Subsection (a) does not apply to an accord and satisfaction.
While that certainly sounds a bit complicated, what it says is that you don't just have to choose between returning the check or accepting a lesser amount than what you think is owed. By writing "without prejudice" with the deposit endorsement, you preserve your claim of more money owed under your agreement with the tenant. We simply had deposit stamps made that said "For Deposit Only - Without Prejudice" and use that for all deposits. Writing "Without Prejudice" doesn't guarantee you money, but it does preserve your right to claim that money is owed - which means you can take the tenant to court if necessary, or if you withhold that money from the tenant's deposit they'll need to prove to a judge that they don't owe it. If you don't preserve your claims with a phrase like "Without Prejudice", it's possible a court could find that you gave up that claim by accepting a check with "Paid in Full" marked on it. As an honest and straightforward landlord, your preference will be that irresolvable disputes with tenants be heard in court. If you've acted in accordance with the lease agreement, kept good records and evidence of what has occurred and preserved your claim, then your chances of success are very good. If you just keep going back and forth with an angry or spiteful tenant, you'll not get very far. A tenant might say "Ha ha, you deposited it marked 'Paid in Full' so now I don't have to pay you". You then can respond, "Please notice that I preserved my claim under the UCC with the 'Without Prejudice' endorsement". There's a good chance they won't know what that is and want to keep arguing back and forth with you. It would be a waste of your time at that point. Just tell the tenant they can tell their side to the judge.
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