Real Estate & Property Law

Online Banking - Some Protections for HOAs That Want It

There are some HOAs and Condo Boards that use and very much like online banking. It provides considerable convenience, but should not be used for reserve fund accounts, especially in Caliornia where there is a requirement in the law for two signatures on reserve account drafts, checks, or withdrawals.

Here is a response I received to the blog on online banking.

" I'm glad online banking is not illegal since we have used it since we became self managed many years ago. We only use it for our operating account and pay all operating account bills online. The bank where we have our reserve account does not allow for 2 signatures. I hold the checkbook for that account, but I am not an authorized signer. That works from an internal control standpoint. Additional controls that we have put in place include sending full monthly financial statements and also sending the check register which shows all bills that have been paid from both the operating account and the reserve account. We typically only pay one or two bills annually from our reserves."

This association has found a way to "cope". One thing I will mention about what I have heard about the banks. Some board members get the idea that a bank does not allow 2 signatures when they are told that the bank does not "check" signatures to make sure there are 2 on the checks. Sometimes this simply means that they don't have the means to check all signatures on checks; however it does not necessarily mean that the bank will not "make good" on a check deducted upon an incorrect number of signatures or a signer not on the signature card if there is a complaint the money should not have been paid. I have heard some stories where the bank corrected the error and some where the bank stood behind the shield of non-responsibility. It likely depends on the facts and circumstances about the check in question, who wrote and signed it. What the money was used for. What occurred that was inappropriate? Etc.

Full post as published by California Condo & HOA Law on September 29, 2009 (boomark / email).