Imagine paying your HOA Assessments on time through your bank, only to be charged a late fee. It can and does happen, but don’t let it happen to you! Understanding how your HOA assessment payments are processed is your first prevention measure…
Can ‘Bill Pay’ Result in Fines From Your Community Association?
We recently worked with a homeowner who paid her assessments using the ‘bill pay’ option at her bank. Unfortunately, the payment did not arrive in time, and the homeowner was charged a fine. Why? Because online bill pay via your bank does not mean an instant payment.
In fact, unless a sending bank has a direct relationship with the receiving organization (like the utility companies), bill pay payments are made by bank check. That means your bank cuts a paper check for the amount you paid and mails it via US mail to the recipient’s address. It’s not difficult to imagine how this added delay in the process can lead to the payment being received late.
Your Bank will remove the funds from your account on the day the check is sent and place those funds into their corporate account until the check is received by your community and cashed. This makes it appear like an instant payment, while in fact, a lot of processing and mailing time is happening behind the scenes. Often, if a check is lost in the mail you will not know it until your Bank contacts you stating the check was never cashed (but hopefully your HOA already informed you of a missing payment).
To help you avoid this happening to you, we thought it would be helpful to lay out how assessment charges work, what the various payment options are, and how they work.
Assessments and Fines Are Controlled By The Governing Documents
How assessments and fines are charged is all controlled by the governing documents of the community association. If the documents say the assessment is due on the first, and a fine is charged for late payment on the 5th, that is what the management company MUST follow. There is no wiggle room.
The ONLY scenario in which assessment payments can be altered is if the Board of Directors grants a waiver. Waivers are rare, as they require a vote of the full board in a regular board meeting. Waivers also will generally only apply to ‘soft costs’ like the late fee, and not ‘hard costs’ like the assessment itself.
HOA Strategies Uses a Bank Lockbox to Manage Payments
As recently as a decade ago, management companies took all payments at the management office, and we would have a dedicated AP clerk on staff whose whole job was entering in all the checks and cash we received for assessment payments.
This system was inherently flawed due to the fact that it made the management company a chokepoint in the payment process. The more checks we received, the more time it would take the clerk to process them, and the longer it would take us to deposit them into the community’s bank account.
With a bank lockbox, we were able to cut out the middle man and push these data entry tasks over to the bank, who is much better prepared to handle an influx of assessment payments.
What is a Bank Lockbox?
Unlike what the name implies, a bank lockbox has more in common with a PO Box than with the real estate lockboxes that hold the keys when you are selling your house. The bank lockbox provides a dedicated address that is directly tied to the bank account holder to which it is associated. This allows bank employees to easily identify where the incoming payments belong.
(This also explains why the address on your billing statement may be in a different state. It is simply where the bank’s processing center for the lockboxes is located.)
How does Bank Lockbox Work?
When the bank receives a payment in the lockbox, they process it the same day and inform the account holder that the payment has been added to the community’s bank account. In this way, there is no middle man between receiving your payment, and the payment getting applied to your account.
But a bank lockbox still relies on the US mail in getting the checks to the lockbox in the first place. In today’s modern society in which everything is available instantly, demand for a faster payment option was high. Enter online bill payments.
Online Bill Payment Options for HOA Strategies Customers
Initially, the only way to do a direct transfer from one bank account to another was through a process called the Automatic Clearing House, or ACH. An ACH conduit had to be set up manually. There was an actual form the bill payer would have to fill in putting their bank account information and the receiving bank account information, the amount they were authorizing to be transferred each month, and a signature authorizing the transfers.
Today, the ACH process is much easier since it can be done automatically, and can be set to a recurring charge or a one-time charge online with just a few clicks. HOA Strategies supports online bill payments via our online portal.
Online bill payments still go directly to the community association’s bank, just like when you mail a check to the bank lockbox, but the payments are processed instantly, giving you the peace of mind knowing that your payment was received in a timely fashion.
Because the automatic payments are set to go on a specific schedule, you also have more predictability of when the money will be removed from your account. Automatic payments are the perfect way to ‘set it and forget it’ for your monthly assessment payments. As new budgets are implemented in your community, the automatic payments will adjust the dollar amount while owners using Bill Pay with their bank will need to manually update the amount from year to year.
Other Payment Options
If automatic bill payments or mailing checks are not the right options for you, we also accept payments via major credit cards on our online portal. You should note though, that credit cards carry additional processing fees.
Regardless of what payment option you choose, HOA Strategies is working hard behind the scenes to ensure that your payment is applied in a timely manner so that you are not hit with unnecessary fines or fees. To help us help you, we recommend you avoid your bank’s bill pay option in favor of any of the above payment methods.