Reader Questions - Why Use Lockboxes?

community managers h o a homefront reader questions May 18, 2015

Kelly,

I’ve lived in a Planned Development in Placentia for 6 1/2 years. Our property management company was recently sold. We now send our HOA monthly fees to a lockbox in Yucca Valley.

Several of my neighbors and I have discussed this and wonder if this is normal. What about our fees going to a lockbox? Your advice in this matter would be greatly appreciated by all of us!

T.W, Placentia

Dear T.W.,

To respond to your question, I consulted with some leading management professionals who regularly use lockbox services.

Brian Davidoff, President of Ross Morgan & Company, said “it is quite normal for assessment payments to be sent to a lockbox – in fact this is the preferred method in which to have assessments deposited to an HOA’s bank account. A lockbox is essentially a post office box maintained by the bank which is cleared every day so checks are deposited in a timely manner. This speeds up the availability of funds to the HOA and also provides a far more accurate method of assessment processing, thus minimizing posting errors. Most banks which specialize in HOA assessment processing provide a lockbox service which is typically linked in real time to the management company’s billing system, so that any homeowner queries can be immediately answered. Lockbox processing is the way to go and you should not be concerned at all about this accounting process.”

Russell Hoffman, President of Valencia Management Group, concurred with Mr. Davidoff, stating: “Yes this is normal. Using a lock box from the banking institution where your association has the operating account provides an extra layer of security, as the management company never handles those checks. Other advantages include improved cash flow for the association as the funds are available quicker, and there is very little chance of checks being misplaced or lost.”

Mike Packard, Senior Vice President with Associa, noted “Many of our branches use lockbox payment systems to process association payments. Payments from our clients go directly to the financial institution. This saves time in processing and adds a level of protection as there are fewer people who actually handle the payment. Ensuring that our client funds are protected is one of the most important functions we perform for our managed communities.”

Isaiah Henry, President of Seabreeze Management Company, said: “Without a lockbox system, a homeowner would send their payment to their management company and the manager would then post the payment to the homeowner’s account and then forward the payment to the bank. This process could take a few days to complete. With a lockbox system, a homeowner mails their payment directly to the bank lockbox. The bank will process the payment and that payment is downloaded into the management company’s accounting system at the end of each day.”

T.W., based on the input from these management company presidents, it appears that lockboxes help communities in several ways. By “cutting out the middle man”, the lockbox adds speed and accuracy to the process, making sure your assessment payments get to the association’s general fund account more quickly. I hope this information puts you and your neighbors’ minds at ease.

Thanks for your question (and thanks to Davidoff, Hoffman, Packard, and Henry for their helpful input!).

Best regards,

Kelly


Written by Kelly G. Richardson

Kelly G. Richardson Esq., CCAL, is a Fellow of the College of Community Association Lawyers and a Partner of Richardson | Ober | DeNichilo LLP, a California law firm known for community association advice. Submit questions to [email protected]. Past columns at www.hoahomefront.com. All rights reserved®.