…and other knowledge on how your assessment check i processed
By: Roy Helsing
Every month managing agents and Boards of Directors hear from homeowners complaining that their assessment payment could not possibly have been received after the 15th. The excuses range from “I checked with the postal service and they assured me mailing time is only two days from here to there” to “The association is mad at me because I complain about stuff and so management purposely delayed depositing my check!” Let’s take a few minutes to discuss “Due Dates” and “Late Dates” and then a bit of education on what really happens to your assessment check when you mail it in.
Due Dates and Late Dates – they are exactly what they mean. Typically, association assessments are “due” on the 1st day of the month. Most people who end up with late fees treat the “Late Date” as the due date. In fact, in over 20 years I have never had a homeowner who mailed their payment so it would arrive on the 1st have a late payment. Typically, requests for reimbursement start with “I mailed it on the 12th…” That of course means they did not put it in the mail until it was 11 days past due. It is interesting that most people send in their mortgage payment so it arrives on the first, because they know the bank is not going to negotiate if it is received past the 10th. However, many of the same people treat the “Late Date” as if it were the “Due Date” for paying their assessments. That will eventually cause a late payment – almost guaranteed.
Bill Pay Services – it is the age of technology and many people do their bill paying online through their bank or some other bill pay service. Nothing terribly wrong with that, the payment will go through even without the coupon – just in the long run, it costs the bank and possibly your association money. What most people don’t realize is that there are only a handful of bill pay services in the country, and while a few of them pull the money straight from your account and pay the bill – most of them pull the money from your account, wait until your check clears into their account, and then pay the bill. This can add several days to the time from when you click online to pay your assessment and when the check actually went into the mail. If you are making payment to arrive at the due date – that should not be a problem, but again, if you are just trying to make it there by the late date you have added several days to the “mailing” process.
ACH – If you want to truly avoid late fees, we recommend you sign up for ACH either through your management company or the association’s bank directly. Most banks servicing homeowners associations offer that service, as do most management companies.
What Happens to Your Payment – Unless you are a self-managed association with the treasurer using something like Quickbooks, what happens to your assessment check is as follows:
– The check is mailed directly to the bank, to their lockbox department. Contrary to popular belief it does not go to the management company, and if it does you might want to look at getting a different management company.
– The bank deposits your check the day they get it – that is banking law. Most lock box departments start at about 7AM picking up from the post office (they pick up all day in multiple trips) and do not stop until all checks are deposited. On some days that can run late into the evening.
– Your payment checks are handled largely by machine. Your envelope is typically put in a stack with hundreds of other envelopes and is run through a machine that opens the envelope, removes your check and coupon, sorts the checks and coupons so they all face the same direction, and then scans the information into data, which is how the money is handled from that point on. Depending on the lock box department, these machines process envelopes containing checks at the rate of 6,000 to 10,000 an hour! The movement of checks through this process is so fast everything is literally a blur. No, it is not a bunch of little old ladies with letter openers at a table. No human sees your check – unless:
– You forgot the coupon, you put a staple or paperclip into the envelope, or you wrote a letter to management or the Board and enclosed it with your payment. Any of these things will cause your check and envelope to be rejected before it is even opened by this blinding fast machine. They get spit out into a separate bin and then go to a smaller machine manned by a person. Those envelopes are opened by the machine – the human pulls out the paperclip and then sends the check and coupon back to a high speed machine again. Likewise, if you wrote a letter the letter gets pulled out, shoved in a large envelope, and your check and coupon go back into a high speed machine. The people that operate these machines process at a rate of about one envelope every couple of seconds.
– Throughout the day a batch file of all assessments received will be securely transmitted to the management company and batch read into the bookkeeping program – again without humans looking at each transaction. The payment is applied in the association’s bookkeeping system from the bank the same day your check hits the post office box. No exceptions.
– A typical lock box operation will handle over one million payments a month – thousands and thousands every day. While this is all impressive, please note that no one has the time to look at your check, the money goes directly into the association’s bank account (not the manager’s bank account, which would be illegal), and any letters you send will be delayed about a week because they then need to be sorted and sent in a batch to the management company. Requests on what the association should do with your check are pointless – the first time it gets read will be hundreds of miles away and days after the check has already been cashed.
Hopefully, this helps understand why Boards are reluctant to forgive late fees when a homeowner says “I sent it on the 10th and the USPS told me it would be there in three days.” It is also why you are likely to not get much sympathy when you say “Management sat on my payment because they don’t like me!” It can also explain why special handling instructions (please apply this check to my architectural application and not my assessment) are not followed. Once you put that check in the mail, there is a 95% chance it will never be touched by a human again. Simply and quickly, it is turned into electrons and the check itself shredded.
The Helsing Group, Inc.
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