Collecting Rent and Security Deposits
BCFSA, the governing body who licenses property managers in BC recently froze a property management company’s trust accounts. The reasoning for this was the company was unable to produce required financial records for the previous year.
We recently discussed managing a property for a potential client who indicated they had not received a statement of their account from their property manager for multiple months.
When a rental property management company collects rents and security (damage) deposits it is required for these funds to be held in a Trust account on behalf of the owner of the funds. There are multiple ways a property management company can hold these funds, they can create a separate account for each client or they can use pooled trust accounts.
Cartref Properties uses pooled trust accounts to hold the rent and deposit funds we collect. What this means is we have one trust account for rent collected from all our properties and one trust account for security/damage, pet deposits. The security/pet deposit funds belong to the tenant until released by them or by an order from the RTB at the end of the tenancy. Any interest earned on these funds is owed to the tenant when vacating the property. To determine the amount owed we use the RTB interest calculator on the RTB website. The interest paid in the trust account currently is not paying the full amount owed to the tenants upon vacating. If interest rates continue to decrease the amount of interest owed may change in the near future.
The pooled rent trust account earns interest though is not paid to the owners, or tenants, instead these funds are paid to the Real Estate Foundation. This foundation is set up to help people who may feel their funds were misappropriated by the management company and can apply to have their funds refunded to them.
The benefit of the pooled trust accounts is that the financial institution doesn’t charge bank fees on these accounts. If we set up individual accounts for each client then there would be bank fees charged to the account along with the interest paid, and we find the fees are often larger than the interest earned.
Cartref Properties works with a Credit Union (Coast Capital Savings) in BC to hold our clients funds in Trust. Part of the requirement for holding the funds is to report annually the funds in trust with FDIC to have them ensured in the credit union.
For all the above reasons Cartref Properties provides a detailed account of each client’s funds received, held and disbursed from the trust accounts to ensure our clients have an accurate account of their funds. If your property management company is not providing you with a monthly statement of your account they are not meeting their obligations as a licensed professional.
Need help managing your investment properties. Cartref Properties can assist you, call today to discuss your needs. You can find more information about us at: www.cartrefproperties.com
