Management company wants direct draft

BrettH3 (South Carolina)
Posts: 47

Posted:

We moved to a new neighborhood; great house, very quiet area, but this management company wants us to sign up so they can directly remove money from our bank account for HOA fees. They are also charging every homeowner who uses a check a check cashing. They are adding on fees for everything unless they directly withdraw the money from our bank account and they want account numbers and routing numbers.
Does anybody else have a management company that wants to draft directly out of your bank account? It does not sit well with me.

KerryL1 (California)
Posts: 14,550

Posted:

Read the contract with your MC to know what they may do. The Board hired them so the Board signed the contract.

What size is your HOA?

KerryL1 (California)
Posts: 14,550

Posted:

Read the contract with your MC to know what they may do. The Board hired them so the Board signed the contract.

What size is your HOA?

CathyA3 (Ohio)
Posts: 6,299

Posted:

Direct draft is not unusual, although many companies offer other options such as using your bank's automated bill payment service. (I recommend the latter since it puts you in control of the transaction. But you do need to remember to update your setup when the assessment amount changes.)

It's also not unusual to charge a fee for dealing with paper checks. The HOA has printing costs for the coupon books, and the bank will also charge a fee for handling these checks. It's reasonable to pass these extra charges on to the people who are using this option and not on to the entire community.

BrettH3 (South Carolina)
Posts: 47

Posted:

175 homes. I’m not on the board so why I cannot see the management company contract.

DeanJ
Posts: 1,786

Posted:

Quote:

Posted By BrettH3 on 10/18/2024 1:09 PM
We moved to a new neighborhood; great house, very quiet area, but this management company wants us to sign up so they can directly remove money from our bank account for HOA fees. They are also charging every homeowner who uses a check a check cashing. They are adding on fees for everything unless they directly withdraw the money from our bank account and they want account numbers and routing numbers.
Does anybody else have a management company that wants to draft directly out of your bank account? It does not sit well with me.

I understand your objection to automatic withdrawals. I understand the PM charging for checks. The norm is an owner portal where the owners pay manually each month.

That said, I usually just pay my fees for the entire year and be done with it.

SheliaH (Indiana)
Posts: 6,964

Posted:

What Cathy and Kerry said.

You SHOULD be able to get a copy of the management company contract- you may not be on the board, but those are association documents and as a member of the association, you do have the right to look at certain documents. Those bylaws and CCRs you got at closing should have more information, or you can check if your community has an owners handbook which may provide the same information.

Like Cathy, I pay my assessments through my bank instead of writing a check. Checks can get lost in the mail or stolen, and with the mail delivery ti e slowing down in many areas, it can arrive late. In our community, we tell homeowners to allow 5-7 business days for delivery and processing- it's considered late if the property manager hasn't received it by COB on 10th of the month,

If you set up the payment through your bank, you can dictate when the payment should be made and how much to pay, and you can change that as necessary- I have mine paid with my second paycheck of the month, so all you have to do is look at a calendar. If you're worried about safety,talk to your bank about their security measures.

If it is not right do not do it; if it is not true do not say it. Marcus Aurelius

KerryL1 (California)
Posts: 14,550

Posted:

Your documents or. your state may have certain requirements about how to request executed contracts, but I doubt the Board can keep them rorm you.

LetA (Nevada)
Posts: 2,679

Posted:

Quote:

Posted By CathyA3 on 10/18/2024 2:39 PM
Direct draft is not unusual, although many companies offer other options such as using your bank's automated bill payment service. (I recommend the latter since it puts you in control of the transaction. But you do need to remember to update your setup when the assessment amount changes.)

It's also not unusual to charge a fee for dealing with paper checks. The HOA has printing costs for the coupon books, and the bank will also charge a fee for handling these checks. It's reasonable to pass these extra charges on to the people who are using this option and not on to the entire community.

A printing "fee" for one sheet of 8.5 x11 paper with 4 coupons on it? Charging a fee for that, don't that sound petty?
Our assessment coupon page goes out as a separate mailing.

CathyA3 (Ohio)
Posts: 6,299

Posted:

Quote:

Posted By LetA on 10/20/2024 9:17 PM

A printing "fee" for one sheet of 8.5 x11 paper with 4 coupons on it? Charging a fee for that, don't that sound petty?
Our assessment coupon page goes out as a separate mailing.

When a board is "saving money by keeping assessments low", sooner or later they will get to the nickel-and-dime stage. It's no different from an individual whose wages don't cover their living expenses. Eventually they start playing the "which bill will we pay this month" game. Because no m no money. It doesn't matter what the item is - dollars (or lack of dollars) spend (or can't spend) in exactly the same way.

I agree that boards shouldn't get to that point. But stupid decisions invariably lead to more stupid decisions.

CathyA3 (Ohio)
Posts: 6,299

Posted:

Quote:

Posted By LetA on 10/20/2024 9:17 PM
... snip ...
A printing "fee" for one sheet of 8.5 x11 paper with 4 coupons on it? Charging a fee for that, don't that sound petty?
Our assessment coupon page goes out as a separate mailing.

Note: the folks who are using their personal bank's free bill payment service and would be charged for a service that they don't use may not consider this "petty".

In addition, the bank that receives the assessment checks will have specific requirements for these coupons. For example, they may require a particular OCR font that the bank's scanner can read, with the coupon information laid out in a particular format. It may even require special ink and a particular kind of paper. The board or manager probably can't just whip those bad boys out on somebody's office computer and printer, and call it done.

(Years ago I worked on a project where we moved my employer's payment handling to a bank lock box. It was a major deal. And yes, we had to pay the bank to handle this, and we bought a printer that was up to the task and the special ink. Banks incur costs for shuffling paper, and they pass those costs on to whoever hires them to do the work. The more stops a paper check makes on its way from the person who writes the check to its eventual destination, the more charges it will accumulate. It's why so many businesses encourage their customers to go paperless - it's faster and it saves money.)

But the bottom line is that when a board is at the nickel-and-dime stage, anything and everything is potentially on the chopping block. The cure for petty is to set assessments at realistic levels.

LoriM15 (Florida)
Posts: 1,009

Posted:

From the association's point of view (not just the PM company's) there are many advantages to having owners sign up for automatic withdrawal. The biggist advantage is that the money actually gets paid on time. No chasing down missing payments, no calculating late fees. Budgeted funds are there when you need them.

There's also the advantage of not having to handle paper checks that can get lost in the mail, misplaced, or stolen. It does cost time and money to have to deal with paper checks. And there has to be trust in the employees that handle the paper checks.

It's not a conspiracy or a way for a PM to cheat an owner. It's very common in the leasing community to do this. Many leasing companies who handle apartments or mobile home communities do not even allow people to submit paper checks in person any longer. I pay the rent for a relative who lives in a mobile home park owned by a very large corporation. I can pay it through automatic or one time ACH transfer through their portal or I can charge it on a credit card for a fee. That's the only options I have.

I personally prefer to "push" my monthly assessment payment by having automatic payment set up through my bank, like others have commented. However, our treasurer always argues with me that having auto withdrawal as a "pull" from the PM company is just as safe and much more convenient. And he's someone who doesn't trust putting any documents in the "cloud".

I wouldn't look for some kind of issues that aren't there simply because the PM or the association want a quick and easy way for an owner to make payments.

SheliaH (Indiana)
Posts: 6,964

Posted:

Quote:

Posted By LetA on 10/20/2024 9:17 PM

Posted By CathyA3 on 10/18/2024 2:39 PM
Direct draft is not unusual, although many companies offer other options such as using your bank's automated bill payment service. (I recommend the latter since it puts you in control of the transaction. But you do need to remember to update your setup when the assessment amount changes.)

It's also not unusual to charge a fee for dealing with paper checks. The HOA has printing costs for the coupon books, and the bank will also charge a fee for handling these checks. It's reasonable to pass these extra charges on to the people who are using this option and not on to the entire community.

A printing "fee" for one sheet of 8.5 x11 paper with 4 coupons on it? Charging a fee for that, don't that sound petty?
Our assessment coupon page goes out as a separate mailing.

Ours goes out with a copy of the upcoming year's budget, current collection policy, snow removal policy and reminder regarding frozen pipes (owner's responsibility, so they should ensure the heat in their homes is sufficient to prevent freezes, otherwise they risk paying for repairs to other units if their busted pipe floods theirs.) Our expenses for printing fees is a line item on our budget, so homeowners can see what the cost is per unit by doing simple math. Consider it overhead expenses (every business has them - a HOA may be non-profit, but has to be run as a business). Consider this another good reason the OP should consider going electronic because those who pay via automatic debit don't get coupon books. They know what the amount will be when they get the budget and can adjust the payment amount with their bank if they pay that way.

If it is not right do not do it; if it is not true do not say it. Marcus Aurelius

TerriS6 (California)
Posts: 3,284

Posted:

Quote:

Posted By BrettH3 on 10/18/2024 1:09 PM
We moved to a new neighborhood; great house, very quiet area, but this management company wants us to sign up so they can directly remove money from our bank account for HOA fees. They are also charging every homeowner who uses a check a check cashing. They are adding on fees for everything unless they directly withdraw the money from our bank account and they want account numbers and routing numbers.
Does anybody else have a management company that wants to draft directly out of your bank account? It does not sit well with me.

Homeowners are not subject to a management company; they are subject to the governing documents and the law. If neither the law nor your governing documents require you to pay by check, you don't have to. I'm guessing the requirement is just to pay. Also, there may be language in your docs that protects your personal information from 3rd parties.

TerriS6 (California)
Posts: 3,284

Posted:

Also, charging a fee for paying by check is a penalty/fine. Is that rule in your operating rules approved by the board with notice to the homeowners, or does it conflict with your Declaration so that it's unenforceable? Is it on the fine schedule?

TimB4 (Tennessee)
Posts: 21,059

Posted:

Quote:

Posted By TerriS6 on 10/22/2024 5:16 AM
Also, charging a fee for paying by check is a penalty/fine.

I suppose an argument could be made for that.

I don't agree with that argument. It is a surcharge or a convenience fee. This is something many companies are doing.

TerriS6 (California)
Posts: 3,284

Posted:

Tim, can I then get a discount if they send me the invoice in a form I don't like? 😊

TimB4 (Tennessee)
Posts: 21,059

Posted:

Quote:

Posted By TerriS6 on 10/22/2024 6:43 AM
Tim, can I then get a discount if they send me the invoice in a form I don't like? 😊

If the law allows it.

CathyA3 (Ohio)
Posts: 6,299

Posted:

Quote:

Posted By TerriS6 on 10/22/2024 6:43 AM
Tim, can I then get a discount if they send me the invoice in a form I don't like? 😊

If you're on the board, you'll quickly learn not to create problems where none exist.

LoriM15 (Florida)
Posts: 1,009

Posted:

Quote:

Posted By TerriS6 on 10/22/2024 5:10 AM

Posted By BrettH3 on 10/18/2024 1:09 PM
We moved to a new neighborhood; great house, very quiet area, but this management company wants us to sign up so they can directly remove money from our bank account for HOA fees. They are also charging every homeowner who uses a check a check cashing. They are adding on fees for everything unless they directly withdraw the money from our bank account and they want account numbers and routing numbers.
Does anybody else have a management company that wants to draft directly out of your bank account? It does not sit well with me.

Homeowners are not subject to a management company; they are subject to the governing documents and the law. If neither the law nor your governing documents require you to pay by check, you don't have to. I'm guessing the requirement is just to pay. Also, there may be language in your docs that protects your personal information from 3rd parties.

Sort of. Most governing documents allow the board to make reasonable rules and decisions outside of what is written in the governing documents. If the board has given authority to the property management company to collect the assessments then they are probably aware and okay with this policy. Most governing documents and state statutes allow the association to maintain a roster of owners and renters. If they have given the authority to the property management company to manage the association, they have given the authority to the property management company to maintain the roster and the individual accounts.

KellyM3 (North Carolina)
Posts: 2,239

Posted:

Quote:

Posted By BrettH3 on 10/18/2024 1:09 PM
We moved to a new neighborhood; great house, very quiet area, but this management company wants us to sign up so they can directly remove money from our bank account for HOA fees. They are also charging every homeowner who uses a check a check cashing. They are adding on fees for everything unless they directly withdraw the money from our bank account and they want account numbers and routing numbers.
Does anybody else have a management company that wants to draft directly out of your bank account? It does not sit well with me.

Yes, auto-draft is a common practice as is the phase-out of "coupon books." Remember, you can still pay by check but it's manual labor for the management company. That's why there will be a fee attached for physical checks.

JohnC46 (South Carolina)
Posts: 14,265

Posted:

I think those opposed to auto draft are those having financial troubles.

TerriS6 (California)
Posts: 3,284

Posted:

Quote:

Posted By CathyA3 on 10/22/2024 8:30 AM

Posted By TerriS6 on 10/22/2024 6:43 AM
Tim, can I then get a discount if they send me the invoice in a form I don't like? 😊

If you're on the board, you'll quickly learn not to create problems where none exist.

That was supposed to be funny. We don't require a particular form of payment.

CathyA3 (Ohio)
Posts: 6,299

Posted:

Quote:

Posted By TerriS6 on 10/23/2024 4:11 AM

Posted By CathyA3 on 10/22/2024 8:30 AM

Posted By TerriS6 on 10/22/2024 6:43 AM
Tim, can I then get a discount if they send me the invoice in a form I don't like? 😊

If you're on the board, you'll quickly learn not to create problems where none exist.

That was supposed to be funny. We don't require a particular form of payment.

I figured it was.

CathyA3 (Ohio)
Posts: 6,299

Posted:

Quote:

Posted By JohnC46 on 10/23/2024 1:00 AM
I think those opposed to auto draft are those having financial troubles.

That's one explanation.

And there are folks like me who are concerned about the security risks and prefer to control the transaction themselves. You don't have to think that the association is a bunch of crooks - simple incompetence can do as much damage. I will use auto-draft in very few cases, and paying assessments isn't one of them.

JohnC46 (South Carolina)
Posts: 14,265

Posted:

Quote:

Posted By CathyA3 on 10/23/2024 7:28 AM

Posted By JohnC46 on 10/23/2024 1:00 AM
I think those opposed to auto draft are those having financial troubles.

That's one explanation.

And there are folks like me who are concerned about the security risks and prefer to control the transaction themselves. You don't have to think that the association is a bunch of crooks - simple incompetence can do as much damage. I will use auto-draft in very few cases, and paying assessments isn't one of them.

I pay all my bills electronically but I do have a few auto-drafts.

WendyM5 (North Carolina)
Posts: 1,522

Posted:

if you were managing 175 homes would you like to manually input 175 individual checks or would you like a computer system to take the money out their bank accounts saving you hours of work? I can do about 30 checks an hour manually so that's 6 hrs of work.

vis ta vie

JohnC46 (South Carolina)
Posts: 14,265

Posted:

Wendy
Thanks for the real life times.

BarbaraT1 (Texas)
Posts: 821

Posted:

They aren't removing money from your bank account. You are sending money from your bank account to the association's bank account.

You set up the auto draft by logging into the association's bank portal and creating an account. No one from the management company has access to your bank account or the ability to take money out - you send it.

For those suggesting using your bank's bill pay service -that is a manual check. Your bank deducts the payment from your account and prints and mails a check. It's no different than you writing a check, except the funds are removed immediately. (Which causes lots of other problems when that mailed check goes missing but your money is already gone).

CathyA3 (Ohio)
Posts: 6,299

Posted:

Our management company makes us fill out a form authorizing direct draft. We don't actually get to log on and set things up ourselves. It's also easier to shut off or change a bank's bill payment system. These could be reasons people are still leery of using direct draft.

I wonder how often banks' physical checks go astray. I've never heard any complaints about it, so I'm curious.

LoriM15 (Florida)
Posts: 1,009

Posted:

I use my bank's bill pay service and I have had issues with checks going missing. I don't believe it's the bank's fault - the checks are very easy to overlook in the mail. They don't say "check" anywhere on them - they look like an anonymous piece of mail. You have to trust that the person or company receiving the mail actually looks at every piece of mail.

I recieve one from someone I rent a property to. It goes out of his bank account on the first of the month and I'm lucky if I receive it by the 10th - usually it's the 15th. Part of that is the slow mail service, and part is the bank holding the funds. The amount of interest they make from each individual payment is small, but overall I think they make a pretty profit from this practice.

An interesting side to this discussion is the terms you agree to when you do auto withdrawal. Usually they give you a choice whether you want to have an exact amount debited or the existing balance. Having the existing balance paid is helpful when your the assessment changes every year. You don't need to make adjustments. However, in an HOA or COA, if you get a fine or late charge or interest added to your account, it will automatically get paid. We had an owner who got fined for not getting permission to change some landscaping. He didn't agree with the fine and said he just wouldn't pay it - but he had auto payment and it got pulled from his bank account when his regular monthly payment got paid.

PatJ1 (North Carolina)
Posts: 15

Posted:

Not always. I will only sign up for a direct draft if I can log in and control that draft. Many HOA's and their MC companies require that a form be filled out and mailed back to them. Changes to any direct deposit can take 3-7 days to record. The MC controls inputting the change.