In one sentence
The agreement routing property revenues through a controlled account, with waterfalls that pay expenses, debt service, and reserves before the borrower sees cash.
The longer version
Structures range from soft lockboxes, where tenants pay into an account the borrower sweeps, to hard lockboxes with springing control on triggers like DSCR falling below a threshold. The waterfall defines who gets paid in what order.
For servicing teams the agreement is operational reality: account setup at closing, trigger testing from financial reporting, and trap events that change where money flows.
Common questions
- What is a cash management agreement?
- An agreement routing a property's revenue through accounts the lender controls, with a waterfall that pays taxes, insurance, debt service, reserves and expenses before releasing excess cash to the borrower.
- What is springing cash management?
- Cash management that is dormant at closing and activates on a trigger, such as a DSCR or debt yield falling below a threshold or a major tenant leaving, letting the lender trap cash when risk rises.
- What is a lockbox in commercial real estate?
- A lender-controlled account into which tenants pay rent directly, so rent never passes through the borrower's hands. A hard lockbox is in place from closing; a soft lockbox has the borrower collect rent and deposit it.
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